Industry news

Nexus, Redbanc and Transbank, three financial service firms in Chilie, have signed a new seven-year, US $90 million technology infrastructure management agreement with EDS.

Under the new contract, EDS will work to consolidate the company’s five data centers. In addition to its global delivery centers in Argentina and Brazil, EDS will design and build a new high-efficiency data center near Santiago, Chile, to serve these clients. EDS also will provide end-user support and call center operations for about 1,200 employees in the companies’ locations across Chile.

“Today’s financial services industry moves at a rapid pace that requires the scale, reliability and agility that EDS provides while allowing us to improve service and deliver value to our customers,” said Carlos Johnson, general manager of Transbank. “We collectively selected EDS based on its solid service delivery and ability to respond to our technology needs in a secure, efficient and flexible way.”

Tech Mahindra, one of the largest dedicated telecommunications outsourcers, has enhanced its presence in Eastern India by setting up a new BPO Centre in Kolkata. The facility will focus on providing end to end customer service delivery to telecom service providers.

The new Kolkata centre will primarily be servicing Reliance Communications’ operations in the first phase of ramp up but will expand to service other clients in the future. The centre will have approximately 1,000 seats in the initial ramp up with 500 seats coming up in end July 2009 and another 500 in the end Aug 2009 time frame.

Reliance Spokesperson said, “We are delighted to partner with Tech Mahindra for our outsourcing requirements. We wanted to provide global level of customer support in India and felt that Tech Mahindra was the perfect choice for that. The company has unparalleled domain expertise in telecom sector & it also brings in immense International experience, having worked with top telecom players globally.”

Organisations looking for ways to cut the basic cost of doing business are fuelling steady demand for global outsourcing services, according to EquaTerra’s Q209 Advisor and Business/IT Service Provider Pulse Survey.

For most outsourcing buyers, the continued recession has shifted the goal of outsourcing from achieving competitive advantage to weathering the economic storm.

Stan Lepeak, MD of global research for EquaTerra, commented, “The fundamental motivation for outsourcing has always been cost savings. Now, that aspiration has become a mandate, driving narrowly focused, low-risk deals with specific cost-saving targets.”

Key findings from EquaTerra’s Q209 Pulse:

• Hot on the heels of a first-quarter surge in demand for business process/information technology outsourcing, demand in the second quarter remains steady with 46 percent of EquaTerra’s client-facing advisors citing increased demand (down only 3 percent quarter-over-quarter) and 65 percent of the service providers polled reporting continued growth in their new deal pipeline, up 8 percent over last quarter and 13 percent year-over-year.

• A majority of service providers polled (58 percent) cite the stagnant economic climate as fuelling demand for outsourcing, a jump of 20 percent from last quarter and the fourth consecutive quarter the percentage increased.

• Given the high-stakes nature of current outsourcing deals, EquaTerra’s Q2 Pulse polled both its advisors and service providers to pinpoint the most frequent cause of failure to meet outsourcing objectives. Not surprisingly, respondents flagged transition issues and observed that getting off on the wrong foot at this critical stage in the process typically proves to have a lasting negative impact.

• EquaTerra advisors pegged the two most common transition-related issues subsequently resulting in failure to meet cost-savings goals as being insufficient transition management by both parties and a lack of understanding of the deal/scope. Service providers (71 percent) attributed failure to meet objectives to an inability to form effective relationships and poor program governance during transition.

Since Q307, the last time EquaTerra polled to determine the hottest geographical destinations for both near and offshore outsourcing services, numerous factors have contributed to alter the global outsourcing landscape: the maturation of the industry and emergence of new outsourcing destinations; the expanded footprint of traditional offshore providers into emerging locations; industry upheavals caused by terrorism and financial fraud resulting in a flight to established providers and lower-risk geographic destinations; and prolonged economic recession, which has bolstered nearshore markets in South America and Central/Eastern Europe as U.S. and Western European buyers opt for outsourcing solutions closer to home where there is a perception of greater control.

In the Q209 Pulse, EquaTerra advisors and service providers identified India, Central/Eastern Europe and South America as the top three destinations for outsourcing, followed closely by the Philippines. While India remains the preferred location according to both advisors (61 percent) and service providers (60 percent), the level of preference has fallen dramatically, declining over 20 percent in last 24 months. India is still the top choice for IT outsourcing, but it has been steadily losing ground in business process outsourcing to emerging locations, especially China and South America.

This shift is attributed to the growing number of viable destinations coupled with the availability of outsourcing opportunities within destination domestic markets, and, in the case of South/Central America and the Philippines, desirable language skills. It’s important to note that while preference for India as a destination may be eroding, Indian service providers are still powerful players in the global outsourcing market and have expanded operations into emerging geographic locations to retain their competitive edge.

“What we’re seeing is the maturing of a worldwide industry and the emergence of a true global sourcing model where buyers deploy and manage global service chains just as they have global supply chains,” said Lepeak.

The Driver and Vehicle Licensing Agency (DVLA) has signed a four year contract for the not-for-profit IT services group, Eduserv, to provide them with managed hosting, web development and disaster recovery solutions. Eduserv specialises in providing IT solutions to the public sector and has worked with the DVLA over the past 6 years, providing managed hosting services for their corporate website (www.dvla.gov.uk).

Eduserv won the contract by supplying the DVLA with a secure hosting environment, essential Service Level Agreements (SLAs), including 99.9 percent application uptime, 24/7 support and disaster recovery.

Outsourcing is hard enough to get right when you are a big organisation. Now, imagine if you are a much smaller company, a Small to Medium-sized Enterprise (SME). If you are a company needing to buy a service from someone else on a small scale then you are not likely to think of offshoring it. You might think of outsourcing to an offshore partner, but for a small project there is no way you can go and personally check out the suppliers – the business trip might be worth as much as the project cost.

And, what about the suppliers? You might be an experienced supplier with a good track record of delivering smaller scale projects, but how does your potential future client know about you? They might be on an industrial estate far from London as you sit in an export-processing zone near Mumbai airport.

Outsourcing for smaller players is really difficult.

I asked Jaroslaw Czaja, the Chief Executive of Polish software development firm Future Processing, about some of these issues and he explained: “Currently a lot of our business comes from word of mouth recommendations and I think this is the most powerful tool for SMEs. Web 2.0 marketing, through its personal, groundswell-based nature, also works well and plays to SMEs strengths of being more flexible than larger companies and therefore sometimes being more willing to try something new. The online/forum grapevine of horror stories from destinations more geared up to larger scale outsourcing also works in our favour.”

Jaroslaw went on to say: “I think Future Processing is like many smaller outsourcers, we are an SME ourselves and often have limited resources to put into business development while always putting existing customers first.(But we also have a lot in common with our customers which is a great plus point). Some sort of online community for outsourcers who are SMEs themselves to find other SMEs to partner with would be really useful.”

I’ve been hearing these complaints from SMEs for years. Government agencies and trade associations often arrange trade missions for SMEs, but at the end of the day, unless the SMEs talk to each other there will be no progress towards creating more outsourcing opportunities for smaller companies. The NOA has worked for some time on helping SMEs and Bharat Vagadia, the SME director is currently working on a plan for a new series of workshops to help SMEs.

I have recently tried putting together a new business network that aims to try addressing some of these issues – to try driving small companies together, wherever they are located. It’s called Peerpex and it goes live in September, though you can register now if you are interested. And the first 500 suppliers to register get real cash credited to their account, so it’s worth signing up.

Take a look and let me know what you think – especially if you are an SME and working out how best to reach out across borders. I don’t think one website can provide all the answers, but it’s a push in the right direction.

http://www.future-processing.com/

www.peerpex.com

The UK IT outsourcing (ITO) market continues to present opportunities for large providers at the top end of the market, according to new research from global advisory and consulting firm Ovum. However smaller and niche suppliers are facing the toughest of conditions as opportunities fall into the hands of the largest players.

The new report titled, “UK IT outsourcing: opportunities in a recession”, shows that the ten biggest UK ITO providers have boosted their total contract value (TCV) of ITO deals signed in the first six months of the year by an impressive 31 percent. This is due to a combination of some new megadeals entering the market (BT’s £500m contract at the National Health Service, IBM and CSC’s £300m deals at the Government’s Identity and Passport Service, and a £685m deal for HP-EDS at insurance giant Aviva) as well as many smaller sized deals that are increasingly encompassing a broader range of services.

John O’Brien, senior analyst and author of the report says: “The UK public sector in particular continues to let significant contracts such as for ID cards, with others such as the Environment Agency still to come. However this is more a culmination of existing procurements than new initiatives.”

Other vertical sectors such as financial services, pharmaceuticals/life sciences, retail and travel are showing active interest in ITO too. They are also under heavy financial pressure as a result of the recession. Recent £20m+ ITO deals with IBM at the Carphone Warehouse, CSC at Virgin Atlantic, and with Xerox at nationalised bank Northern Rock, are encouraging signs of such activity coming to market.

O’Brien continues: “The UK ITO market has some residual opportunities that are reaching sign-off in 2009 – hence the continued buoyant demand in the first half of the year. But beyond that demand is holding up well as outsourcing becomes a top priority for many end users grappling with the impact of recession.”

While this is all good news for the top tier, the second and third tier players are struggling. Amid an increasingly consolidating supplier landscape (HP/EDS, Fujitsu/Fujitsu Siemens) the available deals are falling into the hands of fewer and fewer players, which have immense spending power and reach.

To succeed in the current market, suppliers are going to need to have deep pockets and resilience. Offering more for less by restructuring contracts, offering new technologies such as virtualisation and cloud computing, and providing innovative approaches to drive out further cost for their customers are key to winning and retaining business. This will require significant time and financial investment on the part of suppliers, and will be a challenge to even the most financially stable vendors. Without a clear understanding of, and a strategic response to the challenges faced, this has the potential to spell the end for the second and third tier UK ITO market.

Nectar, the United Kingdom’s leading coalition loyalty programme has extended its IT contract agreement with IT service provider, Savvis.

Under the terms of the agreement, Savvis will continue to manage the underlying IT infrastructure that supports Nectar’s core business applications, including its point redemption, data warehouse and financial systems as well as managing its private networks, security and utility-based data storage infrastructure.

Savvis will also continue to host www.nectar.com, which processes thousands of transactions per day from consumers and businesses and provides access to more than 300 online retailers such as Amazon.co.uk and eBay.

Fiachra Woodman, IT Director at Groupe Aeroplan UK, the owners of Nectar, commented, “We’ve had a very successful and close working relationship with Savvis for the past eight years. We have benefited greatly from the speed and flexibility of their Utility Computing platform.”

Contact centre outsourcers outperform in-house operations

ContactBabel's and The Outsource Junction's have teamed up to create a detailed report on the contact centre outsourcing industry.

The report has found that outsourcers have usually outperformed in-house contact centres, with average speed to answer being 26% lower, and non-talk time being 10% lower in outsourcing operations.

The report also predicts that between now and 2011, growth in the contact centre outsourcing sector will be more than double that of the in-house sector

Other areas covered by the research includes:

• Businesses' attitudes towards outsourcing

• Outsourcing vs in-house performance statistics

• Salaries, HR and technology

• Outsourcers' revenue, growth, profit margins

• Trends in pricing, procurement and OSP selection processes

• Growth drivers, sectors, types of work

• SWOT analysis of the outsourcing sector's future

• Choosing an outsource partner: what to ask

• Top 30 UK contact centre and BPO outsourcers by revenue

• Detailed views of the Top 10 UK outsourcers (financials, location, clients, service portfolio, sector expertise, M&A, etc)

• Sector Focus: The UK Public Service Industry - the fastest-growing UK BPO sector

The full report can be found here: www.contactbabel.com/outsourcing.htm

Aimed at becoming the first platinum five-star hotel in the Hangzhou city, the Dragon Hotel is determined to leapfrog its competition by offering a totally new client experience achieved through a RMB one billion (US$146 million) upgrade project. As a major part of the three-prong project, IBM will implement an information technology (IT) infrastructure system.

Dragon Hotel has been chosen as the official venue for conferences hosted by the Hangzhou Municipal Government. This, together with the challenges brought by the economic climate, has compelled Dragon Hotel to launch a large-scale upgrading project.

The project includes the upgrading of the hotel rooms and infrastructure to a luxury environment as well as training of hotel management and staff.

The fully integrated IT system, when available for service early next year, is expected to boost the hotel's efficiency and productivity and reduce the operational cost, thus helping the hotel improve its competitive advantage.

Under the agreement, IBM will integrate the hotel's major systems -- the hotel management system, the communications system and the one-stop service center -- which include the personal digital assistant (PDA) system, self check-in kiosk, interactive TV, Radio Frequency Identification (RFID) system, Internet telephony, cell phone system and room control system.

Prior to the implementation, IBM Global Technology Services designed a range of customised "Smart Hotel" solutions comprising IBM's RFID technology, Site and Facilities service and Integrated Communications services.

"In the hotel industry, technology can make a real difference by significantly enhancing the customer experience and maximise their comfort and satisfaction," said Eric Du, General Manager, Dragon Hotel. "Through the cooperation with IBM, Dragon Hotel would be able to build a Smart Hotel system to improve significantly the operational efficiency and productivity, the response time to client demands, and most of all, the client experience."

To support Dragon Hotel's objective to continue to be Hangzhou's preferred conference hotel, IBM will implement a conference management system.

Additionally, through collaboration with China Telecom, China Mobile and China Unicom, IBM will integrate China's six telecommunications networks into one platform, the first of its kind in the industry. Every handheld set in the guest rooms will function as a mobile phone to make local and international calls any where in the hotel.

IBM and Cisco revealed that they are teaming on a pilot to help the Dutch utility Nuon and the city of Amsterdam make smarter use of energy by enabling consumers to make more informed decisions about their energy consumption. The pilot program is part of the Amsterdam Smart City initiative, in which citizens, governments and companies are working together to make more efficient use of energy, water and mobility to create a more sustainable city.

The consortium will jointly implement an energy management system based on smart metering and home energy management technology, which will enable 500 selected households to gain better insight into their energy consumption. It is anticipated that as a result of the pilot, customers will be able to save on energy costs and realise a CO2 reduction of at least 14 percent.

Smart meters and home energy management systems will be installed in the 500 households that participate in the pilot. Within this consortium, Nuon and IBM will develop the applications for the energy management system, making use of intelligent IT systems and well-protected web technology. Cisco will be responsible for the IP-based home energy management solutions that help enable real-time, highly secure connectivity between household appliances and the energy system, resulting in substantial efficiencies.

The energy management pilot in Amsterdam has had the help of several program partners housing corporations; Far West and Ymere, Amsterdamse Innovatie Motor, Home Automation Europe, ROC Amsterdam, the University of Amsterdam and Grid Operator Liander. The pilot is co-funded by the European Fund for Regional Development.