Industry news

More than half of telecoms companies plan to increase outsourcing in the next 12 months, according to research from Firstsource Solutions. 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. Telcos are also experiencing increased customer churn due to the search for better deals from competitors.

Those telecoms companies surveyed that already outsource reported substantial cost savings: 67 percent said that they had cut their costs by up to 40 percent through outsourcing, and nearly 20 percent reported cost savings of more than 40 percent.

Matthew Vallance, Firstsource's President Telecoms & Media and Financial Services, said: "Telecoms companies must continue to take cost out of their businesses, as we can expect consumers to take a cautious approach to spending for some time, in spite of evidence that the recession might be bottoming out. Outsourcing is a proven strategy for cutting cost directly and for transforming fixed costs into variable costs."

Although cutting costs will continue to be the main catalyst for outsourcing, telcos reported other important drivers, such as improving the quality of customer service (through tapping into a larger pool of experienced customer management staff) and lengthening the customer service day.

Nissan North America, Inc. has signed a multi-year information technology (IT) managed services contract with CSC.

As part of the contract CSC will provide service desk and end-user support covering desktop computers, personal digital assistants (PDAs) and wireless hand-held devices. CSC will also provide overall service management across all IT providers for approximately 40 Nissan facilities throughout the United States and Canada.

Xerox Corporation is acquiring Affiliated Computer Services, Inc. (ACS) in a cash and stock transaction valued at $63.11 per share. Under the terms of the agreement, ACS shareholders will receive a total of $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. In addition, Xerox will assume ACS’s debt of $2 billion and issue $300 million of convertible preferred stock to ACS’s Class B shareholder. On an adjusted earnings basis, the transaction is expected to be accretive in the first year.

As a result of this acquisition it is hoped that Xerox will increase its global standing and establish client relationships to scale ACS’s business in Europe, Asia and South America.

The transaction, which has been approved by the Xerox and ACS boards of directors and ACS special committee, is expected to close in the first quarter of 2010. ACS will operate as an independent organization and initially will be branded ACS, a Xerox Company. It will be led by Lynn Blodgett, who will report to Ursula Burns.

Lynn Blodgett, president and chief executive officer, of ACS commented: “We’re proud of our significant profitable growth over the past 20 years and our ability to manage our clients’ operations with a global infrastructure and workforce.” She continued “We also know that for ACS to expand globally and differentiate our offerings through technology, we need a partner with tremendous brand strength and leading innovation. Xerox offers that and more to bring our business to the next level while strengthening theirs.”

Many SMEs have simply not read or understood the service and support level that their IT contract provides. In many cases the in house IT department has not shared the risks with the business or, even worse, is unknowingly jeopardising the business through a lack of understanding and insight. Whilst most organisations now recognise that good technology is key to business success, from 24x7 access to email, to robust storage of sensitive customer data, many have no idea that such core functions will not be immediately restored in the event of a disaster under their existing arrangements.

IT Delusion

Most companies blithely assume that an IT support contract covers all the major issues – from email failure to data loss. But that is simply not the case. Look more closely at the not so fine print and organisations will be stunned to discover just how vulnerable the business is to server failure, severed connections and software glitches.

How many organisations recognise that failure of an email server could result in the business losing access to all email for up to five days? Most assume that restoring the server within hours is part of the service contract – but is it? If the hardware fails, the onus is likely to be on the hardware provider, not the service company, to repair the fault or provide a replacement, a process that could take days.

Failure to read the contract means that when problems do occur, organisations put the blame firmly on the IT department or support organisation, whilst suffering significant business loss. But has anyone asked the right questions of the IT support team – whether internal or external? Getting the right IT support contract requires a real understanding of the business risks associated with IT and demands technology service delivery and remediation is prioritised to match business needs.

Failure to do so adds significant business risk. Take a busy city centre bar. A brief power outage at 9am will have limited business impact: there are no customers and the till is not in use. Should that same failure happen at, say, 10pm on a Friday night, when the bar has perhaps as much as £10,000 in customer tabs, a loss of till functionality will result is massive financial cost as the organisation has no way of checking customers’ charges and payments.

Risk Assessment

To mitigate the risk associated with technology delivery, organisations need to identify the single points of failure across the IT infrastructure. Yet while businesses routinely assess the single points of failure in core operations, from manufacturing to distribution, they are patently failing to apply the same robust operational practices to IT. Take as an example a manufacturing company with 12 machines on the production line and, as a result, two machines – at £100,000 each – on system stand-by at all times in case of failure: a massive £200,000 investment that is rarely used.

Meanwhile this same organisation, with 150 employees, has only one email server. The company is sending 1000s of emails daily both internally and externally to customers and suppliers, yet there is absolutely no email resilience. If the single email server, or any one of its key components, goes down the business will stop until it is fixed. It is clear that no-one in the organisation has asked the right questions about IT risk.

So why are SMEs failing to take steps to understand IT risk? In part the problem is one of culture: individuals within the IT team are neither encouraged nor, to be frank, have the skills to map business needs with IT risks and availability. But continued failure to consider IT requirements in isolation from business need will compromise business stability and undermine the value of IT investment.

IT Insight

Mid-market and SME businesses face a real challenge: for any organisation with less than 250 employees, it is simply not possible to justify one full-time IT Director role. Yet far too many organisations of this size not only have an IT Director but also a team of up to three staff. More often than not these IT Directors are long term employees who have progressed to senior status through longevity and loyalty. As a result they may not have the strategic skills required and it is unlikely that an IT team of this size has the breadth of skills needed to manage today’s complex network and application infrastructure.

This expense of full-time employed, in-house IT staff is really not the best approach. Organisations should be considering best practice above all other factors. That means accessing the best skills as and when required in the most cost effective and efficient manner – from strategic direction to network support.

Organisations, of every size, need a team with the ability to deliver real risk assessment and strategic IT decision making. By opting instead to promote long term IT staff to a Manager/Director role, organisations probably end up with an individual who is overpaid to undertake the mundane day to day tasks associated with a small IT team, from plugging in cables and manning the help desk. In addition, the organisation is highly unlikely to have provided the support for this individual to have the resources, time or expertise to assess business risk or undertake strategic planning and long term IT budgeting.

This is simply not a viable model and is adding untenable risk to SMEs. Furthermore, unless organisations continue to invest in new technology, in-house skills will rapidly become out of date. In this fast changing technology environment organisations cannot possibly attain the breadth of skills required to support today’s complex IT requirements – from online order taking, to 24x7 email services, local and wide area networks, as well as business continuity – within a one or two person IT department.

So just what value are these individuals providing to the business? They are not generating revenue nor providing an essential administrative role. Indeed, combining a lack of skills with the organisation’s inability to accurately define ongoing requirements, internal IT departments are incapable of effectively managing third party service and support contracts, adding both further risk to the business and unnecessary cost.

Business Focus

As the recession looks set to continue towards the end of 2010, SMEs need to maintain and win as much business as possible, and can therefore not afford to take any risk at all. Businesses cannot continue to waste money on unfocused technology investments that fail to support short or long term business needs or mitigate operational risk. Nor can they justify third party supplier service contracts that fail to reflect true operational requirements.

A simple, but frank and honest IT infrastructure audit from a competent professional can provide immediate insight into the single points of failure. Now you need to translate that into simple statements, in business terms, that the board can comprehend. Put it plainly and clearly with real timelines. From the risk of how many hours or days of email downtime, to the implications of the loss of access to data and premises? This enables directors and management to determine and prioritise IT needs and investment based on real business requirements.

With this understanding, it is far simpler for an organisation to attain an IT service and support contract with a relevant and, critically, measurable Service Level Agreement. And, once in place, SMEs can look to build on this relationship to attain quantifiable technology value, including advice on strategic investment and long term budgeting.

It is this shift in emphasis away from a grudge purchase towards a demand for value that is essential for mid-market and SME businesses. All IT service and support contracts are not the same. Cost is obviously a key consideration but too many organisations are actually spending too much money on contracts that are failing to reduce operational risk. The objective must be an effective solution that reflects the organisation’s appetite for risk based on real, in depth understanding.

It is only by taking a step back, assessing and understanding the current levels of risk associated with existing IT deployments, that an organisation can truly determine its ongoing IT requirements and then put in place the technology, skills and resources to reduce operational risk and transform IT from a cost centre to business enabler.

We all know the world is changing at an ever-faster pace and on many fronts. While this rapidly shifting economic landscape is creating new business opportunities, it is also forcing companies to respond to new client expectations.

Whether this is fixing mobile technology on the move rather than returning it to the workshop, or providing a ‘same day’ response to a call about servicing, customer demands are growing.

All this is overlain by trends in globalisation and overseas innovation, as well as the emergence of ‘Generation Y’ both in the workplace and as consumers. Generation Y is impatient when service is perceived to fall short, they expect to have information on a product or service ‘at their finger tips’, and they require free and open access to a company’s knowledge base.

Thanks to Generation Y, ideas, news and information travels faster than ever before, with social networking sites delivering feedback direct to thousands of potential customers within minutes.

The reality is that UK business strategies need to be more agile then ever before. They also need to be alert to sector trends and the expectations prevalent within the environment they operate within. And they must adapt quickly to enable them to survive.

What this requires is a company-wide focus on customer service; a vital part of any and all transactions. This is where service providers should come into their own because managing this process in future is likely to be very challenging.

The world is becoming a more complex place, moving at an ever-faster rate.

I think that the big global conglomerates in future will be built around multiple offerings. And I believe that the requirement for agility, flexibility and dynamism will bring with it greater borderless collaboration between companies.

Outsourcing, I think will be far more, not less, common going forward; joint ventures and partnerships, on-shoring and off-shoring offering companies size and scope as well as a more “agile” business model.

This creates a scenario where customers and suppliers become part of a complex, interactive network of companies where, ultimately, who is “the customer” is not an easy question to answer, and where brand influence will need to extend beyond several companies in order to deliver the brand promise to the end user.

In the IT sector that Qcom operates within, there is already a complex web of customers and suppliers. We operate as an accredited service partner to manufacturers, providing customer support. However, our customers may be distributors, who sell their products to end-users through resellers, or resellers themselves; it’s a linked chain of customers and suppliers through to the end user.

IT manufacturers, resellers and distributors understand that customer after-sales packages add value, build customer loyalty, and impact directly on the bottom line. The challenge of delivering good service for everyone, however, has been made harder with the advent of the aforementioned mobile technology, the need to reduce down-time, and a demand for bespoke service packages.

Each of us needs to play our part in order to ensure our processes meet the needs of both customers and end users.

It is for these reasons that corporate thinking needs to be aligned (or realigned) around customer-centric activities and responsibility for delivery should rest with the Board.

There needs to be far greater awareness that customer-facing staff, such as service engineers, are important brand ambassadors. They can act as the eyes and ears of a company, capable by turns of spotting trouble brewing, and (just as importantly) identifying new business opportunities.

With this should come an understanding that around half of the modern service call is fixing the customer not the technology, educating the user on the best use of the systems they are operating.

In other words, product servicing is about people and every service call should be treated as a ‘moment of truth’ which can either add value or seriously damage a product/company in an instant.

Where all or part of a service operation is transferred to an outsourced supplier, it’s usually done to allow the client to concentrate on their core business, to move into new (unfamiliar) markets, or to allow them to complement the service they already offer customers in these areas.

Technical outsourcing expertise, for example, can help resellers and distributors enhance their profitability and it can support business development and expansion across the UK and Europe.

But the relationship needs to be managed and where possible, companies should be looking for this notion of borderless collaboration with their outsourcing partner.

Our relationship as an outsourcer goes way beyond being placed in a ‘supplier box’ with clients, or indeed just white labelling our services.

We are now at the point where we are invited to collaborate with clients when they are pitching for new business, helping to formulate strategy around areas such as customer service.

Achieving this requires the relationship to go far beyond that of supplier-client, but instead brings best of both companies to bear in order to deliver a superior outcome. And that, surely, will be a partnership that ultimately serves the customer better.

Her Majesty’s Treasury (HMT) has signed an information and communication technology (ICT) services contract with Fujitsu. The contract will be delivered as part of public sector Flex, a framework which allows Fujitsu - in conjunction with the Cabinet Office - to provide ICT as a shared service across the public sector.

HMT is the latest government organisation to form part of Flex and joins The Cabinet Office, The Children and Family Court Advisory and Support Service (Cafcass), Crossrail and The Office for National Statistics (ONS).

It is hoped that the ICT contract will raise support and service standards by implementing strict service level agreements and will help to improve productivity within HMT personnel by delivering secure remote working. As part of the contract some staff are expected to transfer across from HMT to Fujitsu under the Transfer of Undertakings (TUPE) arrangement.

Karen Delafield chief information officer HMT comments, “The decision to enter the Flex framework is one which will benefit the organisation in many ways. Fujitsu will help us to accomplish our vision of a modern, flexible, secure and resilient ICT service. The partnership will deliver significant efficiencies whilst also providing a level of flexibility and scalability which cannot be achieved by maintaining services in-house.”

The State Government of Andhra Pradesh, in India, (AP) has signed a five-year State Wide Area Network (SWAN) project with

Tata Consultancy (TCS). It is the country’s largest contract and will be based on the Build, Own, Operate, and Transfer (BOOT) model.

The SWAN project will enable the State government of Andhra Pradesh to start and run various e-governance projects and citizen services. The project will be rolled out in 12 months and TCS will then maintain it for five years. TCS is currently implementing SWAN projects in the Indian states of Chattisgarh, Tamil Nadu, and Bihar.

Dr. Sameer Sharma, (IAS) IT Secretary & Chairman Andhra Pradesh Technology Services, commented: “We are happy to partner with Tata Consultancy Services for this project. Andhra Pradesh has been in the forefront of implementing e-governance projects to take advantage of technology in improving government functioning. This ambitious APSWAN project is yet another initiative of the state government to take a wide array of government services to the common man in the remotest corner of the state.”

The Louisiana Department of Social Services has signed an ITO contract with Affiliated Computer Services, Inc. (ACS), offering citizens secure and convenient access to state benefits.

Under the six-year agreement, ACS will administer EBT for the Supplemental Nutrition Assistance Program (SNAP), previously known as Food Stamps; and Temporary Assistance for Needy Families (TANF). Recipients will receive benefits on the "Louisiana Purchase Card," which can be used at USDA-authorized retailers and ATMs.

As part of the contract, ACS will facilitate processing the state's child support payments; operating the Louisiana Customer Service Center, a full-service statewide call center for programs under the Office of Family Support; and supporting the Disaster Food Stamp program by establishing a customer service center to respond to citizen inquiries.

Vale S.A. global mining company, headquartered in Brazil, has signed a seven-year technology and services contract with HP to transform its technology infrastructure.

The new contract is designed to meet the needs of Vale’s global business by creating a green technology infrastructure that aligns with its environmental sustainability agenda.

Demonstrating a commitment to Brazil, the transformation projects will generate new jobs in the country. Additionally, to further support Vale’s sustainability agenda, HP and Vale plan to donate personal computers to local communities and schools where Vale has a presence.

Carla Grasso, executive director, Human Resources and Corporate Services, Vale S.A. explained: “Transforming and standardizing our technology foundation gives the Vale team worldwide access to leading technology that enhances business development while promoting sustainability and environmental responsibility.”

Don’t you just love it when you see a news headline that incorporates the launch of a ‘work-at-home’ initiative? Well I know I certainly do! What more could you ask for?

This is exactly what Convergys has announced this week. Apparently this has gone down well in the U.S. and Convergys is trying it in the UK. Bring it on!

Convergys has begun seeking UK clients to support the home agent rollout and is targeting clients who need UK-based agents or support in multiple languages.

The home agents receive calls ranging from billing and informational service to technical assistance from customers of Convergys clients in a variety of industries.

Candidates will require a quiet place to work inside their home (who has a quiet home?), a PC that meets Convergys’ minimum standards, cable or DSL high-speed Internet access, and a noise-cancelling headset.

However Britain’s Forensic Science Services’ are not getting such a cushy deal. They don’t get to work at home but they are said to have experienced an increase in efficiency and cost-effectiveness as a result of the recent work conducted by Capgemini UK plc.

Capgemini has upgraded the organisation’s core SAP system, installed a new costing and monitoring system and processed a new management information system for better visibility of customer service and financial outcomes. Well that’s got to make an improvement.

Not only is it now possible to work from home and Britain’s Forensic Science’s are up to speed technology wise, ferries are now using social networking platforms to improve service predictability. IBM has worked with Red Funnel ferries, operating on the South Coast, to use Twitter to keep travellers and road transport operators informed of their timing and whereabouts. There are no bounds to the social networking wave engulfing the world.

What a mix bag of outsourcing ingenuity. The Round-Up will be keen to see more of the same next week.