Industry news

Monday night’s ITV investigative reporting show ‘Tonight’ investigated the sale of British medical records offshore in India. Reporter Chris Rogers demonstrated how confidential details of private medical consultations could be purchased from criminals in India.

Investigating for the programme, Rogers was able to obtain a ‘taster’ of 100 medical records after indicating an intention to purchase and a further 10,000 were offered if he could come to India in person to close the deal. Through his enquiries he found details could be purchased and was offered prices of £4 and $25 per individual record. All of the data was found to come from private clinics and none was determined to have come from the NHS.

In response to this revelation Mark Kobayashi Hillary, NOA Offshoring Director commented: “It’s useful for programmes like Tonight to be exposing these crimes, but not to disparage a largely trusted and successful outsourcing and offshoring industry. It’s important that this is understood to be a data crime, not an offshoring crime.”

He continued, “ The Indian service industry will probably feel slighted that they were chosen for yet another sting operation by a British journalist, but then India is an easy target, having such a large and successful IT and business process outsourcing market. But, the fact is that this problem is not dependent on location, such data theft could occur just as easily in Aberdeen as in Mumbai. The expose shows there are still some contact/processing centres behind the times which are letting the industry down and fuelling bad perceptions.”

He went on to advise the industry that, “The programme puts the onus on users of outsourcing to ensure they go to credible, reputable and mature suppliers. The industry itself has matured since the early days and good suppliers now have very strict policies to avoid any data theft. These include no USB or external email access, no paper and pens allowed; basically all avenues for data removal are taken away. The fact that the NHS is not involved in this scandal is testament to its use of such reputable, proven suppliers.”

TPI, the sourcing data and advisory firm, announced that the global outsourcing market experienced its strongest third quarter on record. However, results would have been substantially more muted without a handful of large contracts between telecommunications companies.

The Q309 Global TPI Index, which tracks commercial contracts valued at $25 million or more, recorded one-hundred and thirty-nine transactions during the just-completed quarter with a total contract value (TCV) of $24.7 billion. It was the highest quarterly TCV since the fourth quarter of 2008 and represented an increase of twenty-one percent over second quarter 2009 and forty percent over third quarter 2008.

However, excluding five transactions in which telecommunications carriers outsourced network operations to telecommunications service providers, TCV reached only $17.2 billion, roughly in line with the slower pace of the past four quarters. The market's year-to-date TCV of $62.6 billion remains 10 percent below the same point last year with the Telco-to-Telco contracts and twenty-three percent lower when they are excluded.

Mark Mayo, Partner and President, TPI Global Resource Management commented: "The outsourcing market's record third quarter wouldn't have been possible without a small number of significant Telco-to-Telco contracts." He continued, "Nonetheless, even without those deals, the TPI Index showed solid sequential improvement in TCV, steady demand for IT outsourcing, considerable growth in Asia Pacific and the best showing for mega-deals in more than a year."

The TPI Index results where as follows:

Overview:

In the third quarter of 2009, Network Operations Outsourcing accounted for $7.5 billion of TCV. This is more than thirty percent of the broader market's value. The impact of that activity was isolated in the IT outsourcing (ITO) segment. The TCV of the ninety-four ITO contracts awarded in the quarter reached $20.1 billion, a fourteen percent jump from the prior quarter and the highest total since the fourth quarter of 2003. When Telco-to-Telco contracts are excluded, however, TCV was flat with the second quarter and is down 12.6 percent year-to-date.

Demand for business process outsourcing (BPO) remained lacklustre in the third quarter as companies found it easier to pursue ITO contracts in the current economic climate than pursue large transformations of their Finance & Accounting or Human Resources functions or the Facilities Management and Financial Services Outsourcing deals that were popular last year. Year-to-date, BPO TCV is down forty-five percent compared to the same point in 2008 and the number of contracts is off twenty-five percent.

Regions and Industries:

The research showed significant differences in outsourcing market performance by region of the world. Asia Pacific awarded twenty-four contracts valued at $6.4 billion, a second consecutive strong quarter for TCV in the region and the third out of the last four in which it topped $5 billion.

In the Americas, forty-seven contracts valued at almost $12 billion were awarded in the third quarter, up sequentially more than one-hundred percent on the strength of Telco-to-Telco activity.

In Europe, the Middle East and Africa, sixty-eight contracts valued at $6.5 billion were signed in the third quarter, up modestly by number but down about 4 percent from the same quarter a year ago.

Outlook:

Mr Mayo explained:"The third quarter showed an unprecedented surge in Telco-to-Telco contracts and continued stabilisation in the rest of the market, and this occurred in a quarter that is seldom the best quarter of any given year." He continued, "Our day-to-day observations suggest that pent-up demand underlies a market that has been deferring decisions in an economic recession. Based on this, we think the market will begin to turn upward over the next six to nine months."

More information and presentation slides are available.

International law firm Simmons & Simmons has announced a 12 month agreement with Integreon, an integrated knowledge process outsourcing (KPO) and legal process outsourcing (LPO) company, to provide offshore legal support services. These services include document review, due diligence, document production, and research services. Integreon has appointed an initial team of five lawyers for Simmons & Simmons but the agreement provides for additional lawyers to join the team as needed to provide flexible capacity and accommodate growth.

Simmons & Simmons will outsource research and document review work, allowing the firm's associates more capacity to focus on higher level legal efforts. Integreon will support the firm from its 24/7 Mumbai (India) facilities, resulting in cost savings in the region of 50 percent for the firm. The firm will pilot the project from its London office, and then roll it out as needed to other offices.

Mark Dawkins, Managing Partner, Simmons & Simmons commented: "It is an explicit commitment in our strategy to be a firm that is embracing different ways of working, so that we can deliver greater value to our clients. The LPO project is one step on that road." He continued, "Our clients will appreciate the fact that we have taken measures to cut costs, but at the same time, continue to provide them with efficient and high quality services that can be adapted to their needs. We are a firm driven by client relationships."

Travelex Outsourcing Americas, foreign exchange, business payments specialist and provider of travel insurance, has launched a new customer care team designed to provide assistance to potential partners, such as banks, credit unions and travel agents, who are interested in selling Travelex products and services. The team will help potential partners during critical early phases of implementing Travelex products.

Tracy Hammock, Senior Vice-President, Travelex North America Outsourcing explained,"Prospective partners regularly have questions regarding our products and sign-up process." She continued, "We designed a specialised team to provide a high-touch approach to assisting new partners with the sign-up and implementation process so that it is as quick and streamlined as possible."

The Customer Care Team will be responsible for: answering questions related to all Travelex products or services; supporting prospective partners during the accreditation and contracting process; coordinating with various functional areas within Travelex to facilitate smooth implementations and following up on any post implementation issues that require resolution to facilitate the partner's first sale.

NOA Director, Mark Kobayashi-Hillary, published his new book ‘Talking Outsourcing’ this month and the NOA arranged an event at London South Bank University on October 1st to launch the book.

Mark writes the ‘Talking Outsourcing’ blog for Computing magazine, possibly the most popular outsourcing blog on the Internet, and for this book he has collected together over 300 blogs spanning the period from 2006 to 2009.

At the book launch, Steria BPO Strategy Director, Hilary Robertson, and the well-known globalisation expert Philippe Legrain joined Mark to give the latest views on outsourcing trends. All three speakers took questions in a panel discussion at the end of the presentations, with Angelica Mari from Computing chairing the entire event.

Mark’s presentation featured him handing out McDonald’s food, scattering Monopoly money over the audience, footballs, a phone call from Lord Mandelson, and he also changed shirt four times – while speaking.

To take a look at the video of the book launch, follow these links: Angelica Mari introduction and Hilary Robertson; Philippe Legrain; Mark Kobayashi-Hillary and Question and Answer session.

When Indian outsourcing company HCL beat rival Infosys in the race to buy UK-based Axon for some £440 million last year, some commentators hailed the deal as the first of many "outbound" acquisitions of European and US IT services companies by their larger Indian counterparts.

So far, that's not happened. Recently, all the big M&A news in outsourcing sector seems to come from the US: Xerox buys ACS, Dell buys Perot.

Yesterday, Reuters India published a very interesting article, 'Indian outsourcers shy of blockbuster M&A', that suggests that this situation won't change any time soon. As the authors point out, India's near-$60 billion IT sector seems determined to focus on acquiring smaller niche companies, both at home and abroad, in order to tap into vertical industry opportunities in sectors such as utilities and healthcare.

As an alternative, they may opt to buy the local back-office operations of large foreign companies - just as Cognizant Technology did last week when it snapped up the Indian back-office unit of UBS for some $75 million.

So there's little chance of a big European firm like Atos Origin or Capgemini coming under Indian ownership in the near future. Infosys, which abandoned the Axon deal last year, has some $2.8 billion in cash - but CEO Kris Gopalakrishnan told Reuters that he's only looking to spend around 10% of annual revenues (around $400 million) on its next acquisition.

There are a number of very good reasons for Mr Gopalkrishnan and other CEOs who may be shopping around to hold back on their purchases - the major one being, of course, the current economic climate. But there are also the huge risks involved in integrating a large European headcount with an existing base of relatively low-cost staff to be considered. Differing business models and cultures will not sit together well without some considerable upheaval.

That said, Indian companies are eager to increase the value of the contracts they can offer companies in Europe and the US and to develop the kinds of high-level, consultative partnerships that the likes of Accenture and IBM enjoy with huge, multinational companies. In order to do so, they'll need to expand rapidly into new territories and also be able to attract (and retain) senior executives with experience in leading top-level strategic relationships. With that in mind, it will be extremely interesting to see how cash-rich Indian buyers proceed.

Automobile manufacturer Renault has awarded a three-year IT services contract to Atos Origin. The new agreement follows a contract signed in 2005 for which Atos Origin achieved all of its service quality, process standardisation and cost reduction targets. Atos Origin will take responsibility for managing 75 per cent of all Renault’s applications.

As a result of the work carried out under the previous contract, Renault’s and Atos Origin’s teams were awarded with a CMMI 3 certification.

Renault CIO François Gitton explained; “Atos Origin has demonstrated its ability to provide quality services on time and on budget. We will continue this partnership and are counting on Atos Origin to take our IT systems to an even higher level, in our drive for competitive advantage. We will need to be even more proactive and continue to reduce our costs.”

QBE Europe, a subsidiary of QBE Insurance Group, has signed a five-year agreement with Accenture to provide application development and maintenance services.

Under the terms of the agreement, QBE will outsource its application development and maintenance services activities to Accenture in order to help accelerate its current business transformation program. This transformation program is designed to improve service levels to brokers, customers and underwriters, and enhance operational efficiency.

Steven Burns, CEO QBE European Operations, commented: “It is critical that we look to shape our business to maximize the opportunities that a rising market will present.” He continued, “Our decision to partner with Accenture will help fulfill our strategic need to rationalise the platforms supporting our underwriting and product delivery and to simplify our legacy IT estate for future growth and acquisitions.”

Financial terms of the contract were not disclosed.

According to Gartner, Inc. organisations can save as much as ten to 20 percent of their Enterprise Content Management (ECM) costs by moving to a shared services model. Gartner analysts concurred that shared services have become a practical way for enterprises to provide ECM services, and vendors under pressure from the economy are now willing to work with the shared services model as a way to drive business.

The shared services approach is a delivery model in which an enterprise purchases ECM functions centrally and governs the types of services offered, while granting users a degree of ownership. The enterprise itself, or cloud-based service providers, can deliver these functions over the Internet, much the same as service-oriented architectures (SOAs) make reusable software procedures identifiable and callable. Shared services may also include support from experts on a particular topic, computing infrastructure and reference architectures.

Mark Gilbert, research vice president at Gartner commented: “Enterprises have long struggled with multiple ECM deployments which have, in turn, created information silos and caused enterprises to pay for separate sets of software licenses, maintenance and support skills for too many ECM vendors.” He continued, “The troubled economy has forced many IT organisations to cut ECM costs, but traditional approaches to consolidating are slow, complex and costly. The shared services — or ECM as a service — approach promises at least a partial solution.”

Mr. Gilbert enforced that information architects and business planners involved with ECM should consider the benefits and limitations of shared services, whether they are practical today and the steps involved in implementation. Gartner outlined the areas to look at which include:

Benefits of the shared-service approach

-The benefits of the shared-service approach include economies of scale, reuse of infrastructure, interoperability across the enterprise, speed of deployment, information sharing, and improved credibility for the IT organisation.

Limitations of the shared-service approach

-The limitations of the share-service approach include an inability to integrate existing information silos and the inability to provide enterprise-scale savings for advanced ECM functions needed by individual departments.

Are shared-services practical today?

-Shared-services make sense if planners can identify basic functions that almost every department uses or needs — for example, secure repository services and content-centric workflows.

Gartner highlighted the importance of IT organisations and business units working together to implement shared services. They identified five key steps for implementation:

-Assess whether shared services make sense

-Standardise on a single ECM product or vendor platform

-Define packages of ECM functions, based on the specific needs of departments and the potential user base

-Establish a governance model for service and support

-Form a competency centre for ECM

Additional information is available in the Gartner report - Use Shared Services to Control Enterprise Content Management Costs

The winners of the 6th annual National Outsourcing Association Awards were announced in a glitzy central London ceremony last night. The awards evening, held at the exclusive Park Plaza Riverbank hotel, was hosted by comedian Hugh Dennis and attended by the best and brightest of the outsourcing industry.

"Over the last six years, the “NOAAs” have become a landmark in the acceptance of outsourcing as an essential business practice and recognise the efforts of companies or people who have shown excellence in the field of outsourcing," commented NOA Chairman, Martyn Hart.

The 16 categories, which encompass every area of outsourcing, attracted hundreds of applications. The best entries were whittled down into a shortlist by a panel of outsourcing experts and the overall winners were as follows:

BPO Project of the Year sponsored by NelsonHall

• NHS Shared Business Services

IT Outsourcing Project of the Year

• Capgemini

Financial Services Outsourcing Project of the Year sponsored by HML

• Capita

Public Sector Outsourcing Project of the Year

• Capgemini

Telecommunications, Utilities and High Tech Outsourcing Project of the Year, sponsored by sourcingfocus.com

• Firstsource

Offshoring Operation of the Year sponsored by the NOA

• Exigent

Outsourcing Professional of the Year sponsored by Buffalo Communications

• Brodies - Andrew Rigby

• NHS Shared Business Services - Peter Coates

Outsourcing Service Provider of the Year sponsored by Invest Northern Ireland

• Exigent

Outsourcing Contact Centre of the Year sponsored by sourcingfocus.com

• Capita

Outsourcing Advisor of the Year sponsored by the European Outsourcing Association

• Stephenson Harwood

Offshoring Destination of the Year sponsored by Cognizant

• Philippine Trade & Investment - Philippines

Outsourcing End User of the Year sponsored by IBM

• AstraZeneca

Award for Innovation in Outsourcing sponsored by Buffalo Communications

• IBM

Award for Best Practice in Outsourcing sponsored by the OUT Group

• Centrica

Best Academic Achievement sponsored by NOA Qualification Pathway

• Graham Jump – Consolve Consulting

Award for Corporate Social Responsibility sponsored by RR Donnelly

• Centrica

Speaking at the awards, Martyn Hart, commented, “These awards are a great way for industry professionals to come together and celebrate success in outsourcing. Outsourcing has remained relatively steady during 2009 despite the recession and this positive performance this should be acknowledged. Looking forward, 2010 promises to be an interesting year, with the predicted uptick in the private sector set against inevitable cost cutting throughout the public sector. Though nothing is set in stone, it remains clear that following best practice will continue to increase the possibility of outsourcing success, whether for business enhancement or business necessity.”