Industry news

The Norwegian National Rail Administration (Jernbaneverket) has signed an application management services contract with Steria, worth an estimated 14 million Euros

In addition to providing local services to Jernbaneverket offices in Norway, Steria will implement an emergency management and new communication system for Jernbaneverket. Steria already supports Jernbaneverket with consulting and system development services.

Knut Frækeland, ICT Director at Jernbaneverket, commented,. "Steria will be responsible for ensuring that all Jernbaneverket employees in each of our offices in Norway always have access to the tools and services they need to complete their job. This is vital in enabling us to concentrate on our core activities," says Frækeland.

As a state-owned authority, Jernbaneverket reports to the Norwegian Ministry of Transport and Communications. The public rail network in Norway currently covers over 4,000 kilometres.

As part of a major transformation project on its mobile IT system, SFR, a French telecommunications company, has outsourced the entire system to Steria. SFR hopes the deal will improve operational performance whilst optimising costs.

The contract, signed for four years and worth almost € 100 million, involves Steria taking on the overall management of the IT production of this operator, covering all the front office applications (sales and subscriptions, CRM tools, marketing, invoicing) and the back office.

"We chose Steria for its ability to assist and speed up our transformation, while making considerable commitments for an entire area and in a standardised manner. This should enable us to increase our agility in managing our IT system and make real economies of scale, which are vital for our future investments. This partnership is a major asset to support our continued innovation policy for the benefit of our clients and thereby improve our attractiveness in an ever more competitive market," commented Emmanuel Erba, Purchasing Director for IT Systems and Services of SFR.

International consumer goods company, Henkel, has chosen Accenture to provide application development and maintenance services in Europe and North America under a seven-year application outsourcing contract.

Under the terms of the agreement, Henkel will outsource to Accenture its application development and maintenance activities, including all SAP applications, business intelligence solutions, customer relationship management programs and Web applications.

Accenture will provide the services through one of its Global Delivery Network centres in Bangalore, India.

Dr. Peter Wroblowski, Chief Information Officer (CIO) at Henkel, commented, “We are delighted to have reached a solution with Accenture that is based on state-of-the-art technologies and work methods and allows us to satisfy the demands of our IT users even more efficiently and cost-effectively.”

When it comes to payroll outsourcing dissatisfaction outweighs satisfaction in many vital areas. This is revealed in new research by HR Access that, for the first time, demonstrates the extent to which existing UK providers are getting things badly wrong. Although many of the businesses interviewed were satisfied with the impact and value of payroll outsourcing, the devil is in the detail. For instance, only 25% agree outsourcing had increased employee engagement and there was 100% consensus that current arrangements could be significantly more cost efficient.

Organisations reported five key areas of disappointment and if current vendors wish to improve their customer relationships, they really need to take this feedback on board. These five areas are failure to properly scope services, weak account management, inadequate handling of change requests, the absence of continuous improvement initiatives and poor communications.

Whether taken individually or collectively, these shortcomings have the potential to derail an outsourcing relationship. Without rapid reversal of this worrying trend, dissatisfaction will continue to grow and fester. The genuine threat is that clients will vote with their feet and select an alternative vendor; one with the philosophy, capability and vision to deliver the promised benefits of outsourcing. Surely this threat alone is sufficient for vendors to up their game?

Whilst the solutions to these five key issues aren’t complex, they do require careful planning and a change of mindset by vendors, plus a level of urgency and energy that isn’t particularly evident in the research. Such a change of mindset is arguably the sternest test for vendors that are somewhat set in their ways.

Of course, in an ideal world these issues would have been eliminated at the contracting stage and this is the key learning point for any organisation currently considering their first payroll outsourcing arrangement. Yet for existing clients there is a real change management programme to force onto the next review agenda.

Vendors need to buy into and adopt a few simple, yet vital principles. Thoroughly scoping prospective clients’ service requirements from the outset is an obvious change. And once clients’ payroll has been outsourced, vendors must maintain focus on responding promptly to change requests and driving through a proactive, continuous improvement programme. Furthermore they need to invest quickly in better and more effective account management, and in continuous, high quality, two-way communications.

These changes, if deployed well and with the right client-centric mindset, will enable vendors to begin building a reputation for delivering exactly what they bid for when it comes to cost, quality, change management and overall strategic value to the customer.

To download a free copy of the research visit http://www.hraccess-uk.com/payroll-solutions.html

Further to my blog last week on the difference between traditional outsourcing and cloud computing, I've received a deluge of comment and information. I couldn't possibly hope to include it all in one blog (or even two or three), but I'm passing on many of your emails to my colleagues at sourcingfocus.com, who hope to cover the subject in more depth in the coming months.

But I'd still like to share with you a sample of the insights I've received. Perhaps the most useful discussion came via an email 'chat' with Gary Barnett, partner and chief technology officer at research and consulting firm, the Bathwick Group. My thanks to Gary for his thoughts on this issue.

Part of the problem with cloud computing, he says, is that currently, it means "everything to everyone". Instead, it helps to think of cloud computing as a spectrum. "At the one end, you have full service provision; then software-as-a-service (SaaS); then utility computing - companies like Amazon with its EC2 platform that offer 'computing cycles' as a utility service," he explains.

But whether it's SaaS or utility computing, he says, the 'cloud' element implies a level of automation and virtualisation that hides the complexities associated with scaling usage up and down - a capability that he refers to as 'elasticity of supply'.

Outsourcers should be very interested in the whole spectrum, says Barnett. "At the service provision end, Kris Gopalakrishnan [of Infosys] is right to see both threats and opportunities. SaaS is the best way to reach down into the mid-market when it comes to offering services like managed email, customer relationship management (CRM), enterprise resource planning (ERP) and so on."

"At the utility end of the spectrum, meanwhile, outsourcing providers can exploit the technical elements of cloud (automation, virtualisation, elasticity of provisioning and so on) to deliver more cost-effective computing services to their clients, or more importantly, to provide clients with a clear idea about how the outsourcer is going to get all the efficiencies they promise."

"Most of my end-user clients won't be 'going to cloud', in the sense of moving their apps/infrastructure to cloud-based services," he adds. "Instead the cloud will 'come to them' - they'll buy in services that are delivered on the cloud, or an outsourcer will gradually transition their infrastructure to cloud as part of an outsourcing deal. Sure, some new apps will be developed for cloud - but there's a heap of legacy equipment in End-User Land that isn't going to shift to the 'cloud' any time soon."

In human years the offshoring industry as we know it is getting close to the prime of its life. It has grown from bouncing baby when doting customer service managers and CIOs looked on, excited as their costs fell thanks to those happy offshore agents and developers. Then came the unruly teenagers as vendor attrition rose, customer service levels fell and those at the other end of the line rapidly became unhappy with their new far-flung customer service people. Data blunders and security leaks then worried executives about their sourcing decisions and some publicly advertised their UK sourcing credentials. But outsourcing still continues apace and most would say the mature providers have overcome their early bugbears to become a ‘safe pairs of hands’. Offshoring is now 'fully grown' and is out there looking for new challenges, developing new ideas and new services. As a natural progression of this, the offshore outsourcing industry continues to clamber up the value chain into more highly skilled pursuits.

“The approach of only outsourcing "non-mission-critical" processes has become dated,” comments Stan Lepeak, Managing Director of Research for EquaTerra.

Indeed, it seems a natural progression of globalisation that offshore locations and providers will seek to provide higher level services. The larger providers become and the better local educations systems become, it is logical that staff originally happy to tap out mundane code or sell low level products, will require new challenges.

“Individuals in these offshore locations are hungry to learn, grow and be promoted and will switch organisations to gain this exposure if they do not receive it with the providers they currently work with,” says, Kulvinder Reyatt, MD of Europe and Asia, for RR Donnelley.

Local skills gaps are also a big issue. In the UK for example the lack of domestic IT expertise is a very real problem. Recent research by Vodafone found that more than a fifth of companies say they lack the IT skills needed for their businesses to thrive.

“Domestic talent pools are not big enough and they need to focus more on performing higher value added activities. For example analysis not processing and decision making not paper shuffling,” said Lepeak.

Offshore vendors have spotted the obvious opportunities and are continuing to offer new services to their customers. It is almost impossible to find an outsourcing company that still offers only low-end, high-volume outsourcing. Providers want the specialists processes and want the extra kudos, business and income that comes with it.

RR Donnelly, an age-old printing specialist, is one company that has captured the BPO zeitgeist, moving originally into low level print 20 years ago but now taking on more traditionally in-house or on-shore tasks. Creative communications, legal processing and research and analytics all fall under their offshoring menu, delivered from India, Sri Lanka and the Philippines and many European locations. The company has also developed offerings in financial management such as accounting, credit card applications and insurance claim management. The company even offers ‘Pitch assistance centres’ for large corporate, investment banks, consultancies and the like

While many of the ‘new’ services being offered by outsourcers might not have always been done in house previously, it is the offshore element that is new. So are buyers ready to offshore their PowerPoint presentations or legal documentation for example? Clearly some are otherwise the companies would not be offering such services, but the offshoring of such processes is still not widespread. So should companies be weary of sending their high-end processes off-shore?

“As an outsourcer I can confidently say no. However, in some cases there is a longstanding hostility between customers and suppliers, with the gap widening in the current recession,” said Dr Roger Newman of Mahindra Satyam. “The reality is that businesses need greater intimacy with their suppliers and for the supplier to be integrated with their business models if there is to be the mutual benefit required for long term success,” he adds.

The subject of management in high-end offshoring is something not to be overlooked. The switch-on, switch-off mentality of large scale outsourcing no longer fits with the often close collaboration now required. For example, imagine trying to refine an important presentation being developed offshore without numerous phone/video conferences. Likewise management of financial processes and data requires new in-house responsibilities, procedures and security measures.

“To successfully manage multiple BPO providers, companies need to take a number of sophisticated and often culturally challenging steps. Companies that successfully manage offshoring core or mission-critical processes look to create collaborative management models that share responsibilities, risks, and rewards, enabling both sides to reach their objectives,” comments Lepeak.

Assessing the possibility of outsourcing high-end processes begs the question how far should one go. Obviously you cannot outsource everything so surely there needs to be a balance. “You can't outsource everything - you need something on which to base competitive differentiation - but nothing should be "off the table" when it comes to considering outsourcing options,” says Lepeak.

The advice from providers is of course speak to them to gain a better understanding of what and how processes higher up the value chain can be effectively offshored. Even amongst old-hands at the outsourcing game, a reassessment of possible suppliers is likely to be a first step.

Sukhendu Pal, Principal Consultant at Centrix Consulting, comments, “All companies need to rigorously assess each of their functions to determine in which they have unique skills and sufficient scale and in which they don’t. Better assessment of competencies can improve a company’s strategic position by reducing costs, streamlining the organisation, and improving quality. Finding more qualified BPO service providers to provide critical functions usually allows companies to enhance the core capabilities that drive competitive advantage in their industries.”

The outsourcing industry has clearly come of age so end users must adapt to keep pace. However, in current economic circumstances, it will not take much to encourage executives to investigate what is now on offer.

The Government of Canada has signed a four year contract extension with CGI Group Inc. The US $78m extension covers the provision of engineering and technical services. The contract, originally signed in 2007, changes the existing arrangement from a Resource Based contract to a managed-services model, with a focus on outcomes.

“More and more government agencies are moving towards a longer-term managed services model with companies they rely on to help them succeed in their mission,” said Hicham Adra, Senior Vice-President and General Manager, National Capital Region. “CGI has been supplying IT services to the Government of Canada for over 25 years. We have a strong track record in government, and we look forward to continuing that with the services provided to PWGSC.”

The Korea Exchange Bank (KEB), the country's largest foreign exchange bank, has awarded IBM a five year strategic procurement outsourcing agreement.

Under the agreement signed in August 2009, IBM will provide to KEB a full range of enterprise strategic sourcing and procurement services, allowing the bank to focus on its core competency and competitiveness in the banking industry while achieving cost savings and improving industry compliance and internal control.

IBM will run KEB's overall sourcing and procurement operations end-to-end, covering areas of information technology, marketing, services, facilities and supplies. As part of the project, the company will establish and support the bank's purchasing strategies, improve the purchasing process and systems, as well as manage strategic sourcing processes and relationship with suppliers. IBM will also make purchasing decisions and settle payments.

The implementation of the procurement outsourcing project supports KEB's Zero Waste Project, which is an employee-engaged management campaign aimed to optimise the cost structure and enhance management efficiency. In addition to optimise the bank's operational efficiency, KEB also wanted to yield cost savings through an advanced, centralised and streamlined purchasing process conducted by IBM.

Telfort, a mobile telecommunications company in the Netherlands, has signed a five-year technology infrastructure and applications services agreement. Telfort hopes the outsourcing deal will augment business growth while improving quality and reducing operational costs.

Under the terms of the agreement, EDS will manage the development and operation of Telfort’s applications and infrastructure, amongst others to provide the company with improved agility and cost performance. As Telfort’s service integrator, EDS also will act as a single point of contact.

“In order for Telfort to grow our business in the low-cost wireless segment, it is necessary to adopt a cost leadership strategy and become more efficient,” said Marco Visser, chief executive officer at Telfort BV. “By partnering with EDS, we will be able to streamline our organisation for efficiency, providing us the opportunity to focus on new areas for growth.”

EDS will provide applications management services for Telfort’s critical business software applications, including new customer care and billing solutions focused on enhancing the customer experience. EDS also will manage the underlying infrastructure, including the network and data center, and provide service management and service desk services.

Although the UK can’t put a foot right in the eyes of the USA at the moment, there is one thing that we can get right, Cricket. Okay, so maybe the UK is not so good at political relationships, but who cares when there is sport! This week saw England win the Ashes and all bad news was forgotten. So the Round- Up will plough on with this week’s news with a spring in its step and brimming with positivity.

A trend the Round-Up has noticed this week, amongst others, is a surge of importance placed on improved customer services as a way of differentiating oneself from competitors. According to Fujitsu, 40 percent of CIOs see improved customer service as key during recession.

IT leaders are looking inwards as they seek new ways to deliver value amidst the recession, according to new research commissioned by Fujitsu Technology Solutions. The report, entitled “Dynamic Infrastructures and the Future of IT” found that more than half of the respondents prioritised the improvement of service levels when it comes to their investment in new technology.

However, this is not the main reason for Fujitsu’s visibility in the media this week. It seems the company may be in difficulty as it announced the plan to reduce up to 1,200 jobs of its UK operations. This measure is being proposed because of lower than anticipated revenues. It seems it is another knock-on effect of the lagging economy.

On a more optimistic note, (remember, just three paragraphs ago I promised springy steps cardiac positivity) interesting news came in the form of the U.S. National Guard outsourcing its training programs to CSC. It is promising that the training of America’s National Army is being entrusted to an outsourced IT provider. If outsourcing is good enough for the Army, then it is good enough for anyone!

And to end on an even higher note, Steria has signed a £45 million deal with the IPCC. The Independent Police Complaints Commission (IPCC) signed the ten-year contract with Steria to provide Information and Communication Technology.

Amongst other departments the IPCC also investigates serious complaints against HM Revenue and Customs, the Serious Organised Crime Agency and the UK Border Agency. The staff exercise police-like powers. So information and communication technology is a pretty important aspect of the department. The round-up is sure Steria will make sure no complaint goes awry.

But we’re not complaining this weekend in the UK as you well know. The August bank holiday has finally arrived and not a minute too soon. We’ll soon be welcoming tanned colleagues back into the office, packing kids off to school and wondering bewildered at where the summer went again. Enjoy the three days while they last!