Industry news

Finnish Defense has selected Accenture to transform its enterprise resource planning (ERP) solution into a defense industry solution by extending current functionality with new features.

Under the terms of the contract, Accenture will design, deliver and maintain Finnish Defense’s SAP solution. Accenture will consolidate a number of disparate information systems so that Finnish Defense can help increase operational efficiency and focus more on leveraging its personnel in times of peace and in crisis situations. The project is designed to significantly improve Finnish Defense’s processes and common procedures in all defense branches.

TravelSky, provider of information technology solutions for China’s air travel and tourism industry, has extended its licences with Unisys China for Unisys server technology through to December 2011. Unisys have been providing server technology to the company for 25 years.

TravelSky operates the reservations and departure control systems for China's air carriers and process more than 200 million passengers a year.

TravelSky Vice President, Mr. Rong Gong, commented, “This supports our aim to make TravelSky one of the most reliable travel systems in the world while satisfying the ever-increasing growth of China’s aviation market.”

Further to the extended agreement, Unisys also provides a group of program managers, software specialists and airline experts who are based at TravelSky's Beijing offices.

The North American outsourcing market witnessed a 15 percent decrease in transaction volume during the first quarter this year compared to the previous quarter, according to Everest's Market Vista: Q1 2009 report on global outsourcing and offshoring activity. However, the BFSI market saw an increase in activity driven by the European IT services market.

Comparing Q1 2009 to Q4 2008, the study findings include:

• The global outsourcing market decreased seven percent in transaction volume, and ACV dropped 16 percent from US $3.55 billion to $2.97 billion.

• While most industries signed fewer outsourcing deals in the first quarter, the banking and financial services sector witnessed 30 percent growth in transactions, dominated by increased activity in Europe and led by the ITO market.

• The government sector dropped sharply with transaction volume falling 35 percent.

• BPO activity dropped 15 percent in transaction volumes.

• Europe witnessed a reduction in transaction volumes, although ACV was higher than Q4 primarily due to a few large deals signed in the region.

“While the American outsourcing market declined, the BFSI market saw an increase in activity, primarily driven by European financial services companies,” said Eric Simonson, Managing Principal, Everest Research Institute. “We believe that overall market activity is likely to see an uptick by the fourth quarter this year and onward.”

The Institute’s quarterly Market Vista reports provide data and analysis of deal trends in the outsourcing and offshoring market, captive landscape, current and emerging locations, key supplier developments, and key developments across the top 20 financial services companies globally. The Market Vista Q1 report also includes special sections on industry-specific FAO and an analysis of the outsourcing market in Eastern Europe.

Other insights for first quarter 2009 activity include:

• Captives activity included 20 new announcements in Q1, compared to 22 in each of the previous two quarters.

• Asia continues to dominate offshore delivery, and Tier-II cities continue to hold preference with new centres arising in locations such as Iloilo City and Bacolod in Philippines and Gdansk, Lublin and Poznan in Poland.

• Potential near-term risk issues arose in Mexico, El Salvador, Poland and Thailand.

• Aggregate US$ revenues across the Market Vista Index of suppliers declined by 2.2 percent on the heels of a 2.5 percent decline in the previous quarter. Revenues of traditional global suppliers declined by 2.2 percent and declined 2.3 percent for offshore-centric suppliers.

Quarterly Market Vista reports include key developments among 20 leading global suppliers. Traditional supplier profiles include Accenture, ACS, Atos Origin, Capgemini, Convergys, CSC, EDS, Hewitt, IBM, Perot Systems and Unisys. Offshore-centric supplier profiles include Cognizant, EXL, Genpact, HCL, Infosys, Tech Mahindra, Tata Consultancy Services, Wipro and WNS.

Interested readers can participate in an Everest webinar. The 45-minute Webinar, followed by 15 minutes of questions and answers with participants, will take place on May 19 at 9 a.m. CDT; 10 a.m. EDT; 3 p.m. GMT Standard Time; 7:30 p.m. India Standard Time. To register readers should visit: www.everestresearchinstitute.com/Events/Webinars.

The Chinese Ministry of Commerce (MOFCOM) has entered into a Memorandum of Understanding with, the sourcing data and advisory firm, TPI.

The advisory firm also strengthened its relationship with the China Council for International Investment Promotion (CCIIP) by entering into a strategic cooperation agreement.

Under the agreements, TPI will advise MOFCOM and CCIIP on accelerating the growth of the country's emerging IT and business process outsourcing sectors. TPI will also assist MOFCOM and CCIIP with their efforts to expand and enhance the pool of talent in China, nurture globally competitive service providers and attract business from multinational companies. In addition, MOFCOM and CCIIP will assist TPI in promoting its growing capabilities to Chinese businesses.

Madam Zhou Ming, Executive Vice President and Secretary General of CCIIP, commented, "The China Council for International Investment Promotion is pleased that TPI is working with us to promote development of the outsourcing industry in China."

A new report released today by Capgemini and the University of Edinburgh examines the changing ways in which manufacturers are doing business as a result of shifting market conditions. The study, “The Global Networked Value Circle: A New Model for Best-in-Class Manufacturing,” explores the evolving nature of today’s manufacturing value chain and examines the global value chains of some of the world’s leading manufacturers, considered to be ‘best-in-class’. The study introduces a new value chain model, known as the “value circle”, for manufacturers looking to optimise everything from product design and the manufacturing of goods to sales and supply chain management.

Consumer reaction to the global economic downturn has hit much of the manufacturing industry hard. Reduced consumer demand has led to serious production cuts at factories around the world. The old approach of a simple value chain in which manufacturing firms take new materials, transform them into products and feed them into the distribution system has gone. In the new value circle model, manufacturers are increasingly engaging with their customers and distributors in the very process of innovating, developing and delivering new products with close collaboration for design, supply and customer satisfaction. This is leading to the transformation of the traditional value chain, with inputs at one end and outputs at the other, to a value circle involving interaction at all levels to create a continuous cycle of improvement.

As part of this shift towards a value circle, rather than linear value chain, some of the new approaches being taken by manufacturers include:

• Product design and innovation - a shift from “doing it”, to “resourcing it”: Adopting new systems to capture and absorb new ideas and innovations from customers, suppliers, collaborators and competitors as well as in-house resources around the world.

• A shift from manufacturing to manufacturing-management: Where manufacturing is done by others, at any location globally, principally in collaborative-partnership arrangements where both parties gain through mutual learning and innovation.

• A shift from contracts to partnerships in supply chain management: Developing closer relationships with fewer suppliers, who are closely monitored, giving both parties competitive advantage.

• Using IT to actively manage the value network: Manufacturing increasingly requires the creation and productive management of highly complex global networks. Achieving this without loss of control, value or margin requires the use of the latest IT approaches such as Radio Frequency Identification (RFID). These approaches are not just supporting the new network management approach by making it feasible, they are driving it.

• A shift towards active partnerships with customers: Addressing customers’ needs and problems by developing closer relationships that enable manufacturers to understand and then deliver what they require. This not only improves customers’ lifetime experience with the manufacturer, but also helps drive product development and innovation process, linking the two ends of the value chain to create the new, more circular approach.

In order for companies to broaden their value chain, the study also identifies three key capabilities for manufacturers. They must have the ability to identify their core competencies. From here, they can partner with others to overcome weaknesses in other areas and focus on developing world-class operations. However, this requires the managerial and IT capability to form, develop, deepen and manage complex business relationships. Companies must also have the foresight to identify the relationships that will be key assets.

“As companies face shrinking consumption, slowing production and declining prices, now is the right time to reassess their entire value chain as they look for ways to keep costs low and improve efficiencies while continuing to innovate,” says Nick Gill, Global Manufacturing Sector Leader, Capgemini. “By adopting a practice of actively managing globally networked value circles, best-in-class manufacturers will be well-placed to weather the current storm in the market and take advantage of the upturn when it arrives.”

sourcingfocus.com readers can access the report here: The Global Networked Value Circle: A New Model for Best-in-Class Manufacturing

Ever on the pulse of the breaking news and trends within the outsourcing industry, the sourcingfocus.com Round-Up has emerged this week from the eternally engaging Financial Times (FT). According to an FT article, the IT outsourcing landscape is due for a radical re-shuffle. It seems that we could be due to enter a new phase, with vendors such as Google, Microsoft and Amazon offering uncomplicated services on a per-person per-month, or even per-transaction, basis. Jonathan Cooper-Bagnall, head of PA Consulting, was quoted in the paper maintaining that, in the past “outsourcing contracts were inflexible, with fixed baselines.” He went on to assert that “the next wave of contracts will go beyond that to include virtual services, such as Google Apps or e-mail.”

So I guess outsourcing giants such as Infosys and Wipro will need to adapt to keep up with the emerging American outsourcing market. Let’s hope they are up to the challenge.

Another area of interest in the IT outsourcing sphere has come in the unlikely form of Scotland. There has been a move by a number of organisations to position Scotland as a rival to Eastern Europe as the UK’s primary near-shore outsourcing destination and even take business from the established Asian players. Organisations including the Trade Association for Technology in Scotland, the Scottish Development International and the Chartered Institute for Bankers in Scotland recently met to discuss how English firms can be encouraged to outsource processes such as software development to Scotland, rather than locations such as India.

Can they do it? One wonders if the Highlands can ever truly compete with Hyderabad where IT is concerned. Watch this space and we’ll keep you updated on the progress.

So, what other big news has hit sourcingfocus.com’s virtual printing press this week? Well, Unisys has been awarded a five-year multi-million dollar extension to its IT outsourcing contract with Landis+Gyr. The services provided by Unisys under the contract extension include; round-the-clock system management and SAP operations, virtualisation and consolidation of IT technologies and international service desk outsourcing.

However, it is a bitter sweet win for the US technology firm, as Monday saw them announce that they were cutting 1,300 jobs as part of a series of cost-savings moves aimed at saving over 225 million dollars a year.

The US Army also caught sourcingfocus.com’s radar this week for far less controversial reasons than those covered in the national press recently. They have awarded CSC a $226m task order. Under the terms of the task order, CSC will provide a broad range of support services, including project and technical management; research, design and development; systems engineering; and training. CSC will support a range of projects at various locations worldwide, such as the United States, Iraq, Afghanistan, Kuwait, Germany and Korea.

And finally more news from our neighbours across the pond; Starbucks has signed a CRM contract with Convergys Corporation. The deal is a two-year extension of an existing contract. To the bewilderment of the sourcingfocus.com team and many readers no boubt, the release, from Convergys claimed that it was due to their rapid growth that their internal contact center could no longer provide cost-effective and efficient facilities to its stores in North America. One just has to wonder if this is the same company whose reported profits have fallen 7.6 percent in the second quarter – a conundrum indeed.

And that perplexing note brings us to the end of this week’s Round-Up. we will keep our collective ears to the ground on Scotland’s progress with its campaign to reign as the UK’s near-shore IT outsourcing destination. I don’t know about you, but I fancy their chances…

The National Outsourcing Association has officially launched this year’s annual NOA Awards (NOAAs). The doors are now open for all outsourcing professionals to submit their entries. New for this year’s awards is a dedicated microsite where sourcingfocus.com readers can find all the information they need to enter.

Now in its sixth year, the NOAAs are firmly established as the main highlight of the outsourcing industry calendar. The NOAAs aim to showcase the best and brightest achievements in outsourcing, celebrating best practice and recognising the efforts of companies and individuals who have demonstrated excellence in their fields.

This year’s awards will be held at the Park Plaza Riverbank, London, boasting spectacular views over the City’s most striking landmarks such as the London Eye, Houses of Parliament and Big Ben. The ceremony will also be hosted by a top celebrity.

The ceremony will be held on the evening of Thursday 15th October 2009. Companies have until the 10th of July to submit their entries.

At the launch of sourcingfocus.com in 2007 I was confronted by a – I thought at the time – rather over-zealous outsourcer. Such was his enthusiasm in all things outsourcing that he appeared hell-bent on showing me that anything and everything can and should be outsourced. He even tried to outsource me. Two years later, the portal is going well and growing rapidly. And I still have my job – I have not been outsourced…yet.

The subject of ‘media outsourcing’ is a nebulous concept and one that has been around for longer than most think. Articles of outrage from, presumably domestic journalists can be found online from as far back as 2004. Even back in those rather good economic times some canny or crazy publishers were looking at the opportunities for outsourcing core publishing functions. The outrage was real and valid but chatter about media outsourcing has since died down, precisely at a time when publishers are sacking staff, scraping for every penny they have available.

sourcingfocus.com’s interest in the issue was piqued last week with news that Channel 4 is outsourcing its HR and payroll administration to Logica. Though not a true media outsourcing function, it does at least indicate that the big guys, and those in financial trouble, are looking again to outsourcing as a viable business option. But what of the core functions such as content creation and editing? After the initial furore and five years of silence what has been happening in media outsourcing?

“You can outsource basically anything nowadays,” commented a source that wished to remain anonymous. “Media outsourcing can be a contentious area but there are loads of companies doing it now from basic BPO right up to high-end copywriting,” he said.

The main complaint over media outsourcing came from suggestions that the high-end processes such as editing and writing would all suddenly be shipped offshore resulting in reduced quality content. Perhaps owing to such complaints, the move towards outsourcing these functions has certainly not been a tidal wave in scale. But there is a growing outsourcing undercurrent in this area. In the last few years there have been new content outsourcing deals from Thompson Reuters, Time Warner, Pearson, the New York Times, The Daily Telegraph and even the Financial Times.

All these publishers have outsourced content creation in some capacity deriving various benefits such as cost reduction to the follow-the-sun capacity. For example, The Telegraph has outsourced its weekend supplements to Australia. Despite these deals, complaints over consistency and quality have not resurfaced, indicating that worries over this type of outsourcing may have been unfounded.

In 2004 Forrester predicted that 4,000 British media jobs would be off-shored for this kind of outsourcing over the following 10 years. Many more than this have been lost due to the ongoing recession and turmoil in the media sector and this has fuelled media outsourcing even more. Various domestic ‘content’ outsourcers have been created by this trend by taking on freelance journalists and creating almost ‘on-tap’ news services. Adfero is one that is taking a lead in this area.

“Everything is 24 hour now. Getting news content out there first is taking precedence over the depth of story. So many [organisations] are finding they can outsource and offshore news production and things like press release editing to cut costs whilst also giving them 24-hour news output and letting them focus on more in-depth editorial,” the source said.

But even though content production jobs are some of the most important in publishing, they are not always an organisation’s largest cost. Media organisations are also looking to cut costs in other areas. Cognizant is one company that has benefited from the media sector’s need to both cut costs and enhance operations due to increased competition. Interest in other areas of media outsourcing also appear to have surged as publishing companies attempt to adapt themselves to the digital age. IT outsourcing, the backbone for operating in the digital world, looks set to perform well in this area.

For example, one client of Cognizant’s wanted to create and monitise its online magazine presence. The company built a next-generation platform for the company which was fully able to be monitised whilst enabling them advanced tracking and reporting capabilities on the site back-end, further enhancing the saleability of the site’s offering.

Virtualisation and SaaS is also playing a big part in the growth of media outsourcing. The increasing availability of web-delivered applications and collaboration tools perfectly fits with the working style of many organisations and the 24 hour news culture. The Guardian for example, recently moved to using Google applications in favour of Microsoft. Likewise, few modern newsrooms are to be found without a wiki for organising the vast amounts of information they assimilate on a daily basis.

Industry observers predict that IT outsourcing is entering an entirely new phase, with vendors such as Microsoft, Google and Amazon increasingly dominating by offering cheaper and easier, commodity-based IT services. Gartner expects this market to grow by 43 percent this year to over US $2.7 billion.

While it has not been covered widely, the media outsourcing industry has clearly been growing steadily in the background. Though it is still a relatively niche area, the movement towards smaller outsourcing deals and ‘on tap’ provision of things like IT services seems likely to increase and make outsourcing viable for smaller players. Media companies are going through a period of rapid change and outsourcing looks set to play an increasingly large part in shaping the media company of the future.

It was a proud time for all of Britain when the International Olympic Committee agreed that London would hold the 2012 Olympic Games. I, like many others, felt a great deal of excitement on that day in July 2005 and the London streets were abuzz with anticipatory chatter on what benefits the Olympics will bring to the nation. Today, it appears that this buzz has almost entirely disappeared.

The Olympics has almost become a dirty word, conjuring up thoughts of mismanagement of public funds, escalating costs and increasingly unlikely completion targets. There have also been grumblings coming from the outsourcing community, especially when the subject of the Olympic Games IT programme is discussed. sourcingfocus.com investigates what all the fuss is about.

The infrastructure needed for a successful Olympics is vast, the Olympic Delivery Authority (ODA) aims to get every spectator to the events by either bike, foot or public transport and the IT systems needed to effectively implement the event are extensive. These targets pile unprecedented pressure on public bodies to deliver the work needed for 2012 and of course, outsourcing (currently another dirty word) is playing a large part in the Olympic forge.

Focusing on IT, the 2012 games will need to have a system in place robust enough to handle information from 94 venues issuing 200,000 accreditations all across 900 servers. That’s not to mention the 200,000 hours of testing that is planned before the Olympics even take place.

So who is handling all of this? Well surprisingly the IT service provider was chosen back in 2002 when the IOC decided that Atos Origin would provide IT services for future games. This is either a mammoth display of forward thinking from the IOC or an utterly bizarre procurement process for arguably the biggest event in the world.

sourcingfocus.com spoke with Lee Ayling, Managing Director of IT and communications outsourcing at advisory firm, EquaTerra to find out what his opinion was on the procurement of services for the 2012 games.

“The ODA has awarded a set of contracts aligned with the partnership network that has discrete amounts of Benefit In Kind to cover service provision. There is some question as to whether these providers [Atos and BT within the UK] have the capability and performance track record in the UK to deliver the full IT services required as effectively as using niche/best of breed providers for certain activities.”

It appears that Mr Ayling is less than convinced that the procurement process for the Olympic Games is the most effective way of ensuring value for money and service quality. Essentially the London ODA has a big pot of money allocated to service providers selected via a completely separate entity, the IOC. How do the IOC know which service provider will work well for 2012? Surely the homeland development committee would be in a better position to judge?

There is also the question of value. Essentially Atos can charge £1m for a particular service, knowing full well there is money in the pot, where as an independent niche vendor may charge £500,000 for that same service. The problem is that the niche vendor does not have a chance to tender for the business because the service providers have already been chosen and the money already allocated.

However, Michèle Hyron, Chief Integrator for the London 2012 Olympic Games and Paralympic Games does point out that Atos’ prior experience is something that would make them an appealing partner, “Atos Origin has been the worldwide IT Partner for the Olympic Games since 2002 and involved in the Olympic Games since Barcelona in 1992. From each Olympic Games we learn valuable lessons for the next. From our experience, success of each Olympic Games relies and depends on knowledge and experience being transferred from previous Games. It also helps to be more efficient, keep costs down and to lower risk.”

The experience Atos has certainly cannot be ignored, however public spending is under the microscope now more than ever and it is essential that tax payer’s money is spent in the most efficient way. Choosing the right partner for the right job is paramount in a venture as crucial as this.

Of course, we are yet to see Atos’ progress and we are all holding our breath to see whether BT come through with the goods. MPs are due to report on the progress of the London Olympics IT programme in July and sourcingfocus.com will be analysing the report for all our readers. In the mean time, we can feel relatively comfortable that a service provider that has had nearly two decades of Olympic experience is handling our IT. Let’s just hope that we are getting value out of every precious public penny.

The Human Resources Outsourcing Association (HROA) has partnered with TPI, and the Information Services Group Inc. (ISG) to release the 2009 HROA Benchmark. The new report details the current trends and best practices in human resources outsourcing (HRO) and confirms the emergence of industry standards among large-market buyers.

The research examines the use of pricing methodologies, the depth and breadth of outsourced services, and the correlation of service level measurements and target levels with emerging industry standards. The respondents, a cross-industry sample of companies with multi-process HRO agreements in place and at least 15,000 employees, provided detailed information from existing contracts, including invoices, change orders, and statements of work, as well as real-life examples of performance targets and measurements.

Among the report’s findings are:

• Workforce administration, payroll and health & wellness benefits are the most frequently bundled services in a multi-process HRO agreement.

• Compensation is the most frequently included talent management process.

• Full-scale learning and recruitment process outsourcing were the least common processes outsourced.

This focus on core processes was found to align with the market's move to multi-sourcing versus the one-stop shop provider. Additionally, analysis of typical change order spend by process area and type of change proves instructive to companies looking to evaluate or estimate total outsourcing spend. On average, buyers should budget 10-15 percent of base fees for change order costs; however, this percentage varies by process and other factors such as level of M&A activity.

"The HROA Benchmark study provides valuable data to help organizations understand the intricacies of establishing and managing multi-process relationships," said Debora Card, TPI Associate Partner. "TPI was able to identify trends that are shaping this developing field of outsourcing, including analyzing how HRO buyers are handling some of the thorniest issues in these engagements. We think this report is a must-have for anyone looking to implement or improve HRO in their organization."

The study also demonstrates that best practices for effectively establishing and managing HRO relationships are beginning to emerge in the industry. Among the companies studied, a correlation of greater than 75 percent existed between actual experience and the HROA Recommended Practices for both pricing methodologies and service level methodologies and measurements.

"The HROA Benchmark validates that our Recommended Practices are indeed aligned with the experience of companies with large HRO engagements," said Richard Crespin, the HROA's Global Executive Director. "Outsourcing's value derives from the potential to provide repeatable products and services that are outside the core competency of clients. We are committed to helping develop industry standards that help ensure HRO is delivered efficiently and the needs of the client base are met."