Industry news

French nuns have received the news that their sacramental bread may be replaced by cheaper Polish hosts, it has been reported.

Authorities are contemplating buying the cheaper wafers, according to The Guardian, as the religious bodies at French shrine Lourdes were contemplating buying cheaper hosts from Poland – which are made by a secular workforce.

However, the Lourdes church has since announced it would continue to buy wafers made in France – but only after negotiating a price reduction.

Sister Marcelline, from the Carmelite convent at Carmel de Saint Germain-en-Laye just outside Paris, told The Guardian: "Foreign producers, namely those from Poland, have undercut the market."

Back in late January, an entry on the NASSCOM India Leadership Forum blog caused a bit of a brouhaha. In it, Vishal Gondal, CEO of mobile games company Indiagames, accused Indian IT companies of failing to adapt to the world of social networking.

"This is surely one 'social' cause [that] the Indian IT leaders should wake up to," he wrote.

His posting attracted a stream of comments - some rather less measured, and more caustic, than others. On the whole, however, those who left comments appeared to agree with Vishal Gondal: there is still much work for such companies to do if they're really going to reap the benefits of Web 2.0.

I broadly agree, but with certain caveats. First, I think it's true of outsourcing companies everywhere in the world, not just India. Second, I think we need to recognise that the measures that Mr Gondal suggests for social networking success - a Facebook page, a Twitter account - don't necessarily translate well to the world of IT services and outsourcing.

It's a subject I thought I'd discuss with Raj Datta, chief knowledge officer at Indian IT and R&D services company MindTree. I first met Raj in London about three years ago and think he's a great person to speak to about social networking. That's because Raj's work at MindTree is driven by the belief that humans are "wired to share" and because social networking takes centre stage in helping Mindtree's workforce to share ideas and knowledge. In fact, the company has been using social software since 2003 and its overall philosophy has been "socio-technical" from the very beginning.

"I remember in 2006, I was chairing a panel at a conference in India, which featured Jimmy Wales of Wikipedia," Raj recalls. "Following his presentation, I asked the audience a simple question: 'Who here is working with wikis in the enterprise?' Only about 5% of hands went up," he says.

If he performed the same ad-hoc poll today, the story would be different, he believes. "The last two to three years has seen a tremendous hype around social software, social networks, Web 2.0 and Enterprise 2.0 as buzzwords, which has demanded attention from various departments."

But have Indian companies been able to transform Web 2.0 hype into action, I wonder?

"Most Indian IT companies today are dabbling it. However, they are early in their discovery process and are grappling with typical issues, ranging from technology, to policy, to process," Datta says. In general, he believes, companies are not easily making the shift to a more open, social, collaborative environment - but there is no way to avoid social software as it is fast becoming part of the "natural habitat" for many people who want to share ideas, whether they're at home or at work.

Perhaps it's just not realistic to judge a company's enthusiasm for social networking by whether they're experimenting with it publicly?

At MindTree, for example, internal corporate communications have provided an ideal platform for early experimentations with social networking. Instead of a one-way, 'top-down' approach - where the CEO or other top executive addresses the workforce in the same way that a general might dictate a battle plan to the troops - Web 2.0 creates conversations where communications can flow in multiple directions.

The systems and tools that Raj and his team have built have social features that also allow 'bottom-up' and 'lateral' communications, too, he says. "For example, our Neuron idea management system allows for ideas to percolate upwards in the organisation to the senior-most people, and in parallel, allow for peer-to-peer lateral communications where people can comment on an idea, rate it, build links between ideas and so on," he says. But top-down communication still take place, because senior executives use the system to issue requests for ideas along a particular theme or to solve a specific challenge, he says. Now that's really tapping into 'the wisdom of the crowd'.

Social networking is also key to how MindTree communicates with its clients about the progress of projects. The company's collaborative ProjectSpace portal allows for effective collaboration between project teams, clients and subject-matter experts so that they can track issues, build project-specific knowledge bases in wiki formats, and establish discussion forums for questions and clarifications.

Raj tells me that he and his team are now working on a next-generation system that will allow MindTree to tap into social networks outside of the company - but in a "planned and seamless" manner, of course.

So it seems to me that there's probably a lot going on behind the scenes at outsourcing companies. Just because a provider doesn't have a Facebook page or a Twitter account, that doesn't mean it's not interested in social networking or failing to explore Web 2.0 it in some part of their business.

IT companies - whether they're in India or anywhere else in the world - are by their nature focussed on business-to-business (B2B) communications, not business-to-consumer (B2C). In other words, they're not trying to sell a new chocolate bar, washing detergent or hatchback car to the general public.

For them, the true value of social networking lies in finding better ways to tackle client challenges and track project progress. These are the things that set them apart from their competitors. So internal social networking initiatives are the best way for outsourcing providers to experiment with new tools and approaches, long before they dip their toes into the dangerous waters of public forums.

NBN Co Limited, the company established to deliver the national broadband network in Australia, has awarded Accenture a five-year contract to provide its core HR administration services.

Under the terms of the contract, Accenture will provide HR administration, records management, recruitment administration and performance and rewards administration to NBN Co.

The Main Street America Group, a provider of insurance products to individuals, families and small businesses in 24 US states, has signed a seven year strategic ITO agreement with Wipro.

Under terms of the agreement, Wipro will manage Main Street America’s IT organisation. The contract aims to achieve faster time-to-market capabilities and reduce operating costs by utilising economies of scale.

Ronald James, Main Street America’s chief information officer, commented: “As The Main Street America Group continues to increase scale and productivity, we need to implement more efficient processes while reducing our operating costs”.

This week sourcingfocus.com has been deluged with industry research which, for a change, is broadly positive. Firstly Everest Consulting has assured us that the Finance and Accounting Outsourcing (FAO) market is expected to grow at almost 20 per cent this year. Then ProBenchmark, the pricing subsidiary of outsourcing consultancy Alsbridge, conducted research showing that costs for most outsourced IT services look set to fall in 2010. ProBenchmark have attributed this price plummet to the economic downturn as well as the increase in uptake of remote infrastructure management. Nice to hear some positive aspects of the economic downturn.

But it was not all good news. Although they claim to have ‘got your number’, the UK public haven’t returned the favour by using 118 118’s number. The directory firm whose famous advertising featured two men in 70s style jogging outfits has announced plans to close its Plymouth call centre. This move is expected to result in the loss of nearly 200 jobs.

Playboy on the other hand released yet more plans to outsource more of its business functions. Known for not shying away from controversy, the men’s magazine brand has thrown itself full throttle into using the sourcing industry to its advantage. I don’t know about you, but if its good enough for Hef…

2010 is looking good as far as I am concerned. I look forward to seeing what next week has in store for the industry.

Costs for most outsourced IT services look set to fall in 2010 due to the economic downturn as well as the increase in uptake of remote infrastructure management (RIM), research has indicated.

While the economic climate remains uncertain, IT outsourcing prices this year look set to remain on the downward trend which began last year, though at a less dramatic pace, according to the first quarter IT service price analysis from ProBenchmark, the pricing subsidiary of outsourcing consultancy Alsbridge.

However, the prices of some service categories including virtual server support could increase.

"How long the economy will be like this and how long client companies will continue to more aggressively [offshore] infrastructure remains to be seen," says Chris Pattacini, ProBenchmarks's director. "It is clear that RIM will continue to proliferate in the market, continuing that downward price pressure, but not as much as last year."

Romania has been topped to be the new popular outsourcing destination, following research that indicated the country had jumped from 39th to19th place in an outsourcing location poll last year.

The numbers of outsourcers and employees operating within the country have increased during to the economic downturn, thanks to the country’s high language capabilities, good solid IT skills and a location in a compatible time zone to the UK - an ideal location for call centres, help desks and back office processes..

Meanwhile Europe’s leaders, including Poland, the Czech Republic and Hungary, have fallen as increasing costs for companies erode their competitiveness.

Telephone directory firm 118 118’s call centre in Plymouth, is expected to close in June, leading to the loss of nearly 200 jobs, it was reported in Personnel Today.

The company has begun a 90-day consultation process with staff, and is reportedly offering its 180 workers voluntary redundancy.

Meanwhile, some staff were applying for positions at the company's Cardiff call centres. It also has offices in London.

The increasing popularity of the internet has led to a fall in business since the centre’s opening in 2003.

The UK Government has signed an ITO contract worth £600m with Tata Consultancy Services (TCS) to manage a state-sponsored pension scheme which is still being formulated, it was reported.

The UK's Personal Accounts Delivery Authority has confirmed that TCS is a successful bidder for a ten-year arrangement to set up and administer the National Employment Savings Trust, a scheme to be launched by 2012.

The Personal Accounts Delivery Authority said in a statement: “The contract is divided into two stages and runs for 10 years, with possible extensions for up to a further five years. The first stage will run to October 2010, allowing TCS to begin the activity required to set up and administer the National Employment Savings Trust.”

Saving money

The current UK government expenditure now stands at around £680 billion a year, of which only around £80 billion worth of activity is outsourced. Currently, much of that spending is at a local level, but it is my view that this should eventually be spread across national government sectors. With every sector currently looking to reduce their operating costs, it is apparent that IT outsourcing has crucial part to play.

This is because currently, organisations in the public sector are looking to maintain services as best they can while recognising that there will be less money. Therefore, outsourcing is an ideal fit. Personally speaking, whoever takes over the key to number 10 this year should be more concerned with commissioning the right outsourcing services rather than taking tasks on themselves. Therefore, managers in the public sector should turn to IT outsourcing at a time when improving efficiency and cutting costs is imperative. A successful outsourcing strategy provides a medium to long-term solution, which can not only deliver the necessary cost savings to ease the burden of the current deficit, but also provide improved operational efficiency and access to specialist skills and technology. This allows any new or existing government to focus on core (in-house) activities. But just what are these services and how can government sectors best take advantage of them?

Releasing the pressure

If you take IT services as a prime example, an outsourcing service provider is better placed than a government body to transfer paper to electronic records, having already made the investment in the required technical equipment, training and skills. These are assets that government departments simply do not posses in house. Therefore, outsourcing these services enables them to transfer the processes to a supplier who has a stronger ability in handling them, while allowing the public sector to concentrate on its core responsibilities.

Health care is a prime example of a sector that is always being asked to fulfill the escalating needs of the patient, not to mention having to comply with the ever-changing government rules and regulations. A change in power could potentially increase these headaches, as any new party is likely to make changes to stamp their authority early on. Therefore, every health care service should look to grow with the ever-changing technology in order to provide high quality health care services and therefore survive in the exceedingly competitive market. One possible way is if the industry adopts health care IT outsourcing. As the health care industry has to continually deal with the mission critical information, highly important data and high network connectivity, the challenges could be outsourced to a specialist services provider.

Meeting new goals

Furthermore, service providers from across the globe with expertise in this critical sector have been engaged in electronic billing records, medical billing, transaction processing systems, document management, integration of existing back end systems with highly new and advanced tools.

However, in order for the healthcare sector to fully benefit from the services provided by their chosen outsourcer, continued innovation form the service provider and trust in the form of a public/private partnership needs to be established.

Innovation and trust

Government must work with their selected service providers to increase trust and develop new innovative processes. Previously, a lack of trust has been the major barrier preventing successful public/private partnerships. The public sector must learn to trust the contractor‘s ability to do things better. For this to happen, contractors need to prove that they can deliver projects more efficiently. Suppliers must also work to ensure they operate in a transparent way. They must be forthcoming with new ideas and innovative suggestions to improve traditional delivery methods.

Firstly, barriers to innovation must be reduced. There is willingness in the outsourcing service industry to match fees to outcomes, for example to match the management fee to educational outcomes in schools. However, this rarely happens because the people who own the contract don’t have the ability or intention to challenge the process. Another problem is that often the public sector wants something easy to measure, and that is usually cost. Achieving high-level outcomes in a changing environment requires institutionalising innovation as part of the outsourcing process. This could include innovation such as utility computing, the packaging of computing resources, such as computation and storage, as a metered service similar to a traditional public utility.

Secondly, trust between the two parties must be developed. This comes from the outsourcer providing regular communication with their specialist sector. I believe this can be assisted greatly by having a CIO in place to handle technology strategy on the government side. This would make life easier when co-coordinating with the chosen service provider, as they will be able to communicate on the same technical level.

The future

In summary, no matter which party is in power after this year’s general election, government will need to cut the costs of delivering public services without compromising quality. It is clear that service providers can assist and add value to this process.

However, the re-commissioning of ineffective services must stop and the elected government must look to service providers to do things differently. This may mean radical changes in the way services are delivered. One thing’s for certain, outsourcing complex IT processes has to allow expert providers to work on behalf of or in partnership with the government. Only then will the government in power be free to do what it should be doing– making policy and acting as custodian of standards.