Industry news

The San Francisco Bay Area Rapid Transit (BART) has signed a contract with IBM to manage the systems that support trains, stations, equipment and operations. The use of the new software is expected to contribute to more efficient operations, improved service and enhanced passenger safety.

Travelling by the San Francisco BART provides an alternative to driving thus contributing to the number of cars on the road. With more than 346,000 passengers riding every day, the rail system connects San Francisco to cities in the East Bay and suburbs in northern San Mateo County. To continue to serve the public's growing transportation needs, BART is undergoing a vast modernisation that includes station overhauls, new rail cars, and route extensions.

Randall Franklin, Program Director, Business Advancement Program, Bay Area Rapid Transit commented: "There are thousands of people and parts responsible for making sure that our trains arrive on time and deliver our passengers safely to their destinations." He continued "Because we are managing an aging fleet while planning for the future, the efficiency of BART requires visibility across all of our assets to provide safe and uninterrupted railway services to our customers."

See the video of the IBM rail overhaul.

BBC has renewed a ten-year iPlayer support contract with Capita and Transversal. Transversal has been working with Capita to provide self-service technology to support the BBC’s Audience Services.

The BBC Audience Services contract includes the BBC iPlayer application through a ‘Help’ website service developed by Transversal. It allows users to get instant online answers to questions. The technology is also used for FAQ support for all BBC general queries.

When commenting on the contract Jonathan Rush, Head of Business Development at Capita for BBC Audience Services said, “The BBC audiences want and expect new communications channels across the range of BBC services. They’re ready and willing to use self service technology and we are meeting that demand head-on."

SwedishAmerican Health System, a major healthcare provider with headquarters in Rockford, Illinois, has signed a contract with MedQuist Inc. to provide transcription outsourcing and speech recognition editing services to the system's hospital and medical centre.

SwedishAmerican projects annual savings of approximately $500,000 as a result of the move to outsourcing and speech recognition, while improving productivity through the replacement of old technology.

Phil Wasson, Vice President and CIO of SwedishAmerican commented: "To meet our increasingly complex medical documentation needs, we determined that a vendor with the scale, scope, and experience of MedQuist was best."

Singapore’s People’s Association, a statutory board under the Ministry of Community Development, Youth and Sports, has signed a two year multi-million dollar ITO contract with Tata Consultancy Services. The People’s Association is a grassroots government organisation in Singapore.

Under the agreement, TCS will develop and maintain People’s Associations’ business and citizen centric applications. The contract is expected to enable higher process efficiency and staff productivity across the organisation.

TCS has an established presence in Singapore for over 20 years, and has over 30 customers including Singapore Airlines, Citibank Asia Pacific, General Electric, Singapore Exchange, Temasek Holdings, Government of Singapore Investment Corporation (GIC), Standard Chartered Bank, ING Bank and others.

The City of Houston, which spends more than $125 million per year on technology, has signed the contract with TPI in the hope that they can offer advise on operational cost reductions and improved service deliveries, including outsourcing, in-sourcing and hybrid sourcing strategies.

Richard Lewis, Chief Information Officer, City of Houston commented: "We selected TPI because of its reputation in the sourcing industry, wide experience in the Public Sector and proven approach to helping enterprises identify sustainable programs for optimizing their IT infrastructure services."

Vertex, an international Customer Management Outsourcing business (CMO), commissioned the research which clients in the private and public sectors participated in. The results concluded that consumers find the high street retail environment delivers better customer service than any other sector including its online cousin with 68 per cent of claiming it to be ‘fairly good’ or ‘very good’. This is in sharp contrast to Central Government agencies which were rated ‘fairly good’ or ‘very good’ by only 28 per cent of respondents.

While the research shows retailers and financial services (banks, building societies and insurance companies) are seen as the most trustworthy when it comes to protecting personal information, significant concerns remain with around a third still claiming they are ‘untrustworthy’. This lack of trust rises to an incredible 55 per cent for Central Government agencies.

The survey also confirmed the importance of a choice in the ways that consumers interact with organisations: 42 per cent of those surveyed actively seek to avoid face to face interactions with public bodies – a figure that is only exceeded by customers of utilities (74 per cent).

Other findings highlighted the major gripes of engaging with an organisation. Unsurprisingly “holding” or having to follow unnecessary automated responses topped the list (50 per cent) while the desire for first call resolution, and being dealt with by the person who answers the phone, was cited by around one in six.

Paul Sweeny, Chief Executive Officer at Vertex commented: “Although customer engagement is more complex than ever it’s important not to lose sight of the one consistent factor that makes for a great experience – the capabilities of the organisation’s people. In our experience, motivated, empowered and passionate customer service personnel make the biggest contribution to a brand’s satisfaction scores.”

Atos Origin, the global IT outsourcer, has been chosen to handle IT for the 2012 Olympic games in Rio. After Vancouver in 2010 and London in 2012, Atos Origin will also serve as the IT systems integrator for the Sochi Games in 2014 in Russia before delivering all back-end IT for the 2016 Olympic and Paralympic Games in Rio de Janeiro.

The ITO contract between Atos Origin and the Olympic Games is the largest sports related information technology contract ever awarded. It covers the Olympic Games in Salt Lake City in 2002, Athens in 2004, Torino in 2006, Beijing in 2008, Vancouver in 2010, London in 2012, Sochi in 2014 and Rio in 2016. As part of the contract with the Olympic Games Atos Origin manages the relay of competition results and information about athletes in less than 0.3 seconds to spectators and media around the world.

Atos Origin has already had a presence in Brazil for over 19 years and currently employs 1,500 people in consulting, managed operations and systems integration. In July 2007 Atos Origin was responsible for the IT at the Rio 2007 XV Pan American Games.

Recently, I've been blogging about the differences (and similarities) between cloud computing and traditional outsourcing. This generated some thought-provoking comments from Kate Craig-Wood, the managing director of IT hosting company Memset.

Cutting straight to the chase, Craig-Wood believes there are only three real differences - at least between cloud computing and IT infrastructure outsourcing. They are:

1) Shorter contracts: Hours, days or weeks ("at most, one month"), rather than months or years ("usually at least six months for traditional outsourcing").

2) On-demand capabilities: near-instant scaling up and down of available resources.

3) No up-front costs: Capital expenditure (cap ex) and installation fees, she explains, are absorbed into the rental charges. In effect that transforms the cap ex usually associated with IT infrastructure into operational expenditure (op ex).

"Modern 'managed hosting' providers like my company are largely synonymous with 'cloud computing' or 'utility Computing' providers," Craig-Wood argues. After all, she continues, a company such as Memset can provide a customer with anything from a single virtual machine to a large dedicated cluster, with a contract of one month and no set-up fees.

"We are blurring the line between traditional IT infrastructure outsourcing (for example, HP/EDS at the high end and Rackspace at the low end) and 'pure' cloud providers, such as Amazon EC2."

The impact for IT outsourcing providers is clear, she believes: cloud computing is exposing the true costs of computer resources - which, thanks to Moore's Law, are "really, really cheap".

According to Craig-Wood, "Cloud/utility providers are driving the commoditisation of compute and storage resources, thus eviscarating the outrageous profit margins enjoyed by the old guard of IT outsourcing providers."

It's a controversial viewpoint - and I have to admit that I'm still mulling it over. I guess it all depends on what services are provided around these resources, the level at which they are delivered, as well as the level of assurance required by many corporate customers. Kate claims that cloud computing "threatens the livelihoods of the big IT firms who have become better at selling peoples' time than actual IT services"; I, on the other hand, wonder if peoples' time is something many companies are still happy to pay for - if it frees up time for their own employees, or indeed, enables them to run a leaner workforce? What do you think?

One-quarter of the top business process outsourcing (BPO) operatives will not exist as separate entities by 2012, according to Gartner, Inc. Gartner said that market exit, acquisitions, and the ascent of new vendors will rearrange the BPO provider landscape in the coming years, and enterprises should look for warning signs when evaluating BPO vendors to mitigate risk.

“As providers are exposed to the economic crisis, loss-making contracts, and an inability to adapt to standardised delivery models, many will struggle to survive in their current form,” said Robert H. Brown, research vice president at Gartner. “Some will be acquired and some will exit the market completely to be replaced by dynamic new players delivering BPO as automated, utility services.”

Gartner has identified six key signposts to watch for that might herald the predicted market shakeout and identified which BPO vendors might be candidates for acquisition or outright market exit.

1. Chronically Unprofitable Portfolio BPO Deals

Some BPO providers are carrying unprofitable contract portfolios, largely stemming from too-much, too-soon pursuit of deals, without much thought as to how to transition them to a standardised, rationalised, profitable state of ongoing operations. Buyers’ vendor selection teams should gain insight into prospective providers’ deals to understand how profitable the vendor is. While most vendors will be reluctant to share this information, those that stand the best chance of longevity will realize that BPO is a partnership and being open about profitability can limit long-term risk to both parties.

2. Sustained Inability to Win Significant New Business or Drive Growth and/or Profitability

It is important to gain insight into the vendor’s track record of winning new business, particularly over a sustained period of two to three years. Handling multiple deals at once is a necessity in outsourcing, and buyers need to know that a vendor can successfully cater to the needs of more than one customer. A lack of recent new business activity can indicate that a vendor is choking on a backlog of business.

3. Loss of Visible, Established Marquee BPO Deals To Competitors Because of 'Recompetes' at the End of a Contract Life

For some exposed vendors, the loss of a major, or ‘marquee’, customer can be a leading indicator of trouble, especially if the remaining portfolio of business is small. It will always be prudent due diligence to seek and gain a reference from any current anchor clients to understand how committed they are to the vendor and their experiences in dealing with them.

4. Capitalisation Prevents Funding for Bidding on New Deals

Some heavily leveraged — or risk adverse — vendors may be unable to obtain the necessary investment needed to bid on a business opportunity, however attractive the proposition. In addition to the costs of the bid and proposal, large BPO deals usually require significant amounts of upfront cash investment on the part of the vendor. For this reason, more providers are making investments in platform-intensive approaches to BPO that require buyers to adopt their standard platform and service-level agreements, as opposed to the "lift-and-shift" strategy. Heavily leveraged vendors still invested in the lift-and-shift approach are the most likely to run into problems acquiring funding.

5. Exposure to the Banking and Finance Sector

The financial services sector accounts for about one-third of the total BPO market globally, and providers with significant amounts of BPO revenue from the banking sector were the first exposed to the credit crunch and ensuing financial meltdown. Subsequent mergers and acquisitions saw both current and prospective buyers of BPO "taken out of play" and this exposure could still leave many BPO providers vulnerable in the longer term. While exposure to the banking sector is by no means an absolute harbinger of doom, sourcing executives should be aware of the potential impact if their provider has a significant amount of revenue (more than 85 percent) as a financial services pure play BPO vendor.

6. Levels of BPO Contract Cancellation and Re-Insourcing Rise Even Higher

Cancellation rates among Gartner’s annual BPO buyer survey in 2008 rose sharply from the 2007 data. Therefore, Gartner advises buyers to build exit strategies into contracts and develop contingencies for contract termination, especially before signing the deal. BPO switching costs can be steep, so it’s important to understand contractual issue escalation procedures to ensure that all rational options are exhausted before initiating legal and/or termination discussions.

Additional information is available in the Gartner report Business Process Outsourcing Vendor Consolidations: Is Your Contract at Risk?

This week has been a turbulent one for the press. The ever increasing reality of the demise of print media is insurmountable. Last week News International’s the London Paper went to the newsroom in the sky after an epic battle with the London Lite. This week the UK’s Evening Standard announced it will be a free newspaper later this month, after more than 180 years as a paid-for title. The Standard has denied that there will be any immediate redundancies, although it will lose millions of pounds of revenue annually from the decision to drop the 50p cover price. It certainly doesn’t look good for us old journalists.

However, the Round-Up can’t sit in on a Friday afternoon moping when there is so much exiting sourcing news floating around. As long as the industry is booming, I am still in a job!

Before we look at all of the lucrative deals that have been signed, we must first look at the two interesting studies that have been released this week and are extremely pertinent to the sourcing sphere. The first is from Firstsource, who revealed the positive news that 55 percent of telecos will increase outsourcing in the next 12 months.

Cutting costs is the main driver according to the research of 85 leading telecoms companies across the world. The research showed that the recession has led to more than half of telecoms companies reporting lower customer spend, and over a quarter of telcos said that they have witnessed a rise in customers delaying payment of their bills. No wonder companies are turning to outsourcing.

On the other hand the second study, from Gartner, is a little less positive. It warns that one-quarter of top BPO providers will not exist in 2012. Apparently this due to a change in the BPO provider landscape which is as a direct result of market exit, acquisitions, and the ascent of new vendors.

Gartner has identified six key signposts to watch for that might herald the predicted market shakeout. Readers will be happy to know that a summary of which can be found in the news section of sourcingfocus.com.

Apart from the two studies there has been a plethora of ITO contracts that have been announced. These include Telfort signing with EDS; Nissan North America with CSC; and Her Majesty’s Treasury signs a contract with Fujitsu. Phew, that is a mouthful. So actually there is not a lot to moan about this week. As long as business is sailing high, so too are my spirits!