Industry news

Leading Mexican business Grupo Gigante has announced it has extended its outsourcing contract with IBM for five additional years through.

IBM will continue to maintain the Group's key business processes, including its customer/supplier portal and support for all financial, administrative, commercial, logistic, operating and HR processes, as well as in-store support.

For Grupo Gigante's corporate headquarters and its subsidiaries, Gigante Grupo Inmobiliario, The Home Store and Tiendas Super Precio, IBM will be responsible for fully managing and monitoring the information technology (IT) infrastructure under two managed service modes, applications and infrastructure.

Adrian Valencia, CIO, Grupo Gigante said: "Relying on the support of a solutions and research centre like that offered by IBM at its Guadalajara IT Campus provides us with the opportunity to test new solutions that facilitate strategic business decision-making and bring more efficiency to our day-to-day operations."

Global IT company Wipro is planning a market expansion into new continents following predictions of an expected rise in outsourcing to India.

Wipro official, Suresh Vaswani said in a recent statement that the company was “looking to both expand and venture into niche markets in several countries including Europe, China and the Middle East”.

As a result of the firm getting a foothold in China, this would also provide advantages when looking to expand the business further in Japan, according to the company.

The Chairman of the National Outsourcing Association has defended the call centre running the national Swine Flu Helpline, following reports it had been misdiagnosing patients.

Up to 80 per cent (up to 800,000 people) of people who were told they did have swineflu, may not have actually had the illness, according to reports today.

The National pandemic Flu Service (NPFS) was set up under NHS Direct as a specialised service to take pressure away from its main phone lines. The service enables patients with flu-like symptoms to be assessed via phone or internet and be given Tamiflu vouchers.

However, the decision was taken to use private sector providers so that the service could be ‘flexed to meet the anticipated surge in demand’ an NHS Direct Statement says.

Martyn Hart, Chairman of the NOA, said this was not the blunder the right-wing press were keen to make out. “The fact is that the government doesn’t want swine flu to spread,” said Hart.

“So call centre staff will have been told to err on the side of caution when diagnosing. It’s also very difficult to distinguish clear symptoms described by a patient over the phone. The guys running this phoneline deserve a break.”

Scientists from the Health Protection Agency (HPA), said that at the height of the swine flu scare, the rate of correct diagnosis could have fallen to approximately one in 20. This means that in the busiest week of operation 40,000 doses of Tamiflu were dished out when 95 per cent – 36,000 should not have been.

Invensys Rail, a multinational provider of railway control and communications systems, has teamed up with Cognizant in a research and development (R&D) outsourcing deal.

The agreement will see over 120 rail professionals offered job transfers from Invensys’ existing R&D centre in Hyderabad.

Under the five year contract, Cognizant will manage the company’s R&D process for the UK, Australia, Spain, and the US.

In a statement Cognizant said it hoped the deal would “bring in greater operational efficiency and cost-effectiveness to its [Invensys] global product R&D processes, improve quality and time-to-market, and enhance customer experience”.

"This business relationship is highly significant for the ongoing growth of Invensys Rail in both mature and emerging markets," said James Drummond, Chief Executive Officer, Invensys Rail.

Financial terms of the contract were not disclosed.

The IT research and development (R&D) offshoring market in India is set to achieve a 23 per cent compound annual growth rate, reaching $21.4bn by 2012, according to a study by consulting firm Zinnov.

Zinnov CEO Pari Natarajan said, despite this growth in the R&D offshoring market in India there is a dearth of required talent pool, it was reported in the Offshoring Times.

Salaries constitute around 70-75 per cent of an R&D company operations and this was also impacting their productivity, said Natarajan.

A trend is growing in the US to bring call centre operations back into the country, having offshored the customer service operations to India.

Atlanta-based natural gas distributor AGL Resources is the latest to bring its call centre – which was operated by Wipro – back to the US, in a move which will create 75 new jobs locally.

It follows a succession of similar moves this year, from companies including Delta Airlines, United Airlines and auto maker Chrysler Group reported earlier in the year, it has been revealed.

This could raise a flag for Indian business process outsourcing (BPO) firms, according to publication tradingmarkets.com and follows the economic crisis and subsequent calls for companies to move operations and jobs back home.

"Given the current state of the US economy, now is the right time to invest in our country and create new jobs," said Hank Linginfelter, executive vice-president, utility operations, at AGL Resources.

Navistar and A.P. Moller-Maersk have both signed multi-year outsourcing contracts with IBM.

Navistar has signed a seven-year deal with the IT giant to provide the truck and motor home manufacturer with a range of IT services including data centre relocation, server and storage management, and database management services.

In the same week IBM, who already provide IT services for container ship operator A.P. Moller-Maersk, has had its contract with them extended until 2014.

Under these contracts, technology giant, IBM will provide both companies with a business model converting common IT processes to standardised components. These components can then be implemented across geographic and organisational boundaries.

Navistar CIO Don Sharp is optimistic about the advantages outsourcing IT solutions will bring to the company: “With facilities on five continents and continued global growth, it is imperative for Navistar to transform its IT infrastructure.”

Gone are the days of outsourcing and offshoring business processes and IT functions being a simple matter of choosing between a select few providers. The emergence of so many new providers with different skill sets, along with numerous potential offshore, nearshore and even homeshore locations has created a new complex global delivery paradigm known as multisourcing. But just what is multisourcing and what are the reasons behind its growth?

Multisourcing is simply the disciplined provisioning and blending of business services, most of the time IT related, in order to find the optimal set of both internal and external service providers. As a strategy, multisourcing treats every functional area as a portfolio of specific activities, some of which are then outsourced to third party providers while in house employees continue to perform other activities. Likewise, so-called multishoring or the use of multiple offshore, nearshore or homeshore locations can easily be considered an offshoot or, very much, a key component of any multisourcing strategy.

Benefits of multisourcing

Multisourcing offers an organisation superior flexibility and greater adaptability when choosing outsourcing solutions. In addition, multisourcing allows an organisation to objectively compare their internal shared services arms with external third party vendors. Thus, a larger resource pool is tapped and competition is initiated between providers to deliver the highest service quality for the best possible price.

Furthermore, with the traditional outsourcing approach of utilising one service vendor, there is always the risk that quality will deteriorate over time. Given the high costs associated with switching vendors and the subsequent loss of institutional knowledge after any switch, significant risks are associated with having all of your processes and projects tied up with one vendor. In the same manner, having one vendor who sends all of your work to one or two offshore locations may be considered unstable and pose significant risks to an organisation.

Potential risks and pitfalls

Although in theory, a multisourcing strategy offers less risk and fewer pitfalls than the traditional outsourcing model of using one provider, it is not a perfect solution. In fact, there are still potential pitfalls and added costs associated with a multisourcing approach. For starters, there is always the possibility that both the organisation and the vendor will under-invest in the assets necessary for the strategy to work or in the relationship aspects of the arrangement. After all, neither the client nor the outsourcing vendor is completely dependent upon each other.

Using multiple vendors may limit their capacity to use their economies of scale to achieve significant cost savings for organisations. Furthermore, there are inevitably larger management overhead costs associated with managing and monitoring multiple vendors. In addition, managerial turnover on the client side can, in fact, make it more difficult to switch vendors or to shift work between vendors.

Despite these potential risks, a successful multisourcing strategy can significantly reduce all of the risks associated with traditional outsourcing and have the added benefit of increasing operational efficiency.

Implementing a multisourcing strategy

Once an organisation has reached the appropriate maturity level and is ready for a multisourcing strategy, planning for, and implementing, a well planned strategy will be the critical key to success. The multisourcing strategy is a general outsourcing framework, consists of:

• Organisational Readiness

• Vendor Selection

• Contract Negotiation

• Project Planning

• Transition Management

• Metrics Tracking

Each of these phases has its own collective set of goals and challenges that will be critical to the overall success of any multisourcing strategy. In summary, successfully implementing a multisourcing strategy will still depend upon the maturity level and capabilities of the organisation seeking to pursue it and how well the implementation process is planned and then implemented and monitored. A successful implementation will not only save organisations money but it will also reduce the traditional risks associated with outsourcing and improve overall operational efficiency.

It’s fair to say that the number of people out of work in the UK - at 2.47 million - is at the highest level in 14 years. And more than one in three 16-24 year-olds, about 366,000, have been out of work for over six months. That’s the highest number of long-term unemployed young for 15 years. If things don’t start to improve, we could be facing losing another generation from the workforce, similar to what happened in the 1980s.

So what can be done to reverse this year-on-year rise in unemployment that the UK is currently experiencing? First of all, we must look at the skills people have to succeed in the workplace. And it’s here that a huge irony becomes immediately apparent. The UK’s young people are more skilled in IT than ever before - their use of social networking platforms, computer games, file-sharing and multi-media applications leaves most people over the age of 35 baffled. But they can’t operate most office systems. It would appear to me that their appetite for computer-based knowledge is being unexploited by our education system.

At Indicia Training we have seen the number of basic IT courses being booked by UK firms rise dramatically over the past few years. Courses on how to use Microsoft packages – the most commonly used computer programmes in business – have risen by 55% over the past year. And there is a simple reason as to why - more than half of all jobs in the UK are office based, and need these skills. Feedback from clients suggests that unfortunately, our young people are leaving school or college without these skills.

As such, private sector businesses are increasingly having to pay for the shortfall in these crucial skills by turning to private providers for training in basic business competency.

For many private sector firms, these skills mean a matter of commercial life and death. Take Scotland for example. Having done their bit to bring out the talent than undoubtedly exists in these intelligent and lively young people, the business manager wearily reads the words of the Scottish Government’s report Skills for Scotland: A Lifelong Skills Strategy “from cradle to grave.” One of the key areas was “a response to the needs of the economy and the demand of employers.” So far we have yet to see these plans put into practice.

Standards of literacy and numeracy in Scottish schools have been stagnant for nearly two decades - 25% of 17-25 year olds are illiterate - and many academics fear the new curriculum is unlikely to resolve the issue. If basic literacy and numeracy skills aren’t increasing, how can young people be expected to grasp the skills needed to survive in business?

And it seems the Government has realised they’ve got it wrong. Education Secretary Fiona Hyslop has recently been demoted, to be replaced by Culture Minister Mike Russell. Hyslop has come under fire for months now over everything from class sizes, teacher numbers to the new curriculum. In his reshuffle, First Minister Alex Salmond stated that education needed a “fresh look” – an admission that his Government got it wrong?

So why are companies happy to fork out so much on training? I believe that research from the Federation of Small Businesses, which shows companies that invest in training are two and a half times more likely to survive the recession, has spurred a lot of firms into taking action. And with the UK economy on track to come out of recession by the end of this year, according to a variety of business monitors, it will be these firms, the ones that have invested in training, who will be the ones that begin to see the benefits. They will emerge stronger than before and will be better placed than their competitors to capitalise on the available opportunities.

Australian telecoms company Optus has signed a three-year agreement with HP Enterprises in a bid to improve the performance and quality of its support services and customer functions.

HP will provide applications management for a number of key applications including certain customer billing, data warehouse and other core systems.

“By streamlining our applications environment, we expect to achieve significant service level and operational improvements across our IT portfolio, which will result in a better experience overall for our customers,” said Lawrie Turner, chief information officer, Optus.

“Optus needs an agile applications environment to innovate and meet the changing needs of its customers,” said David Caspari, managing director, Australia and New Zealand, HP Enterprise Services.