Industry news

The Renault Group has signed a three year outsourcing contract with Capgemini which will see the service provider take responsibility for managing the car manufacturer’s application lifecycle.

More than 180 Capgemini professionals will be involved in the project, including technical support, and applications development specialists.

The capacity for innovation the outsourcing service provider shows would serve to meet Renault’s needs, said its deputy CIO François Gitton.

"To meet the constantly evolving needs of users, a good knowledge of their industry is essential. This enables good alignment between the service provided, current projects and priorities. Capgemini has the functional and industry capabilities required,” added Gitton.

"This contract is a great opportunity to build a strong partnership with Renault. Our commitment can be seen in both the length of the project and in our ambition to assist the group in its future challenges,” added Alain Donzeaud, member of the Capgemini Group’s Executive Committee.

British outsourcing group Capita is embroiled in a row over claims that it overcharged schools for providing IT services. School software provider Bromcom said in a statement it had complained to the Office of Fair Trading (OFT) over Capita's Children's Services for overcharging by £75 million.

According to a Reuters report, Bromcom said it had made the complaint over what it called anti-competitive practices, including tying and bundling together software products which should be sold separately and charging inflated annual software maintenance charges to schools. It said it believed schools had overpaid over the past 12 years.

In a statement, Capita commented, "Capita Children's Services has already, through its solicitors, robustly rebutted the unfounded allegations made by Bromcom and we have had no contact from the OFT whatsoever with respect to this matter.

"We have served the education market for a number of years and grown our business through supplying innovative products to meet the changing needs of the market, maintaining good client relationships and working successfully with other suppliers."

Chiquita Brands International, an international fresh produce distributor, has signed a finance and accounting outsourcing contract with WNS, a large global BPO provider.

Under the terms of the agreement, WNS will provide finance and accounting back office services to Chiquita's business entities in North America, Europe and Latin America. The contract with Chiquita marks WNS's first foray into Latin America, where the company is currently looking to expand its business.

"This agreement with Chiquita represents a significant global expansion for the company into Latin America," said Anup Gupta, Group Chief Operating Officer of WNS Global Services.

Serving Chiquita in both English and Spanish, the scope of the agreement covers all finance and accounting processes including: general accounting; fixed assets; credit management; billing; collections; dispute management; cash application; accounts payable and travel & expense.

German manufacturing company Siemens will split off its IT Solutions and Services business by 1 July 2010 to form a separate unit, it has been reported.

In an interview with the Wall Street Journal, CFO Joe Kaeser said: “All options for the unit remain open, including an IPO or a joint venture.”

Analysts also expect to see a restructuring of the business, where a profit margin of 6.3 per cent in 2009 was far below expectations of 11 to 15 per cent.

The company recently revealed the group's fourth quarter results which saw a decrease on Siemens 50 per cent stake in Nokia Siemens Networks (NSN) which contributed significantly to its reported €1.98bn loss on equity investments. The company posted a fourth quarter net loss of $1.65bn which has been said to have contributed to the condensation of its IT solutions division.

Siemens have attributed this loss to a significant market deterioration resulting from reduced operator spending and tough competition from Chinese vendors. Siemens also posted a 25 per cent rise in operating profit, which was higher than expected.

Amsterdam Airport Schiphol has joined forces with IBM in a four-year contract to manage a baggage handling system to speed up the transfer process for bags bound for connecting flights.

Vanderlande Industries and IBM will design and build a system that enables transfer luggage to move quickly between all of the airport's baggage handling areas in an attempt to almost double baggage handling capacity and improve passenger satisfaction, while significantly reducing the handling cost per bag.

Mark Lakerfeld from Amsterdam Airport Schiphol said: "With this baggage transport system we will be able to manage the future growing stream of passengers and baggage."

Schiphol serves the third largest international air travel market in the world and is one of Europe's largest airports with over 40 million passengers a year.

At peak travel periods, more than 52,000 pieces of transfer baggage are handled at the airport each day.

Dr. Stephanie Morgan, psychology lecturer at Kingston University and author of ‘The Human Side of Outsourcing’, is conducting a survey with the NOA. The Cultural Focus Survey, is a continuation of Dr Morgan and Kingston’s research into the way culture and psychology affects the outsourcing industry.

Sourcingfocus.com would love to have reader input into this study to ensure its results are as representative and wide-reaching as possible. The survey only takes a few minutes to complete so, if you’re interested in the cultural side of outsourcing, please get involved. Sourcingfocus.com will cover the results of the survey in the new year.

CIOs across the private sector lack clarity and conviction around desktop virtualisation, with 49 percent of respondents believing that such technologies promise more than they can deliver, research conducted by Fujitsu has shown.

The view came through most strongly from companies with 1001-3000 desktops where 60 percent agreed that desktop virtualisation is over-promised. This view contrasts with larger enterprises (+3000) who are more optimistic with only 38 percent agreeing. Interestingly, manufacturing organisations remain the most sceptical with nearly two thirds believing desktop virtualisation is hyped versus their counterparts in retail, financial services and other private sector companies who remain more open-minded about the potential opportunities desktop virtualisation presents.

Commenting on the findings, Ian Bradbury solution design director at Fujitsu UK & Ireland said: "What's clear from the research is that the IT industry is doing its usual job of over-hyping the benefits of a technology without showing the real and tangible benefits it can bring. We know CIOs remain committed to technologies that combine improvements in both the experience and service to end users, yet also have a positive financial impact as well.

"The industry has been talking about desktop virtualisation in some form for over 15 years – from server-based computing to thin client and blade PCs. Our belief is that desktop virtualisation is coming of age, with the next three years being the time CIOs will really challenge the way they manage and deliver their desktop environment."

The CBI, the employer’s lobby organisation, and private sector chief executives, have urged the UK Government to look more seriously at public sector outsourcing. In a recent meeting on the state of government’s financial affairs members urged Alistair Darling, the Chancellor of the Exchequer, to balance his books two years earlier than he had first proposed and to consider the option of more outsourcing for the sector.

The CBI hope this move will open up the market for more public contracts and help the government improve the UK’s finances. Through greater reform, the employers’ organisation feels increased numbers of public contracts, will provide increased competition which will be a positive move forward. The organisation is open-minded about whether those contracts are won by private, public, or voluntary bodies, although individual members of the organisation's public services strategy board will have an invested interest in the outcome of any outsourcing deals.

Achieving a budget balance is a “big ticket’ issue, says Jonathan Cridland, the deputy director-general of CBI. However, he also expressed reservations about the government’s commitment to working with the private sector, “The reality we fear is that the government will continue to nibble at the edge and let little bits go out to market".

Outsourcing is good.

Well obviously I am going to say that. However, I am not the only one blowing the outsourcing trumpet. When Adidas recently revealed plans to outsource the manufacturing of NBA jerseys it was seen as a controversial move. Senator Chuck Schumer went as far as to claim that the company was sticking ‘America in the eye’ with its aim to outsource to Thailand. This claim was not well received by economy and business journalists alike.

I think the most poignant argument against Schumer’s outsourcing bashing was formed by Fox Business journalist John Stossel:

“What Schumer doesn’t get is that what really “sticks America in the eye” is his protectionism. Outsourcing is a good thing. When companies go abroad, they do it because the cost savings allow them to make better products for less. This means more profit for the company and lower prices for all American consumers and businesses. Shumer, like many of his colleagues, doesn’t understand economics”.

Here, here Stossel! I couldn’t have put it better myself. So in true ‘sticking’ it in Schumer’s eye style, I will proceed with the main sourcing news this week.

The London School of Economics made history this week when it claimed it has signed the first ever academic website management outsourcing contract. The contract was signed with iomart Hosting who will maintain the platform that supports the Universities website off site.

This week has also seen CBI, the employer’s lobby organisation, and private sector chief executives, urging the UK Government to look more seriously at public sector outsourcing. The public sector outsourcing debate is clearly intensifying as we draw closer to next year’s inevitable UK election.

Alistair Darling, the Chancellor of the Exchequer, was asked to balance his books two years earlier than he had first proposed, and to consider the option of more outsourcing for the sector. I wonder what Schumer would have to say about this. We’re pretty certain offshoring is also going to play a part. Perhaps we could offshore government expense claims Ed?

Finally, a report was released that showed more than one in five UK small and medium enterprises are considering offshoring next year. The research was carried out by ICM in November on behalf of SLASSCOM, the development body for Sri Lankan outsourcing.

I think I mentioned it last week but I am going to have to reiterate that 2010 looks like it is going to be a big year for the outsourcing and offshoring industry. Outsourcing is good.

Globalisation has meant sourcing from further afield (often the other side of the world). Yet there is growing consumer conscience, and more awareness of green issues thanks to the immediacy of the Internet. All this combines into increased supply chain risk. “Greening” the supply chain is a control mechanism which can help protect all parties in the chain from adverse brand and reputational attack, whilst contributing to the bottom line of supplier and buyer alike.

Up to 90% of a business’ carbon footprint derives from its supply chain. Therefore, applying quantitative performance targets - such as a 10% reduction of the carbon footprint of bought-in product/semi-finished goods/raw material over the next 12 months - can have a dramatic effect on the bottom line. However, if a supplier is already at or near best practice in terms of carbon footprint management, it would be unfair and unrealistic to impose a 10% improvement objective, so there needs to be a mechanism to fairly distribute the targets. Meanwhile this all has to be policed and reported on. Technology tools as well as management commitment are required here - after all, if you can’t measure it, you can’t manage it - where have we been, where are we now, where do we want to be, how do we get there?

Carbon reduction/greening the supply chain is good for the companies in the supply chain, good for the purchasing company, good for UK plc, and good for the planet!

Some points for consideration:-

 ISO 14001 is an environmental management standard imposed more and more on suppliers by such as local authorities, government departments and many large commercial organisations. In turn, suppliers are tending to pass on 14k certification as a requirement to their suppliers.

 Supply chain greening is often integrated with compliance with other risk areas in self-assessment forms, and/or assessed by internal or external audit teams e.g. health & safety, social/ethical, business continuity.

 The larger the supply chain, the more complexity. Responsibility in the public’s perception goes beyond first-tier suppliers all the way down to raw materials suppliers. Images on the 6 o’clock news of filthy chemical effluent pouring into a stream can be potentially disastrous to the brand, reputation and share value of a manufacturer – whatever protective contracts they have with their tier 1 suppliers.

 Legal compliance – increasing costs of non-conformances/corrective actions, fines/penalties, danger to brand and reputation, lack of confidence by investors, employees, suppliers.

 Performance benchmarking – internal and external.

 Reduction in energy use in the supply chain, GHG emissions improvements in the supply chain, trading carbon equivalents etc. all require data collation, analysis and reporting - data submission requirements to UK government as part of the Climate Change Agreement scheme, participation in the EU Emissions Trading Scheme, plus the UK government’s new CRC initiative.

All businesses simply have to do something about greening their supply chain – just how far will you go? How quickly? What software tools are available to help? What is the ROI argument and project payback period – a powerful business case must be presented to and accepted by the board, and then consistently driven through the supply chain.