Industry news

The City of Santa Clara, California, has signed a contract with Unisys Corporation to provide information technology (IT) and application outsourcing services. The five-year contract has an estimated value of approximately $20 million. The city can extend the contract for an additional two years at its discretion. Under the contract, Unisys will provide a full range of IT management and support and application services for the city government.

The Unisys services will support 15 city departments, administrative offices and utilities, helping more than 1,000 end users serve the city’s 117,000 residents more effectively.

Gaurav Garg, Director of Information Technology, City of Santa Clara explained; “The City of Santa Clara has a new vision for the way IT can add value to the business of municipal government,” He continued, “We want to see IT management services and expertise available on demand, wherever and whenever needed, to serve continually changing initiatives and public-service priorities.”

This week has been a tumultuous one for politics and outsourcing alike. The BNP were invited on the BBC’s Question Time for the first time ever, as a result of it’s European election win, whilst ITV’s Tonight program investigated the sale of British medical records offshore in India. All of this has put, race, culture and immigration on the political agenda. Whist this could have numerous benefits, it does inevitably put the image of the foreign ‘Other’ in the media. This poses the question: What effect will this have on outsourcing, and in particular offshoring?

In respect to Monday night’s ITV investigative reporting show Tonight, the NOA Offshoring Director, Mark Kobayashi Hillary, aimed to set the record straight by insisting the expose was a data issue not an outsourcing issue. He 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.” Hopefully the programme will not have harmed the hard the already perilous reputation of offshoring. No one wants to hear more of the protectionist sentiment that has played the media year.

On the issue of Britain, racist politics and how this will impact offshoring, the effects remain to be seen. The UK media has chastised the BNP leader and have described his views as unacceptable, unlawful, and more poignantly, un-British. The Round-Up can only hope that the BNP leader’s lack of support from the British public will translate in the way the UK continues to conduct its sourcing business.

It is also encouraging to see new outsourcing deals are coming thick and fast into sourcingfocus.com’s mailbox.

Simmons & Simmons, an international law firm announced a 12 month agreement with Integreon to provide legal process outsourcing. This is an outsourcing agreement that sees Integreon supporting the legal firm from its facilities in Mumbai (India).

There was also a deal struck this week between the City of Santa Clara and Unisys. The world-wide company will provide information technology and application outsourcing services to the Californian city. The five-year contract has an estimated value of approximately $20 million. Under the contract, Unisys will provide a full range of IT management and support and application services for the city government.

So far, so good, as far as offshoring and outsourcing goes. Let’s hope it continues to go from strength to strength, despite the ramblings of some how misguided politicians.

The U.S. Environmental Protection Agency (EPA) has signed a blanket purchase agreement (BPA) with CSC for information technology (IT) support. CSC is one of seven companies signed up to the BPA which has a seven-year performance period and an estimated maximum total value of $955 million for all firms.

Under the terms of the agreement, CSC will compete for task orders to provide services, including server and storage management, computing, geospatial support, IT security, call centre operations, telecommunications and video conferencing.

Despite these straightened economic times, compliance issues are still driving offshoring in the financial services sector and enterprises need to be sure they have the most efficient, and cost-effective, outsourcing strategy. For many this is a new opportunity to examine how the business works and improve it, to get it into a position where it can best take advantage of the upturn when it comes. But where are the top destinations, the most effective people and the greatest value for money?

The UK financial services sector sees itself as a mature market, because of the high levels of competition and international knowledge collected together in the City of London. Outsourcing for these firms is often just seen as procuring cheap people, rather than experienced knowledge workers who augment the local team. This attitude does not allow banks to get the best from their outsourcing deals. Although it may surprise many UK banks, Spain is emerging as a new, cost-effective and yet highly knowledgeable centre for skilled financial sector consultants. Perhaps large UK banks should now be asking themselves whether they have something to gain from the Spanish experience.

Once derided as an over-cautious approach to retail banking, the Spanish strategy has embraced the challenges of compliance, risk and IT investment which the UK has been guilty of putting off until the proverbial tomorrow. This over-caution may have stood the banks in good stead when it came to weathering the recent economic storm.

The system’s experience of complying with strict regulation has its origins in the Spanish government’s response to the fallout from reckless industry loans in the 1980s. These included tighter central bank control, a ban on off-balance vehicles and an insistence on making extra provision during boom times. Rather than being seen as an obligation, compliance was instead viewed as providing significant benefits with respect to financial performance, operational excellence and business relationships with partners.

Although the smaller banks suffered considerably from bad loans to the property sector, in terms of risk management the larger Spanish banks took a strategic approach, creating well-remunerated and long-term risk committees. As Emilio Botín (Chairman of Banco Santander) commented last year, “[risk management] consumes a lot of our directors’ time. But we find it essential. And it is never too much.”

In addition, and in stark contrast to the UK, real-time banking, rather than next day (mañana) reconciliation has already arrived in Spain. Strategic investment in modern platforms means that the consumer has access to real time reconciliation of their personal financial information, via multiple channels, including the ATM.

The experience of the last twenty years has created a knowledgeable workforce in the Spanish financial sector. One which Forrester identified in its Spotlight on Spain[1] report, where it recommends the country’s “large, well-qualified IT labor pool [and] world-class vertically-focussed services resources”. Noting the rise of Spain as an outsourcing destination, Forrester goes on to suggest that the country is an ideal nearshore complement for European firms outsourcing to India, or a first step for those new to outsourcing.

As the outsourcing sector in India increasingly suffers from attrition, wage inflation and skills shortages, its cost advantages are beginning to narrow against European rates. For the financial sector, Spain’s banking experience and strong cultural and linguistic ties with Latin America allow the potential to scale. This makes Barcelona, plus somewhere like São Paulo in Brazil, an effective alternative to India or Eastern Europe.

Successful outsourcers know that the so-called soft costs, such as travel time to the offshore destination, the impact of distant time zones and cultural differences, can have a significant effect on budgets. Correspondingly, close proximity and real-time collaboration can generate cost-efficiencies, reducing management overheads, travel costs and the need for repeated internal change requirements.

Forrester does not see outsourcing going away, claiming “there is no doubt that interest in remote IT delivery is on the rise”. So perhaps UK banks could benefit from tapping into the Spanish outsourcing solution and considering a new approach to compliance, risk management and investment in technology platforms? UK financial institutions need not adopt Spanish practices wholesale, but it’s time to face these issues, which the sector has postponed for years. City financial institutions could finally shake off their mañana approach to efficient banking and, during this difficult economic period, take advantage of the expertise and knowledge of their Spanish counterparts, through outsourcing.

Toyota Boshoku Europe, global automotive manufacturer, has chosen Atos Consulting, the global consulting practice of Atos Origin, to design and implement its European finance shared service centre. The new contract is part of Toyota's expansion in Europe. As a result of this project, Toyota Boshoku Europe will build its corporate core Finance solution, harmonizing financial reporting and reducing period closing lead-times.

Atsushi Toyoshima, Chairman & CEO of Toyota Boshoku Europe N.V. commented: “We have chosen Atos Consulting for its ability to lead international projects, and for its demonstrated expertise and capacity for innovation with Oracle solutions. With the leverage of Oracle Business Accelerators, Atos Consulting has been able to reduce implementation time from 18 to nine months, and deliver a complete solution for three countries."

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.