Industry news

Barclays Bank has decided it will not renew its £400m outsourcing deal with Accenture following its expiration in June, it has been widely reported.

The news comes a month after the financial services giant announced it would bring the management of it s desktop systems back in house.

The move will see 230 out of the 900 technology staff who moved to Accenture when the deal was signed in 2004, return to Barclays, according to Computer Weekly.com.

A spokeswoman at Barclays said: "We will not be renewing this as we are bringing the resource in-house."

The change followed a strategic review to ensure it had "the most efficient model that supports our business".

The partnership included application development and management of the bank’s UK-based commercial and retail banking systems in a bid to cut costs.

Banks are predicted to move their customer service operations away from high street branches and towards call centres in the wave of an increasing trend.

The move comes as a result of the stiffer competition banks now face with main threats stemming from telecoms firms and high street retailers, according to industry analyst Gartner.

As the economy begins to move forward, banks need to plan for the "new world" emerging from the end of global recession, says Gartner.

“If they don’t, they will become uncompetitive and fall behind more-forward-thinking rivals," said Richard De Lotto, Gartner principal research analyst.

New and emerging outsourcing locations are beginning to chip away at India’s market dominance, according to a new survey

The survey of 514 outsourcing service providers in 50 countries, from Duke University's Offshoring Research Network and PricewaterhouseCoopers found that established providers are increasingly facing competition from upstarts in Latin America, Eastern Europe, and Asia.

Emerging economies are increasingly expanding their sector activities, including the Chinese government designating 20 cities as outsourcing hubs to attract more international investment.

However, according to the survey, only 16 per cent of Indian service providers see competitors from other emerging economies as a threat.

"Growing competition has transformed the outsourcing industry into a global race for market share," said PwC Managing Director Dr. Charles Aird.

“India's success as the world's back office has motivated other developing countries with well educated and under-employed populations to seek to duplicate their experience."

Other survey findings include:

• 70 per cent of outsourcing deals in 2008 were renewed at the expiration of the first contract, down from 72 per cent in 2007.

• Unrealistic client expectations and the lack of a client outsourcing strategy were the top reasons for contract terminations.

• "Nearshoring" has gained momentum among companies using or considering outsourcing services.

Department store chain House of Fraser is outsourcing its IT support to Capgemini UK in a seven-year contract set to take effect this month.

As part of the contract Capgemini will manage data centre services, applications support and development, service desk, desktop support and third party services.

It will also manage network services, which will be provided by Capgemini under a sub contract agreement.

House of Fraser says that its decision to outsource its entire IT operations will give it improved access to the wide range of IT skills and capabilities required to support its business plans, a more cost-effective IT support operation, and considerable IT procurement and financing benefits.

Let us pretend it’s not January 2010 – let us instead pretend it’s January 2009, and we are predicting what will happen in the year to follow.

I cannot conceive that many would have even considered the possibility that within six weeks of the new year, the Indian outsourcing industry would be in complete turmoil over the largest ever fraud – i.e. the Satyam situation.

How many could have realistically predicted that by May 2009, EDS, the bastion of the sourcing world, would be bought by HP for £13.9 billion, doubling its services business in one fell swoop? Who would have also thought that ACS would have been bought by Xerox, transforming their global proposition?

And how much of the trend reversal in the financial sector could have been predicted? Citibank and Aviva have proclaimed for years how important their captive offshoring operations were; how they formed a distinct competitive advantage and how they fundamentally disagreed with the prospect of outsourcing as a viable alternative – within six months of 2009, Citibank had sold its captive to Genpact, and Aviva had in turn sold its to WNS.

I don’t think many people really would have predicted that!

So, today, the dawning of 2010, what do we think we will be talking about this time next year? Will the ongoing expectation that one of the principal Indian outsourcing companies will buy a major European player eventually become reality? Will innovation come back into the forefront of the market’s thoughts as a renewed priority and not continue to be shunned in favour of basic cost reductions? Will cloud computing really start to mature, or will there be a horrific security disaster from using cloud-based technology in sourcing that delays its wider uptake, or worse, leads to ongoing distrust of the concept?

Will there be an unexpected, or even aggressive, merger of two or more of the major sourcing players?

Will multi-sourcing no longer be the flavour of the month as companies struggle to believe that multiple supplier relationships could be efficiently managed, when managing just one causes so many problems?

I certainly don’t know the answers to these speculations just yet, but hopefully during 2010 I will be able to keep you abreast of the latest rumours and happenings in the sourcing world.

So I trust you all had a Merry Christmas, and here’s wishing you a happy (but most likely unpredictable!) 2010!

The age of uSwitch took many companies by surprise. The fact that customers can simply ‘up-sticks’ and buy services from a competitor virtually instantaneously, still confounds many companies. An industry hit badly by this customer-led revolution is the utilities sector. Some providers have begun to offer increasingly attractive deals, hoping to tie customers in for long profitable contracts. The mobile phone industry, by its nature saturated, has responded to the switching culture with instant ‘gifts’ for taking out seemingly never ending contracts. Orange, for example, has recently introduced the 36 month contract tying customers to £10 a month for three whole years. Yet amid the price wars and contract battles, companies are in danger of neglecting a key component of the equation – keeping customers happy.

As the UK approaches the end (possibly!) of the recession, it would do well to consider this point. A widely reported survey from market research firm One Poll, released this year, found that six out of ten people had switched companies because of a poor level of customer service. Also, in a 16-country survey, Genesys Lab found that poor customer service costs $338.5 billion per year in lost business. It is clear that short-term promotions and long-term contracts are not the solution.

At the centre of all customer relationships is the ability of an organisation to communicate promptly, rapidly and usefully with customers. The ability to please a customer in the first instance, placate where things have gone wrong and provide support for technical problems are all part of a company’s commitment to each new customer. The recession has caused companies to lose focus as they go for the quick new business wins, and attempt to gain business at any cost. For example, can you ever remember there being so many sales and reductions on the highstreet before Christmas?

Of course there are other factors at play, for example, the continued move to internet retailing. These factors serve to confuse the most important issue - if companies want to properly adapt to the age of uSwitch and online shopping, they need to reassess how they look after their customers. Only by providing a consistent and outstanding customer service from end to end, can companies ever provide the added-value necessary to stop customers ending up ‘down the road. And this means polishing everything from the shop floor to the call centre.

IBM has announced plans to expand its Indian BPO business, having significantly cut its US and European workforce in 2009. It has been reported that the company will increase its Indian capacity by at least 5,000 people this year.

The IT giant currently operates outsourcing facilities in a number of Indian cities, including Mumbai, Kolkata, Pune, Hyderabad and Gurgaon, and indicates that any expansion will likely take place in existing locations. The company hopes to capitalise on an anticipated rise in demand for BPO services during the coming year, it said in a statement.

Selby Mascarenhas, IBM Poland’s senior advisory consultant, commented, "We plan to focus more in the services sector by opening more BPO centres in India."

Virgin Atlantic has signed a five-year agreement with SITA services to provide IT support for the airline. Under the five-year agreement, SITA services will provide Virgin with more than 100 sites worldwide in addition to taking over 40 contracts from previous suppliers.

The airline IT specialist will also supply international and domestic IP virtual private networks, voice-managed local area networks, cabling, core network support as well as vendor and service management.

According to the airline’s director of finance and business services, Tim Livett, the agreement is intended to improve service delivery while generating “significant economies of scale".

The deal, which forms an important part of Virgin Atlantic’s IT cost reduction strategy, is expected to be completed by this summer. “[Virgin] will have the added benefits of simplified supplier management, faster deployment, improved reporting and reduced incident resolution times. All hugely valuable in addition to the monetary savings” said the firm’s head of IT services, Matthew Billings.

Walgreens, America’s largest pharmacy chain, has signed a ten year finance and accounting outsourcing (FAO) contract with India’s Genpact.

As part of the contract, Walgreens will move its accounting processes and staff to Genpact, a move that will involve the transfer of at least 500 jobs.

The Genpact-Walgreens agreement will impact accounting staff at its offices in Deerfield, Illinois and surrounding areas, including Danville and nine smaller accounting locations across the US, reported the Offshoring Times.

Wade Miquelon, Walgreens executive vice-president and CFO, commented: ‘The deal will help us improve cost productivity and facilitate our growth strategy, while maintaining an agile and service-focused organisation’.

Laundry and kitchen equipment supplier, Miele Professional has appointed voice specialist GasboxDMG to provide a two-year lead generation campaign.

Under the agreement, GasboxDMG will deliver highly focused lead generation activity in addition to inbound customer service support, marketing response handling and contact management. The agreement is hoped to further support Miele’s sales and growth in the market.

Lead generation for the Miele Professional dealer network will be further enhanced by the use of GasboxDMG’s integrated email tool, delivering the ability to engage with prospects using personalised and relevant content.

“We are pleased to announce that Miele has re-signed the contract with GasboxDMG for the next two years. GasboxDMG continue to provide us with the latest technologies and the highest standards of leads in terms of both quantity and quality”, Les Marshall, commercial director at Miele Professional said.