Industry news

It is with great sadness that sourcingfocus.com writes the final round up of outsourcing news in 2009. It has been a fantastic year in the quest to discuss all things sourcing related. There has been turbulence at times, but the industry has soldiered on and we find ourselves now at the dawning of a New Year. The end of the year is a time for reflection, and with that in mind, let us look back over the year that was.

In the summer the blockbuster film Slumdog Millionaire won eight Oscars and put India in the media spotlight. But Hollywood films are not the only things that have been putting India on the map. In the (equally glamorous) world of outsourcing, India continued to soar above the rest with 89 per cent of respondents in an EquaTerra report outsourcing their ICT services there.

The summer also saw the launch of 2009’s Outsourcing Black Book which, surely to the ire of many, brings offshore risk back to the fore. Sourcingfocus.com asked the experts what they thought in the news analysis ‘For whom the bell tolls’.

As we neared the end of summer, India’s glitz and shine waned rather dramatically. Reuters released a report which revealed that three executives at Satyam had been arrested for alleged involvement in the company’s accounting fraud. India’s main investigative agency said in a statement that it had arrested the vice president, senior manager and assistant manager in the company’s finance department on Sunday. Only time exposed how deep the fraud went.

Another strain on the outsourcing industry came in the guise of Barack Obama’s controversial offshore tax avoidance crackdown. The US president, who campaigned relentlessly on the issue of closing offshore loopholes, said the steps he announced would raise $210bn (£140bn) over ten years and "make it easier" for companies to create jobs in Buffalo, New York, rather than in Bangalore, India. Just when we thought it couldn’t get any worse!

Looking back, the sourcing industry has had a lot to contend with over the past year. Despite this, the industry has been going from strength to strength. As I mentioned last week, it seems we have all taken a leaf out of Santa’s business model. Sourcingfocus.com hopes all readers enjoy their Christmas break and looks forward to when we meet again in the New Year.

Europe overtook North America as the biggest outsourcing spender in the world for the first three quarters of this year, according to a TPI report.

Europe’s G2000 companies outspent their US counterparts by $1.2bn, and are on course to end the year as the highest-spending for the first time.

Overall, North America and Europe dominated the rankings with United States and Canada at No. 1 and 3, respectively, and six European countries making the top 10 - the United Kingdom (2), Germany (4), the Netherlands (6), France (7), Switzerland (9) and Denmark (10).

While other markets are growing slowly but steadily, the report found that India, at No. 13 and China, No. 21, have experienced a rapid rise in spending among their G2000 companies. Brazil, in increasingly prominent sourcing players, emerged at No. 24 as the highest-ranked country in Latin America. The report also found that Latin America has the fourth-highest market opportunity among the regions with $3 billion in additional ACV potential.

"Understanding the global outsourcing market requires up-to-date information on local and regional dynamics in every part of the world," said Melany Williams, partner and managing director, TPI Momentum. "This report offers on-the-ground detail and analysis by TPI experts and advisors to help service providers and others identify and pursue the most promising opportunities - wherever they might lie."

Readers can find out more about the report here.

The cost of outsourcing for end-users within the UK looks set to increase as country begins to come out of recession, research has suggested.

The operating costs associated with areas such as real estate and staff are set to increase over the next 12 months, according to the report from technology consultants Ovum.

This will lead to more staff employed on a permanent in-house contract and could force outsourcers who want to retain the best staff to up pay, in a move which will pass increases on to clients.

Ovum lead analyst Peter Ryan said: “Onshoring centres in North America, Europe and Australia/New Zealand, are already seeing vacancy rates that are substantially higher than usual.”

Significant onshore opportunities for outsources will still exist however, according to the report, particularly in areas that have been hit by the recession.

Healthcare company GlaxoSmithKline (GSK) has signed a five-year outsourcing agreement with HCL Technology division HCL Axon.

Under the agreement, Indian based outsourcer, HCL will provide GSK with systems integration, SAP implementation and IT consulting services for the international company.

The appointment comes a year after Indian-based HCL Technologies’ acquisition of UK based Axon.

"This is an important win for us, it keeps our objective of becoming the largest global SAP-based business transformation provider on track and confirms the rationale behind the merger with HCL technology.” said Mr Steve Cardell, President, HCL Axon

The French National Center for Scientific Research (CRNS), has signed a six year deal with three specialist outsourcing suppliers to manage a range of its operations.

The three companies sharing the maintenance of the CRNS’s information systems are Capgemini Sud SAS, a subsidiary of the Capgemini Group; Logica, an IT services company; and Bull, a specialist in large infrastructures both open and secure.

As contract leader, Capgemini will lead the overall operation, while Logica will act as a joint consortium member. The group will handle third-party applications management and outsourced IT systems for finance and accounting activities, plus the Human Resources and salary management system for the Center.

This new contract will see the group managing corrective maintenance of IT systems, as well as outsourcing, for two particular IT systems: Sirhus, for human resources administration and salary management for CNRS employees, and BFC for budget execution monitoring, spending, projects, revenue, financial monitoring of research contracts and both general and analytical budget accounting.

BNY Mellon Asset Servicing has announced it is to expand with the establishment of a global outsourcing group to cut costs for clients.

The group will aim to build on the company’s project management and technology expertise in a bid to better service its current outsourcing arrangements.

The new outsourcing set will be able to combine admin and bookkeeping, as well as other back office taste, with middle office servicing capabilities, to cut down on costs for clients.

BNY Mellon Asset Servicing chief executive Jim Palermo said: "Outsourcing solutions have long been an important part of BNY Mellon's offering to investment managers and other financial institutions worldwide.

“As an industry leader in technology and client service, BNY Mellon has further focused and strengthened our capabilities and today is uniquely positioned to meet firms' needs in this space."

The British Airways (BA) contact centre is overwhelmed with calls from thousands of concerned customers fearing for their Christmas and New Year flights following the announcement that BA staff are set to strike from next Tuesday.

However, it has been reported that the airline has refused to draft in additional seats to handle the calls.

BA cabin crew announced last night they would stage a walkout from December 22 to January 2 threatening as many as 650 flights a day from Heathrow and Gatwick.

Preceding this announcement customers found themselves waiting for up to an hour to get through to BA customer service staff.

A spokesman for the airline said all the information which agents are able to give out is on the website. He said: "A lot of the calls are about refunds and we cannot give information about refunds until we know whether there are any flights which will definitely be cancelled."

BA still plans to try to avoid the strike and has refused to say which flights are at threat of cancellation, leaving call centres in Manchester, Newcastle, Cyprus, South Africa, Delhi, Nigeria, the United States and elsewhere inundated - with no plans to increase existing teams.

Customers due to take flight during the period are being contacted by email or phone, and information on the website is advising that decisions on flight cancellations are yet to be made.

The Association of Train Operating Companies (ATOC) has renewed its IT outsourcing contract with Capgemini in an £18.5m contract providing support to its reservation system from 2009-2019.

Steve Pickman, projects director at RSP said: “Capgemini has provided us with a reliable and cost-effective service over the years which has played a vital part in assisting the development of modern rail retailing methods. I am therefore very pleased that we will be continuing to work with them for a further ten years.”

Under the ten year agreement Capgemini will provide IT infrastructure, application management and infrastructure management support to the reservation service.

In order to effectively handle increasing public demand for the national reservations service, the contract renewal will also feature a refresh of the existing HP and IBM hardware upon which the current reservation system runs.

The Philippines is set to take advantage of the amount BPO employees spend in shoos, by placing more business process outsourcing offices in molls.

This will be one of the leading trends in the country’s real estate sector next year, according to the Philippine Daily Enquirer.

Commercial property and real estate services adviser CB Richard Ellis’ research director Victor Asuncion said the retail segment of the industry would continue to be strong throughout the coming year, not only because of the new malls that were scheduled to open, but also because of the BPO boom.

“Developers are identifying pockets of growth in various areas in Metro Manila and outside Metro Manila. They’re identifying niches across different areas,” he said.

Governance and careful planning are key to maximising the effectiveness of IT outsourcing for large businesses, two recent books have claimed.

The two books have outlined that governance can help companies navigate the complexities of outsourcing mission-critical operations to a third party, it was reported this week.

Rupert Kendrick, an expert in legal issues surrounding the use of technology, has written Outsourcing IT: A Governance Guide, which states that the provision should be adopted in a way that supports, rather than hinders, business goals.

Jimmy Desai's work - IT Outsourcing contracts: A Legal and Practical Guide - shows how organisations have overcome challenges arising from putting technology in the hands of third-party providers.

Mr Desai is a partner in a City of London law firm and has been advising on IT outsourcing contracts for more than ten years.

Earlier this month, studies by Research and Markets found that the IT outsourcing sector is expected to grow next year, driven by an increase in mergers, acquisitions and competition.