Industry news

Green IT has been on the radar of service providers and end users for some time now. Increasing regulations involving carbon reduction, energy efficiency and environmental impact have meant that green IT has crept up the boardroom agenda and is now probably one of the most discussed topics amongst C level executives. Analyst firms have recently been getting their teeth stuck into the issue and this week Datamonitor released a report entitled ‘Can green IT bloom in an economic downturn?’ CFOs are not keen on being put in a position where they have to hand over money in response to meeting government regulations, but would they change their mind if they could see that money making its way back into the coffers, with interest?

Over the past few years, green strategies amongst businesses have predominantly been half hearted initiatives. Organisations have been keen to appear to do something rather than to actually implement an effective strategy. Greenwashing became synonymous with big conglomerates and corporations were found to be making outrageous false claims about carbon neutrality, green infrastructure and other green fingered exploits.

Now however the paradigm has shifted. Greenwashing has lost its impact as stakeholders and the public have wised up to the real issues at hand and are adept at spotting phoney strategies.

Of course, any investment in time or money into the green agenda is spurred on by increasingly tougher government (or EU) legislation and not some altruistic need to save the planet. However, businesses are starting to explore whether there is a return on investment with initiatives which previously would have had CEO’s gritting their teeth as they watched their money go down the green drain. Green IT has become one such area where investment may mean efficiency and cost savings for many firms. The Datamonitor report has highlighted that organisations do not see green IT and cost-effective IT as mutually exclusive. Here is why:

The first area where savings are made is energy costs. Greener technology means less energy is used and the dial on the electricity meter doesn’t spin as fast. This may seem like a small saving, however when you consider the billions of pounds spent in keeping the world’s data centres running, a 10-25 percent energy saving means big bucks.

For vendors, investing into green IT may be one of the best moves they make in terms of winning new business. The majority of public sector contracts have rules and regulations with regards to the green credentials of a potential third party supplier. By investing in green technology, suppliers can make themselves as attractive as possible to green fingered government officials. Private sector end users are also not exempt from environmental regulation.

The Carbon Reduction Commitment is due to come into force in 2010 and businesses of all shapes and sizes will need to be aware of their emissions. Data centre outsourcing will increase as end users look to cut back their carbon by outsourcing it to the greenest suppliers. There is plenty of opportunity for vendors pushing a green USP.

Cloud computing is frequently being considered as a green IT tool. Companies are considering this virtualised route as a way of not only reducing the amount of old and inefficient servers they have, but also as a way of allowing employees to work anywhere and everywhere. Working from home (hotels or pubs are also very popular) schemes are allowing businesses to totally streamline the amount of IT they have and in turn reduce their carbon footprint.

Vendors are offering bespoke cloud computing applications that allow work to take place on a huge scale, meaning thousands of employees are able to work seamlessly with one another without having to switch on the office lights. Combine this with the reduction in emissions as a result of fewer workers needing to make the daily commute and cloud computing seems like an attractive green route.

Of course, all this comes at a price. Initial investment into any new technology is costly and if done without careful forethought can cause disruption to business. During times when IT budgets have been cut, the last thing on an IT manager’s mind would be to spend resources on helping the environment. However, businesses need to thoroughly investigate the ROI opportunities associated with clean technology and properly implemented green strategies. If people can show that being green can bring monetary benefit to a business then CFOs up and down the country will be prepared to listen to a proposal.

Displaying ROI in green technology will benefit both the business and of course the one thing that tends to be ignored in all of this, the planet.

The law is truly an ass, to paraphrase that famous Dickensian line. Though outsourcing in its current form was not prevalent at the time Oliver Twist was written, Dickens could not have known how perpetually right his turn of phase would be. One of the areas keenly affected by the ins, outs and peculiarities of the law is outsourcing. The trouble is that the law in many countries is based on a body of legislature hundreds of years old while outsourcing as a business process has only come to prevalence over the last twenty years. In effect, the law is still catching up with the outsourcing world, and changes in ‘standard business’ legislation can have unexpected and costly effects on the industry.

A recent example hailed from the European Commission, the part of the EU responsible for new legislative proposals. An update to the 1990 Merger Regulation, which defines the Commission's regulatory role for mergers, saw certain large outsourcing deals brought into the category of mergers and acquisitions. This means that where an outsourcing supplier is buying all or part of the IT assets being outsourced by a company (that has sales over $6.8 billion globally, $340 million in Europe and potential sales in excess of $340 million a year) could go to the European Commission for approval. This change extended certain deal negotiations significantly and even made it possible for suppliers to face anti-competitive scrutiny if they make too many acquisitions in the same sector

Phil McDonnell, head of competition at London-based law firm Addleshaw Goddard, comments: "You have got to build in some time into your procurement to give the supplier time to go through the hoops. There will also come a point where a regulator will say a supplier has too many deals in the same sector," he said. "I don't think we are at that point yet, but that is where it is heading."

This is clearly a big alteration and there have been many other laws which also force significant changes. Another such area was TUPE, the employment legislation designed to protect employees from suddenly finding themselves out of a job when, for example, a company becomes overly reliant on one client and then the client transfers work elsewhere. The regulations stipulate that an employee that has been working entirely on that one client be automatically transferred to their employment. The employee does not have to go but can if he or she chooses. Of course such changes had and still have big implications on the outsourcing world, for example in wrangling over accommodation of staff transfers, redundancy payments, and pension arrangements.

“The application of TUPE can have a very significant commercial impact on the deal itself, both on entry and exit if there are a number of employees whose employment (and therefore the liability to pay wages) transfers with the outsource,” commented Duncan Pithouse, Partner at DLA Piper.

The fact that the outsourcing industry is still relatively young means there is not really any legislation that is specific to the outsourcing space. It is the sector-specific and overarching business legislation that outsourcers need to be aware of.

“Whilst traditionally there has been no "outsourcing legislation" per se…there is a raft of legislation and regulation that affects an outsourcing arrangement, and which can apply on a mandatory basis in all of the countries that are "in scope" of the outsourcing deal, and that differ from deal to deal,” commented Pithouse

Indeed, legal hotshots in the outsourcing space make it their business to stay on top of the implications of new legislature on the industry. Meaning there is usually a lot of speculation and commentary in the run up to changes which in turn helps outsourcers plan ahead. So what are the key issues that the legal world is currently seeking to address?

It’s impossible to get through an article nowadays without some reference to the financial crisis, and to do so would be crass. The impact of a lack of ready finance has driven big changes in outsourcing.

“We have seen that the fall-out from the economic crisis of the past 18 months, and its particular effect on certain vendors, has driven a much greater appreciation of the risks involved in outsourcing key functions to an external party, which in turn has led to a greater focus on appropriate contractual protection, especially in relation to supplier financial standing and termination rights,” commented Mark O'Conor, another partner at DLA Piper.

Trust in business is a rare thing nowadays and outsourcing vendors are not escaping the spotlight. MiFiD, an update to the regulation of UK financial instruments that came into force last year again extended the necessary outsourcing due diligence process.

“The Markets in Financial Instruments Directive (MiFID) has amended the Financial Services Authority's rules on what constitutes a material outsourcing for a regulated financial services entity. As such, certain sourcing and outsourcing arrangements must now feature all of the provisions listed in Chapter 8 of the FSA Handbook,” O’Connor added.

An additional effect of the financial crisis has been a resurgence in protectionist thinking brought on by continuing mass redundancies. The more prevalent redundancies become, the more they are covered in the media which puts outsourcing directly on the agenda. Many companies are being forced into more outsourcing and specifically offshoring, to ensure basic survival. Though outsourcing is a business necessity in most cases, the public do not generally like it and politicians follow suit.

“[We are seeing] a tightening of immigration rules - for example the new requirement that overseas applicants for skilled employment have increased levels of qualification (e.g. a Masters Degree in the case of solicitors). This inhibits the ability of outsourcers to move the most skilled people to the locations at which they will prove most effective except on a short-term basis,” explained, Partner, at Pinsent Masons: Iain Monaghan.

While such changes, this a UK example, do not block sending jobs offshore, they certainly make things more difficult for outsourcing and offshoring to operate effectively. The rules also necessitate an increased understanding of rules around visas and work permits in outsourcing circles.

Outsourcers have clearly had to deal with a lot to derive those wonderful cost and skill benefits they covet. But there is something else rapidly breaching outsourcer’s legal horizons that is possibly the biggest re-thinking of the business they have faced to date. Environmental issues have been bubbling away on business radars for a long time now but years of mass inaction from government and business have brought the law into play.

“The push towards "Green IT" brings in a whole host of European and worldwide legislation linked to environmental concerns and climate change. These include the Batteries Directive, the suite of Directives known as REACH (concerning the regulation of certain chemicals) and the revisions to RoHS and WEEE Directives (the "lead directive" prohibiting certain non-biodegradable substances like lead solder in computers) which are relevant to ITO to the extent that these clauses need to be expressly included in the agreement.” Duncan

Legislation linked to the disposal of corporate purchases has been developing for some time and the WEEE recycling directive did cause some turmoil in 2008. The biggest impact of the green wave is still yet to come however. As governments finalise plans for carbon trading schemes such as the Carbon Reduction Commitment planned for 2010, challenges will emerge in the calculation of carbon usage across outsourced relationships. Increasingly green suppliers will likely also prove much more attractive to companies under green governments.

It’s clear that legislative changes provide regular cause for change in the outsourcing industry and also create numerous extra costs. But are the changes all bad? Duncan Pithouse sees it as more of a two way street:

“To the extent the changes drive a greater appreciation of, and treatment of, the risks of outsourcing, the changes are for the better. This simply means that the better prepared both customers and suppliers are, and the more appropriate the contract terms are, the better the ultimate - and long term - deal will be. On the negative side, the changes do mean that outsourcing becomes "harder" and organisations undertaking outsourcing, and those providing outsourcing services, need to have a deeper knowledge of legal landscape for their sector,” he said.

The key then is preparation, preparation, preparation. Outsourcers need to become increasingly legal-savvy and understand exactly which parts of the law, in any country, they are operating in affect their outsourcing deals. An eye on the horizon as new legislation is laid out, is also increasingly important.

“Be as prepared as possible and as early as possible and make sure that the contract is robust enough to protect from a change in law but flexible enough to adapt to changes. Plus the contract should anticipate changes in law and deal with how those changes will be catered for, and paid for. Without express wording, customers and suppliers may find themselves locked into protracted negotiations as to whether compliance with the new law should sit at the doorstep of the customer or supplier,” added Duncan.

With the cost reduction benefits from staff offshoring beginning to fade, software development expertise is becoming more important for Business Process Outsourcing (BPO) services providers. This is according to a new report from Ovum, the global analyst and consulting company.

The report, “The role of proprietary software in BPO”, highlights the increased use of software development in support of BPO services provision. It provides examples of BPO services providers including Capita, Atos Origin, and Tata Consultancy Services’ use of software development to enhance their BPO service delivery.

Samad Masood, IT Services senior analyst and author of the report, commented, “The extensive use of low-cost offshore resources by all BPO providers is serving to level the playing field across the market. Software development is the new battleground for BPO services providers who wish to differentiate their services.”

According to Ovum’s research, both IT services and BPO service providers are using software development within the “process layer” in order to improve delivery efficiencies without having to significantly modify their client’s underlying enterprise software platform.

In the same way, software development expertise is also key to a vendor’s ability to use cloud computing technologies to offer BPO services on a modular basis. This is giving rise to new models of BPO provision and serving to shift the competitive landscape between software, IT services and BPO services vendors.

“Proprietary software development is key for BPO services providers to future-proof their business, and provide ongoing cost efficiencies above and beyond the standard labour arbitrage provided by offshoring”, added Masood.

New research shows that customer service is thriving in the UK. More than 46 percent of consumers think Britain is best for how well we are treated, surging ahead of the US on 25.5 percent, says the Institute of Customer Service. Germany is a long way behind in third on 7.9 percent and other major European tourist destinations – France, Spain, Italy and Greece – all scored poorly.

Despite difficult trading conditions, almost 40 organisations or professions achieved a customer satisfaction score of 80 percent or above - the benchmark for world class customer satisfaction.

The study of 25,000 people revealed John Lewis is the best individual organisation and the first to top 90 percent in the ratings. Other top performers include the Fire and Ambulance Services, Waitrose, M&S, Mazda and the RAC.

Overall, the UK achieved an average rating of 74 percent in the Institute’s UK Customer Satisfaction Index (UKCSI), up from 72 in the previous study six months ago.

Jo Causon the Institute’s chief executive, said: “The results show organisations are trying really hard to keep consumers satisfied, but we realise from the wide range of scores across the sectors that there is no room for complacency.”

Even the much-maligned banking sector performs better, with more people content with the attention they receive in branches and on the phone – showing they are not inclined to blame ‘frontline troops’ for recent economic woes.

It is those who take customer service seriously that are reaping the rewards and will continue to do so beyond the current economic gloom, says the Institute.

The UKCSI allows consumers to rate service across 13 public, private and third sectors - covering professionalism, quality and efficiency, ease of doing business, problem solving and timeliness.

“Striving to offer world-class customer service gives your business the best chance of getting out of the recession sooner – and stronger" explained Causon. She continued, "putting customers at the heart of your business improves employee performance, which increases corporate performance and makes organisations more competitive.

“We know individuals and businesses have less money to spend and are more careful where they spend it. Research shows that taking customer service seriously can produce 24 percent more profit. Even a 5 percent jump in customer loyalty can boost profits by between 25 and 85 percent.”

Utilities props up the table as the worst performing sector, with an overall UKCSI score of 66, with national Public Services and Telecoms also with work to do.

At a time when many consumers feel the need to tighten their belts, Utilities was the sector with the highest proportion (22 percent) of customers changing their supplier. There was however a notable improvement in complaint handling in the sector, which rose to 63 percent overall.

Other key points to emerge from the Index include:

· The top performing sector is UK tourism.

· There has been a resurgence in popularity of fish-and-chip shops.

· Overall, women are happier with the service they receive than men.

· Local pubs, despite trade being hit by recession, have increased their popularity rating.

· Local plumbers come out top of small businesses, beating hairdressers, travel agents and shoe repairers/key-cutters.

· Utilities was the worst performing sector with an overall UKCSI score of 66.1, bettered by Public Services (national) on 70 and Telecoms on 70.1.

Top 10 success stories:

John Lewis (90.9 percent)

Fire Service (89.8 percent)

Waitrose (87.1 percent)

M&S - food (87.0 percent)

Ambulance Service (86.4 percent)

Mazda (86.2 percent)

RAC (86 percent)

M&S – non-food (84.5 percent)

P&O Ferries (83.9 percent)

Center Parcs (83.8 percent)

Affiliated Computer Services (ACS), has announced that it will supply an intelligent ticketing system for the first tram system in the Persian Gulf region, marking the company's first major contract in the Gulf. This follows ACS’ new Dubai offices opening in May this year.

The Persian Gulf's first tram line will have 13 stations and will be equipped with a 100 percent contactless ticketing solution, fully compatible with all public transport in the Emirate, including buses, metros, trams and waterbuses.

ACS’ public transport division, ACS Transportation Solutions Group, was selected to provide the ticketing solution by Alstom, which is building the tram system for the Dubai Roads & Transport Authority (RTA).

Under the terms of its contract with Alstom, ACS will supply all the ticketing equipment including validation terminals, control terminals and vending machines capable of issuing and recharging contactless cards and selling single-use contactless tickets. ACS will also develop a central management system that interacts with the RTA system, which assists with disseminating fare-setting rules, monitors customer data, manages restrictive lists and security keys, and distributes revenues.

Remy Redeuilh of Alstom, commented, "We selected ACS to provide a state-of-the-art ticketing system compatible to Dubai UAFC requirements. With high passenger flows expected on the Al Sufouh Light Rail Transit system, this new ticketing technology will play a critical role helping address congestion and traffic flow.”

Dr Pepper Snapple Group (DPS), a leading producer of flavored beverages, has signed a five year contract with HCL Technologies Ltd. (HCL), a leading global IT services provider, to provide IT application and infrastructure operations and management. HCL will deliver application support and maintenance, and manage and monitor infrastructure support and operations.

"After evaluating a number of global service providers, we selected HCL due to the strong team and comprehensive technical solution tailored to our business needs. With its Axon acquisition, HCL also offers deep SAP capabilities, an area of importance to us," said Virginia Guthrie, CIO and senior vice president of information technology for Dr Pepper Snapple Group.

The five-year engagement is expected to assist DPS in application support and maintenance, end-user computing, integrated service desk and network management. HCL will also deliver managed print services for DPS. The services will be delivered through HCL's partnership with Xerox.

Phones4U has signed a deal with Fujitsu Technology Solutions to drive cost out of its IT operations and support new growth plans. As part of a delivery partnership with Tata Consultancy Services, Fujitsu will implement a new PRIMERGY BladeFrame data centre solution.

In 2008 TCS made a joint bid with Fujitsu and delivered an innovative option whereby TCS would continue to manage the new, dynamic infrastructure but Phones4U would retain ownership of IT assets. This new model will be initially applied to the two Phones4U data centres housing its critical Siebel retail platform.

Steve Johnson, Director of IT strategy at Phones4U explains: “Fujitsu BladeFrame delivers a cost-effective hardware solution that supports open systems and delivers significantly reduced operating costs. Crucially the technology means we can dynamically reuse capability for development and testing of new services and gives us scalability for long-term growth.

“Fujitsu’s approach and the consequent costs have been consistent throughout the process. It has been flexible enough to deliver what we want without sacrificing quality and the engagement with other parties has meant a joined-up, integrated solution.”

Steve Taylor, IT Managed Services Director, Phones4U commented “The nature of this deal has allowed Phones4U to test our multi-party sourcing model in action. FTS, TCS and a couple of our other partners have worked together in a very effective way through the procurement and the implementation phases of this work. We see this as a model example of how our sourcing model will work in the future. FTS played a central role in the process and we expect the project to deliver significant benefits to our business.”

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To increase the value of the sourcingfocus.com twitter feed we will be tweeting as regularly as possible from the most important outsourcing industry events. Today one of the team will be providing updates from the Inaugural Sri Lanka Forum, finding out more from this emerging outsourcing destination

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BT Group and Tata Communications Ltd., two of the world’s largest providers of voice and IP services, have signed a voice services agreement as part of a global supply arrangement.

Through the five-year agreement, Tata Communications will become BT's primary supplier of International Direct Dial (IDD) and other voice termination services outside BT's own footprint countries and BT will become Tata Communication's main distribution channel for its IDD traffic into the UK, eventually expanding into other markets across Europe.

By providing each party with access to additional capacity and flexibility, the contract will allow BT and Tata Communications to benefit from each others’ strengths as they develop and grow their businesses in their respective markets.

Brian Fitzpatrick, MD of BT Wholesale Markets, said: “Tata Communications is a leader in the international wholesale voice business, making them a perfect partner to help us achieve additional economies of scale to those of our own. We look forward to maximising the opportunities this relationship presents to both organisations as we expand our portfolio of wholesale products and services and ultimately strive to become even more competitive with our pricing.”

BT will also have access to Tata Communications' routing capabilities and on-line management systems providing greater economies of scale that aims to improve BT's competitiveness in the international calls market.

HP will be the official technology provider for the upcoming Plastiki expedition led by adventurer and environmental storyteller David de Rothschild and his organisation Adventure Ecology.

HP joined the Plastiki expedition as the voyage’s official technology provider to inspire people to rethink waste as a resource. The Plastiki, a one-of-a-kind 60-foot catamaran created out of reclaimed plastic bottles, self-reinforced PET (polyethylene terephthalate) and recycled materials, is making its momentous voyage across the Pacific Ocean later this year.

HP will equip Adventure Ecology and the Plastiki crew with the technology needed to make the 10,000-mile expedition from San Francisco to Sydney. HP also collaborated with Adventure Ecology on its interactive activity and educational centre, Plastiki Mission Control.

“This partnership is not only of great significance due to the long-term mission of Adventure Ecology to promote and influence smarter ‘Planet 2.0’ ways of working, but also because of the exciting opportunity for us to help support HP’s ongoing commitment to reducing the environmental impact of its products, services and operations" said David de Rothschild, founder, Adventure Ecology. He continued "It is our shared vision to create a smarter, more sustainable ‘Planet 2.0’ way of living, through inspiration, education, storytelling and the empowerment of individuals. This partnership has all the right ingredients to create the agents of change that will help to sculpt our future”.