Industry news

After the last Round-Up, it would be hard for this week not to be a walk in the park for outsourcing news. So, continue reading safe in the knowledge that I have no colossal announcements to make. Before I commence this wondrous journey into the chasm of all things positive and exciting, I must first highlight one (just one) not so positive piece of outsourcing news.

I am more than certain that you are all aware of the effect the economic downturn has had on the industry (yes, that old chestnut). This week saw a new report from TPI that said the number of outsourcing deals awarded fell 7.5 percent from the first quarter to the second quarter to a total of 135.

The TPI Index, which follows commercial outsourcing contracts of US$25 million or more, found that the market in the first half of 2009 had 11 percent fewer contracts with 22 percent lower total contract value than for the comparable six-month period in 2008. However the report also highlighted that IT outsourcing is showing early signs of stabalising. It seems the trend towards smaller outsourcing deals continues apace.

Right, now that is out of the way we can take a look at the exciting outsourcing prospects reported on this week.

Firstsource Solutions have conducted research that shows more than half of telecoms companies (55 percent) plan to increase outsourcing in the next 12 months. As always cutting costs is the main driver for telcos’ outsourcing strategies, according to the research of 85 leading telecoms companies across the world.

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.

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, including through tapping into a larger pool of experienced customer management staff, and lengthening the customer service day. Telcos also want to reduce customer churn. I told you I would have some exciting news.

Even more exciting news comes in the form of fibre optic cable being laid in East Africa this week. SEACOM, a private sector funded undersea fibre optic cable, has finally gone live across East Africa bringing super-fast communications to a previously satellite-only country. Local businesses are expecting significant benefits from the new 1,28 Terabytes per second (Tb/s) cable as large cost reductions and new connectivity spreads across the region.

The cable system, linking south and east Africa to global networks via India and Europe, overcame thousands of miles of rough seas, Somali pirates and huge technical difficulties to be switched-on across Tanzania, Kenya, Uganda and Mozambique this Thursday under the eyes of the global media. Thankfully, the launch went without a hitch with key SEACOM executives giving live broadcasts and presentations using the new system.

Local outsourcers are pushing the region as the newest location on the block for offshoring. East Africa is another area I did not flag up as an up and coming outsourcing destination but their ICT Board and BPO Society have big plans says otherwise. Once again, I stand corrected.

News just in means I may have to break my promise. A decidedly sticky situation has arisen for Spinvox, that erstwhile doyen of the voice recognition industry. The BBC says they’ve been using offshore BPO providers to listen-to and transcribe for their voicemail-to-text service. Spinvox maintain the service is almost entirely done via clever computers with some human interaction where the technology needs help learning words and so on. Who’s telling the truth is yet to be decided. The debate rumbles on as we go to our virtual press; watch this space and the twitterverse where a increasingly interesting multi-logue is occurring, to find out the latest.

So, readers, did I deliver? Was that a short, but incredibly sweet journey through the weeks outsourcing news? Fingers crossed the good news keeps flooding in so next week will be as much of a pleasure to write (not comparative to the pleasure you as readers have experienced in reading it of course!).

Have a great weekend.

More than half of telecoms companies (55 percent) plan to increase outsourcing in the next 12 months, according to research from Firstsource Solutions, a global BPO provider. Cutting costs is the main driver for telcos' outsourcing strategies, according to the research of 85 leading telecoms companies across the world.

Revenue pressure is driving decisions to outsource. 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 of 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, including through tapping into a larger pool of experienced customer management staff, and lengthening the customer service day. Telcos also want to reduce customer churn.

Vallance added: "Even in a recession, top quality customer services can help telcos retain their higher value customers and even encourage them to take additional services. Telecoms services are becoming more complex through the convergence of products and services. This requires outsourcers to have an in-depth understanding of the industry and the capabilities to provide the kinds of specialist customer services and support infrastructure that convergence demands. Outsourcing can also boost revenue, through reducing customer churn, encouraging customers to pay their bills on time, and by selling new products to them with a sales-through-service approach.

"These issues are driving telcos to consolidate their outsourcing suppliers to a handful of strategic partners. The demand is for outsourcers that have proven expertise, understanding of the sector and the ability to provide their clients with a global model, enabling provision of a comprehensive range of high quality services, flexible to scale up and down according to demand, and at lower cost than in-house."

SEACOM, a private sector funded undersea fibre optic cable, has gone live across East Africa today bringing super-fast communications to a previously satellite-only country. Local businesses are expecting significant benefits from the new 1,28 Terabytes per second (Tb/s) cable as large cost reductions and new connectivity spreads across the region.

The cable system, linking south and east Africa to global networks via India and Europe, was switched-on across Tanzania, Kenya, Uganda and Mozambique early this morning under the eyes of the global media. The launch went without a hitch with key SEACOM executives giving live broadcasts and presentations using the new system.

The launch of SEACOM opens up unprecedented opportunities, at a fraction of the current cost, as government, business leaders and citizens can now use the network as the platform to compete globally, drive economic growth and enhance the quality of life across the continent.

Commenting on the finalisation of the Project, Brian Herlihy, SEACOM CEO, said: “Today is a historic day for Africa and marks the dawn of a new era for communications between the continent and the rest of the world. Our tireless efforts of the past 24 months have come to fruition, and we are proud to be the first to provide affordable, high quality broadband capacity and experience to east African economies. Turning the switch ‘on’ creates a huge anticipation but ultimately, SEACOM will be judged on the changes that take place on the continent over the coming years.”

One area that is being touted for significant growth is the East African services industries. Kenya has been making significant noises over the last few months in the shape of KenCall, the country’s largest contact centre. The company opened a UK office last month and expects interest in offshoring to Kenya and other East African countries to boom over the next few months. The benefit of cheaper communications will also be keenly felt.

Eric Nesbitt, Chief Operating Officer of KenCall, commented: “Overnight, comparatively speaking, we will see a huge cost benefit and a marked increase in service quality," he said. "We have been spending an average of £20,000 a month on our satellite communications. Once the fibre optics go live, that will come down something like 85pc, to £3,200."

The Bank of Beirut has signed a five-year contract with IBM to provide a recovery solution for the Bank’s London subsidiary. Now, should a disaster occur, the solution will enable the bank to consistently and reliably recover its data in a short time frame.

Martin Osborne, Manager Administration at Bank of Beirut said "We faced a challenge every time we carried out a recovery test, having to build our servers from scratch, including loading and configuring the operating system and restoring the data. This created a strain on our IT resources and we realised that we needed a more consistent and reliable data backup and recovery solution to ensure that we could guarantee the bank’s capability to provide increased resiliency and business recovery at times of need."

As part of the contract IBM will enable the bank to recover its data quickly, easily and consistently. Tests will be completed, ensuring that the bank meets its regulatory requirements and gains confidence in its ability to recover its London operations.

IBM will also deliver high levels of security and availability and help address stringent standards for data protection, business and systems continuity, disaster recovery and regulatory compliance.

Bank of Beirut is one of the largest banks in the Lebanon. Its London subsidiary which was established in 2002, but has operated in London as a branch for more than 25 years, provides private and corporate banking services for Bank of Beirut’s Lebanese customer’s operating in the UK and across the Middle East and North and West Africa.

A few months, I was fortunate enough to meet up with Rick Perry, head of international network planning at telecomms company Cable & Wireless. What I learned from Rick surprised me: that the laying of an undersea fibre-optic cable isn't just an impressive feat of engineering and financing, but also a process fraught with political tension, intrigue and high drama.

After all, he pointed out, an undersea cable can, in most cases, only be laid if a consortium of competing telecomms operators can set aside ferocious commercial rivalries and work together to fund, install and maintain it. At the same time, they must often work with the leaders of developing nations where political risk and regulatory complexity are a fact of life.

"A lot of games are played. Getting all the parties involved to agree on a single paragraph in the necessary documentation can take a whole day. Just getting a consortium together in the first place is a task in itself," Rick told me. (For more on our conversation, see my profile of Rick, which appeared in the Financial Times in June).

Rick's words to me on the huge problems involved in delivering fibre-optics to developing regions of the world came to mind again when I visited Nairobi in late June, as the guest of Kencall, Kenya's first international call centre company.

Kenya has long been impeded in the outsourcing industry by poor communications links to the rest of the world. At present, companies such as Kencall are forced to rely on satellite systems. While Kencall chief executive Nicholas Nesbitt insisted to me that call quality is pretty good over satellite when we met at the company's Nairobi headquarters, he also acknowledged that this is a turn-off for many prospective clients in the US and UK. "We've had companies walk away from us when they've heard we use satellite," he said.

As soon as Kencall can take advantage of fibre-optics, it will leap at the opportunity. "That will take the call-quality issue off the table entirely, enabling Kencall to compete on a level playing field with any other outsourcing provider in the world," Nick said.

Kencall is already preparing to make the jump, because two fibre-optic cable systems - the East Africa Martime System (TEAMS) and SEACOM systems - could be about to transform Kenya lives on an almost unprecedented scale.

In fact, the SEACOM system was 'switched on' today (for more on this, see news story, 'East Africa goes fibre optic'). Both systems, however, have faced considerable challenges along the way and will likely face more in future. When I met Jean-Louis Parmentier, chief operating officer of Seacom (a consortium of private investors) at dinner in Nairobi last month, he related to me how the company's cable ships had recently been attacked by Somali pirates (also reported in this Team Seacom blog entry).

A fierce rivalry already exists between his organisation and that running TEAMS (a joint venture between the Kenyan government, Abu Dhabi-based mobile operator Etisalat, and a handful of local telecoms and internet companies), which has led to much public sniping in the past year (although a future price war between the two would clearly be good news for Kenya corporates and consumers).

And it will still be months before either cable system is fully operational and connected to Kenya's national fibre infrastructure, which itself needs serious upgrading work.

With those tasks out of the way, however, the impact of lower-cost, higher bandwidth connectivity will be enormous - not just for companies like Kencall and the people they employ, but for all Kenyans.

President Mwai Kibaki has ordered a radical revamp of the government's ICT infrastructure, with the goal of making government departments more accessible to the population via the Internet. By contrast, his predecessor, Daniel Arup Moi, banned computers from government offices, I was told by Dr Bitange Ndemo, permanent secretary of the Kenyan Ministry of Information and Communications.

Above all, more reliable, low-cost connectivity will also allow a far greater proportion of the Kenyan population to get online, delivering incalculable social and economic benefits, and it is to be hoped, bridging the 'digital divide' that currently exists between them and their contemporaries in more prosperous nations.

The City of Irvine, California has signed a five year IT services contract extension with Affiliated Computer Services (ACS).

The agreement, worth US $18 million, will see ACS continue to manage IT operations and provide a broad range of services, including operation and support of the city's data centre, helpdesk and desktop support, applications support, and network management. In addition, ACS will provide consulting services to help the city, including its public safety department, align IT operations with business objectives.

"ACS has been a trusted partner to the City of Irvine for nearly 15 years, providing the city with excellent support and continued innovation," said Jan Stinger, information technology administrator for the City of Irvine. "ACS' expertise provides the city with a greater ability to focus our resources on serving our citizens."

The U.S. Defense Information Systems Agency (DISA) has awarded EDS potential five-year, US$34 million contract renewal, which will see EDS continue to support DISA’s Multinational Information Sharing (MNIS) program.

Under this contract, EDS, through its teaming partner, Harris Information Technology Corporation (HITS), will provide systems engineering and technical assistance to the MNIS Program Management Office.

Since 2004, EDS and HITS has supported the MNIS program management office’s day-to-day operations by providing life cycle system engineering and integration support services.

Hutchison Whampoa's 3G mobile telecoms business, part of the 3 Group, has extended its ITO contract with Perot Systems Corporation for three more years. Perot Systems has supplied Hutchison Whampoa with IT services for three years prior to the extension.

Under the extended agreement, Perot Systems will continue to provide ongoing maintenance and management of key IT business applications, including knowledge management and solutions in service activation support for the seven 3G telecommunication operators of Hutchison Whampoa's 3 Group.

The project will be driven extensively from Perot Systems' Bucharest, Romania facility as part of the company's global delivery network of applications, infrastructure and consulting solutions.

Financial terms of the contract have not been disclosed.

United Launch Alliance (ULA), the spacecraft launch services initiative, has awarded CSC, a new managed IT services contract. CSC will provide a consolidated service center and desktop and application services for the ULA enterprise. The agreement supports ULA's mission of engineering, manufacturing and launching rockets for the U.S. government and commercial organisations. The three-year agreement has an estimated value of US$9 million.

CSC's relationship with ULA, a joint venture between Lockheed Martin and Boeing, began in December 2006. CSC currently provides personnel support for ULA's help desk, desktop, server, network and application organisations.

Carmine Orsini, Vice President of ULA's Information Technology and Chief Information Officer, commented, "ULA looks forward to working with CSC in the journey to support our company-wide ethic called Perfect Product Delivery. Our primary goal is to optimize the processes and products we deliver throughout the IT value stream using continuous improvements techniques based on customer value."

The Honolulu based Rehabilitation Hospital of the Pacific (REHAB) has signed a five-year, $10 million, ITO contract with Affiliated Computer Services (ACS). Since 2002, ACS has been providing a full range of IT application and technology infrastructure services. REHAB is the only acute care medical rehabilitation organisation serving both Hawaii and the Pacific.

"ACS enables us to provide high quality IT services at predictable costs," said Clair Jones, chief executive officer for REHAB. "Extending our long-standing relationship with ACS strengthens our ability to provide outstanding care and service to the community. Our plans include installation of a new Electronic Medical Record system and the ACS team will be an integral part of this key initiative."

Under the renewed contract, ACS will continue to provide full IT services, including mid-range and server management, network management, applications management, service desk, and desktop management. ACS will also continue functioning in the CIO role for REHAB.