Industry news

Good news for our readers this week; firstly it’s Friday (it comes every week but is always a joy) and secondly the best weather is yet to come – yes more sun is forecast for the UK this weekend! Those based elsewhere we wish you good weather too!

But before we continue into the sun-soaked weekend and lazy disposition that such days inspire, its time for our very important and ever informative weekly news round-up.

News that Steria and the Belgian Police have united to introduce a new fingerprint identification system will please those worried about the UK’s Big Brother society - at least we’re not alone in our government’s surveillance exploits.

Orwellian complaints aside the new system does sound pretty good and is likely to make catching the bad guys a whole lot easier. According to a statement the system will provide “more precise results with a shorter response time and be prepared for future additional functionality. It will also offer increased search precision, significantly improved response times and a palm print search option.”

Steria’s Benelux division has joined hands with the Belgian Police Department’s Legal Identification Division to implement the system. Steria will apply the technology required for the capture and transmission of finger and palm prints and traces, and will also be in charge of all necessary integration services.

Now onto other news; WNS, a global BPO provider, has appointed Rick Sturge as Deputy Managing Director, Europe. If this isn’t a sign of WNS growth intentions in the UK and rest of Europe I don’t know what is.

Before this move Rick was Head of Strategic Development for the Chartered Institute of Management Accountants (CIMA). He has over 25 years experience in ‘business development, finance and transformation, outsourcing and finance and accounting’ [sic] – wow that is a mouthful. Not to blow his trumpet too much, he has also previously held progressively responsible executive roles with Serco, PricewaterhouseCoopers and Accenture.

Rick will have the small task of driving WNS’s business development efforts, particularly in the travel and leisure and finance and accounting sectors, leveraging his cross-industry experience.

News from our neighbours across the pond reports that Air Canada has extended two outsourcing contracts with Unisys Corporation for hosting & integration (HIS) and cargo portal services (CPS).

The contracts will last until 2015 and Unisys will continue to host Air Canada on its Logistics Management System at its data center in Minneapolis. The CPS cargo system, which Air Canada will use until 2011, is an Internet portal for the air cargo industry.

The system brings together a range of carriers and forwarders in a neutral portal reducing transaction costs and allowing cross-market competition. Seems logical to us.

The final big story of the week comes from our beloved Orange UK. It’s decided to outsource the operation of its entire mobile network in the UK. Nokia Siemens Networks will take up the reigns for Orange UK’s 15.9 million mobile subscribers and responsibility for 230 of its staff.

Few details of Orange’s business reasons were released. But with UK mobile saturation at an all time high perhaps it’s prudent to slash overheads when new revenue streams are few and far between. Only time will tell the fates of the nation’s canniest mobile operators – watch with interest.

On that note, I bid you farewell for another week. Now feel free to commence that lazy disposition and more importantly for those in the UK - enjoy the sun this weekend.

Over the past few weeks we have had a recurrence of deplorable violent activity in Northern Ireland. A policeman and two soldiers have been murdered by the Real IRA and many are concerned that this will restart the ‘troubles’ Irish people have long fought to end. Public feeling against renewed violence was palpable as more than 2000 people took to the streets in Northern Ireland holding ‘No going back!’ placards and making a stand for peace.

However, despite the uproar from the general public, potential investors may be concerned that the near-shoring hub has trouble bubbling under the surface and this could deter organisations from taking advantage of the outsourcing opportunities Northern Ireland has to offer. These opportunities have led to a significant surge in investment, something that Northern Ireland has been relishing over recent years. As recently as the beginning of the month gem, a contact centre provider based in Belfast, announced a £19.5m expansion plan which will see another 900 seats made available for an ever increasing client list. Geraldine Fusciardi, Sales and Marketing Director of gem, further promoted the image of Northern Ireland and commented, “We are extremely busy right now as businesses are looking to use contact centres with similar cultural touchpoints.”

This is all welcoming news, especially as the global economy is experiencing a period of financial instability. The last thing Northern Ireland needed was an obstacle in its progress to becoming one of the most attractive destinations for near shore outsourcing. The recent ‘Black Book of Outsourcing’ produced by Brown and Wilson had a section devoted to establishing the riskiest and safest locations to outsource to. This outsourcing handbook had Belfast in the safest 25 destinations to outsource to. This is certainly an acknowledgement of the benefit that peace has brought to the country and in turn highlights how Northern Ireland has become an attractive business area. However the Black Book was published before the recent activity and as we all know, bad news has the potential to severely knock confidence in a location, you only have to look to India for an example of how quickly confidence can be rocked within the outsourcing world.

The Mumbai attacks and the resignation of the CEO of Satyam over a £1bn fraud may have contributed to Mumbai being placed in the 25 riskiest destinations to outsource to. We have certainly heard mumblings of a slowing down in the Indian BPO market and many people are wondering whether emerging destinations such as South Africa and Eastern Europe are going to chip away at the Indian stronghold as a result of a confidence downturn. Does Northern Ireland risk having its end users lose confidence and consider other destinations first?

Speaking to Sourcingfocus.com Bill Montgomery, Director for International Investment at Invest Northern Ireland, commented on the impact the recent events will have on Northern Irish businesses, ‘These are utterly terrible events that have occurred, however in relation to business we are not seeing any adverse effect. Of course questions have been asked however there have been no investment cancellations or potential investment trips halted. Mr Montgomery goes on to say that the events have been ‘isolated and targeted incidents that everyone is against’.

Indeed it appears that it has been pretty much back to business as usual. After putting their U.S. tour on hold briefly, to deal with the events, Martin McGuiness and Peter Robinson met Barack Obama this week in Washington and will presumably continue to promote Northern Ireland as a foreign investment destination.

So concern of a possible reduction in business interest in Northern Ireland may be premature. As Bill Montgomery highlighted, Northern Ireland has done extremely well and the proposition they offer is too strong to ignore. Potential investors should, like with any investment, carry out a thorough risk analysis of the potential locations they are considering. However, they should not be overly concerned about a sudden turn for the worse in Northern Irish violence. The country is united against falling back into the awful times that characterised the late 60’s and continued for nearly 30 years. The area has evolved and despite the awful actions of a few extremists, Northern Ireland looks set for continued growth continue to grow as the country continues offer one of the most competitive near-shore outsourcing models in the industry.

Outsourcing is an industry which thrives in a recession. Now more than ever end users are focusing on the bottom line, making slashing costs a decisive factor in the procurement process. However despite this ‘cost is king’ approach, we are seeing the rise of a particular outsourcing model that treats suppliers as strategic partners rather than external cost cutters.

The ‘service effect’ model is being used by end users in an effort to detach themselves from how a supplier delivers their services, which allows the user to focus on end objectives. This outsourcing model has become prominent enough for the National Outsourcing Association, the UK outsourcing trade association, to hold a seminar dedicated to the topic.

So what is service effect? How can end users feasibly sit back and let the supplier work their magic? Essentially the service effect model boils down to end users identifying exactly what their strategic outcome should be in an outsourcing arrangement. The supplier’s job is to then meet the outcome using whatever tools are needed. Srikanth Iyengar, Global Head of Business Development for Strategic Global Sourcing at Infosys, summarises, “In service effect models, customers focus on an overall outcome which helps us run our operation in a very efficient way.”

It seems like an interesting way of conducting an outsourcing deal and it means that both supplier and end user must, above all else, trust each other to work towards the agreed objective. Mr Iyengar highlights the importance of the end user trusting the supplier and adds that “setting clear expectations and objectives for the supplier to work to is essential” he also goes on to say that the supplier becomes much more of a “strategic partner” rather than just simply a vendor. This strategic partnership is salient for both user and supplier. Suppliers will need to ensure that teams working on the end user account are fully briefed on the way the user operates and well versed on the market the user operates in. End users will need to incorporate the supplier in key board-level decisions in order to properly align the strategy or modify objectives.

This level of trust and partnership surely would not be obtained over night. Mr Iyengar reinforces this by saying that “prior relationships help”, so do service effect models fall into the realm of contract renewals rather than brand new outsourcing contracts? Suppliers and end users would certainly be taking a bigger risk entering into these contracts. Suppliers could be left with a bloody nose if objectives are not met, end users could face a situation where money has been ploughed into a partnership with nothing to show for it, so surely a prior relationship is essential rather than helpful; And what of ongoing communication to ensure things are going to plan?

Service effect models have the potential to work well. However, as with any outsourcing deal they need to be thrashed out properly in order to reap the benefits. George Wheeler-Carmichael, partner of law firm NABARRO LLP, warns end users that only focusing on outcomes can lead outsourcing deals into trouble, “Contracting for an outcome or a ‘service effect’ puts a new perspective on an old issue with outsourcing contracts, rather than creating an entirely new challenge. Whether a customer is starting out on a new outsourcing relationship or is renewing an existing one, if the aim is to achieve a business outcome, scoping the service requirements is still as important as ever. Focusing on the end point of the journey and allowing the supplier greater flexibility in the technical means of getting there must not distract the parties from setting out required characteristics of the journey and from contract and service management in general.”

Mr Wheeler-Carmichael also commented that there needs to be regular ‘touch-points’ where users can monitor the progress of the outsourcing arrangement, he also commented that key milestones should be set and reached in order to properly maintain the relationship.

What does the future hold for service effect models in outsourcing? According to Mr Iyengar, clients switching to service effect models with Infosys are in their tens rather than hundreds suggesting a gradual change rather than a sharp shift. While Mr Iyengar expects these types of contracts to be more prominent in the future, it remains to be seen which vendors have built sufficient trust with clients to make such a strategic leap.

So the service effect model is one to keep an eye on as a trend for the future. It appears that there are those who have felt comfortable enough to adopt this strategy with their suppliers; however, the model may not be for everyone. Those in multi vendor relationships may find the service effect model very challenging and possibly not the right solution. The model does add another dimension to outsourcing and it will be interesting to see whether those that begin their outsourcing journeys through downturn cost cutting, find themselves in a service effect relationship a few years down the line.

Being green has gone through many stages over the last ten years. For some time simply paying lip service to environment was enough to get by. Token projects and initiatives followed in all their PR-able glory. Exposures for ‘astroturfing’, bad press and grassroots and governmental pressure inevitably moved the corporate world forwards on green issues. Drip by drip the real importance of minimising impact on the environment has filtered into organisations and many companies now appear to be doing some impressive things. Carbon footprints, carbon offsetting, low-impact building and numerous other concepts have all followed. But as yet there is still much to be done about green issues in globalisation - what of those companies that outsource and offshore large chunks of processes and development?

Outsourcing and offshoring as an industry has reached relative maturity and many companies now contract out a large amount of work. This is creating an almost global carbon footprint largely hidden from their domestic corporate personas. What the company’s call centre is doing in India with its offshore IT developer in Russia, is becoming increasingly important to recognising a company’s global green impact. ‘Greensourcing’ is the answer being put forward by the outsourcing industry to help companies lower their outside impacts, but what is it and how’s it going to help?

Jeremy Hammant of LCP Consulting, a management consultancy firm, offered his explanation, “Alongside the financial and commercial elements of the procurement process we’re starting to see clients looking more at the intrinsic green and CSR credentials of potential partners. This is true in pretty much every sector we’re working in. Now, as part of the selection criteria there is a set of evaluation criteria around green, sustainability, CSR, call it what you will, meaning green is becoming part of the selection process.”

The drive towards green is certainly evident in consumer-facing businesses as customers continue to vote with their feet and wallets on environmental issues. But is this force strong enough to feed through into the B2B space, to those companies far-removed from end consumers?

“There’s certainly a desire from consumers to understand what are an organisation’s green credentials. I think this is permeating all the way down through the supply chain,” commented Mr Hammant.

The force of the green end user is not to be underestimated, recent figures from the carbon trust found that two out of three people think it’s important to buy from environmentally responsible companies and approximately one in seven had decided to use a different supplier due to a shabby environmental record.

So the green wave is clearly getting bigger but what are outsourcing suppliers doing to meet the rising tides? Patni, a large global outsourcing company, is an example of a company that seems some way ahead of the curve in this respect having invested millions of dollars in a new ultra low environmental impact delivery centre. The ‘Patni Knowledge Centre’ seats around 3,500 staff members at any one time and takes every possible step to reduce the amount of energy it uses and waste it puts out. The use of natural light wherever possible, intelligent air conditioning, minimal sewage output and ‘Lead Platinum Building’ (a certification for exceptional environmentally rated buildings), no name a few of the innovations, appear to give the centre bragging rights over most other outsourcer’s green efforts.

The importance of companies developing initiatives like this cannot be denied. But we asked Saurabh Karora, a Patni spokesperson, about the current demand for greensourcing.

“I think people are becoming more and more aware of green issues as a social responsibility. This is impacting big businesses hugely and they’re asking themselves and their suppliers how they can reduce their carbon footprints. Towards this goal end users are increasingly looking at leveraging vendor relationships with those that have invested heavily in green. Patni has invested around $40 million dollars in this facility and we are planning to construct more similar centres around India. As a corporate citizenship strategy this is how we’d like to look forward.”

Evidently greensourcing could be big bucks if supplier investment is anything to go by. But it’s not just lowly consumers that will make this sustainable globalisation a reality. There seems to be a green storm brewing around today’s companies that will increasingly and more forcefully begin to push the envelope on green issues.

Arthur D. Little, of the Sustainability & Risk Practice, commented in a report, “While carbon and environmental footprints are a growing concern, much of the footprint that can be attributed to a company lies in other parts of its supply chain. As stakeholders become increasingly insistent that “promises made” by the CEO should be “promises delivered”, CEOs will need to extract more innovation from suppliers as well as the company itself to deliver on commitments to sustainable performance”.

The drive from investors, consumers, canny companies and forward thinking suppliers could soon be augmented by the law. The EU Emissions Trading Scheme, introduced in 2005, is an early example of the direction governments are heading. Though focused on the high-emissions industries such as energy and transport, carbon footprint reduction driven by government is only set to grow. The sheer necessity of meeting the 2012 Kyoto Protocol and its successor will necessitate heavily polluting countries to get tough on companies.

“The regulatory environment is in a state of determination at the moment. You have the UK Government Office of Climate change inviting responses on a climate change bill. Regulatory conditions and emissions trading haven’t yet fully landed. We’re in a position where the game has opened but we’re probably still playing on the first morning of the test match,” commented, Alan Braithwaite, a Professor at Cranfield School of Management and founder of LCP.

Mr Hammant added “I think as regulation starts to kick in green principles will become much more important in procurement.”

Companies and outsourcing vendors may groan at the thought of compliance with new green legislation but there are also clear benefits to those taking the lead.

“Very often if something is green it’s also cheaper due to the reduction of energy consumption,” commented Alan Braithwaite, a Professor at Cranfield School of Management.

The Sustainability & Risk Practice report identified various other attractive reasons for going green including costs factors ranging from enhanced compliance with government regulation, lower consumption of energy and other resources, to enhanced return from capital investments. Greensourcing could also lessen risks to a business, for example, by a strengthened brand, enhanced reputation, improved community relationships, and/or reduced grounds for litigation. According to the report, the risk of supply discontinuity can also be lowered by applying environmental performance metrics and targets into the supplier performance assessment or contract renewal process.

Saurabh Karora sees Patni reaping the rewards of their bullish investments, “I think increasingly companies are also looking to green vendor partners to make a positive difference to their bottom lines or even their top lines.”

However, Mr Little’s report is also quick to warn of the difficulties of driving green into suppliers, “Many companies underestimate the difficulties of controlling supplier standards at long distance. The longer and more articulated a supply chain is, the harder it is to control entirely. This becomes especially true when a ‘low-cost-country sourcing’ (LCCS) strategy is pursued”.

So, the fact that some outsourcers are proactively addressing green will be heartening for end users. Certainly attempting to drive green into existing outsourcing relationships in far flung locations could be painful to say the least. And measurement processes are also a long way from clear definition.

But the risks are clear to those that ignore the trend, “A reactive company develops its business and product/service strategy without any consideration of sustainability issues in the supply chain. Monitoring of suppliers is piecemeal and lacking predetermined targets for sustainability, leaving the company open to risks,” said Mr Little.

Greensourcing is clearly going to become much more important over the coming years as the various forces encouraging sustainability intensify. The take-up of greensourcing services certainly is not yet fully established and it’s likely to be a while before an outsourcing deal is won on green specifications. However, like it or not, the green wave is coming and it’s up to companies to decide if they will act early to ride it or wait and be swept unceremoniously into a brave new green world.

Hyundai Motor America has signed a three-year contract renewal with Convergys, a global BPO provider. Convergys will provide customer management services to the car manufacturer.

As part of the contact Convergys will provide dedicated customer service agents as the first point of contact for vehicle owners contacting Hyundai’s Consumer Affairs for sales and service related concerns. Convergys will also provide case management, fulfillment, self-service, and other back office processes to Hyundai.

“At Hyundai, we know that providing the highest level of service to our customers throughout their relationship with our company is a key driver of continued loyalty,” said Kelly Kawaguchi, Hyundai’s National Manager of Consumer Affairs. “Convergys’ experienced and knowledgeable agents ensure our owners have an excellent service experience each and every time they contact us. In addition, Convergys’ extensive reporting capabilities give us the insight we need to take positive action on trends and issues that can impact customer satisfaction.”

“Car buyers and owners are sophisticated when it comes to the purchase and maintenance of their vehicles. Providing a consistent customer experience across all channels throughout the customer’s relationship with a particular brand is a key differentiator for manufacturers and dealers and a solid predictor of return business,” said Jim Boyce, Convergys President, Global Business Units. “Convergys’ experience in the auto industry, coupled with our live agents and self-service solutions, is a key component of Hyundai’s strategy to maintain high customer satisfaction levels and drive profitable growth.”

Orange is outsourcing its mobile network operations in the UK to Nokia Siemens Networks. Under the contract, Nokia Siemens Networks will manage, expand and provide maintenance services for the Orange UK 2G/3G mobile network for the next five years. The deal aims to deliver improved quality of service and enhanced coverage for Orange UK’s 15.9 million mobile subscribers, while driving operational efficiency. Orange will continue to own and strategically plan its network.

Nokia Siemens Networks is also finalising arrangements for a UK sub-contractor to provide first line maintenance services. As part of the outsourcing arrangement, close to 470 staff will transfer from Orange UK with approximately 230 joining Nokia Siemens Networks and the remainder being transferred to a first line maintenance sub-contractor.

Pete Marsden, VP of IT & Networks for Orange UK, commented, “Nokia Siemens Networks has a proven global expertise in managing large, multi-technology networks, and our partnership with the company is a win-win for all involved.” Mr Marsden also commented on the future of the Orange employees being transferred, “Nokia Siemens Networks will provide our transferring employees with strong career paths within global organizations recognised as telecommunications industry leaders.”

No financial details were released.

The NHS has launched ‘The Cancer Commissioning Tool’ (CCT) developed by IT services company, Concentra. The CCT will help NHS managers, specialists in public health, senior staff within networks and clinicians develop better cancer-fighting strategies at a local level, based on national data and standards.

The new system brings together information that had previously only been available in piecemeal fashion to give the health service a much more comprehensive view of cancer care across England. The system will also help create greater NHS efficiency by allowing important activities like checking costs of new medicines to be done just once.

Richard Hancox, Associate Director of Commissioning at the National Cancer Action Team, commented, “I am convinced a lot of positive results will flow from the CCT. I also foresee that the success of the CCT can be built upon in other disease areas in the NHS.”

The Cancer Commissioning Toolkit works by helping local cancer networks obtain the fullest picture on all the most promising new cancer treatments, benchmark their performance and share vital information with other parts of the NHS. The main users are managers in Primary Care Trusts, who will use it to better plan their local cancer treatment strategies, working to national guidelines as outlined in the NHS’ Cancer Reform Strategy, with the ongoing aim of improving the UK’s cancer treatment record.

Air Canada has extended two outsourcing contracts with Unisys Corporation for hosting & integration services (HIS) and cargo portal services (CPS).

Under the terms of the HIS agreement, lasting until 2015, Unisys will continue to host Air Canada on its Logistics Management System at its data center in Minneapolis. The CPS cargo system, which Air Canada will use until 2011, is an Internet portal for the air cargo industry. The system brings together a range of carriers and forwarders in a neutral portal reducing transaction costs and allowing cross-market competition.

Lise-Marie Turpin, MD of Air Canada Cargo, commented, “Our relationship with Unisys has worked very well for us. As well as providing our enterprise system as a hosted service, we also collaborate on eBooking, Cargo 2000 shipment quality services and integration with specialist third-party software. In today’s tight economic environment, we found value in reviewing and extending our agreements and are confident that Unisys commitment in the ongoing evolution of their products will provide our employees with best of breed solutions for the years to come,”

The contract extensions were both signed in December 2008.

WNS, a global BPO provider, has appointed Rick Sturge as Deputy Managing Director, Europe.

Rik will be responsible for driving the firm’s business development efforts, particularly in the travel and leisure and finance and accounting sectors, leveraging his cross-industry experience and will be working closely with Eric Selvadurai, Managing Director, Europe.

Rik, a Chartered Accountant, has over 25 years of diverse and varied experience in business development, finance and transformation, outsourcing and finance and accounting. Most recently, Sturge was Head, Strategic Development for the Chartered Institute of Management Accountants (CIMA), focused on fostering and nurturing business relationships with companies and governments around the world. Earlier in his career, he held progressively responsible executive roles with Serco, PricewaterhouseCoopers and Accenture.

"WNS’s strong reputation in the BPO industry and the opportunity to be a key player in the company’s growth were key factors in my decision to join. I look forward to bringing WNS’s resources and capabilities to clients around the globe, working with Eric and the team,” said Sturge.

To an interesting roundtable lunch with Microsoft integrator and consultancy Avanade, the joint venture in which Accenture has a majority stake.

The meeting was to launch the UK results of a recent worldwide cloud computing survey, for which Avanade spoke to 500 C-level executives – only a small number of whom were in the UK, however.

While the research suggests many businesses believe cloud computing can have a positive impact on the bottom line, it found that most have no plans to integrate it into the enterprise in the next 12 months. It's a viable business model, said Avanade, but security concerns override the benefits in many respondents' eyes.

The meeting was interesting for a number of reasons: first, because defining cloud computing seemed to be a challenge. They eventually agreed that it meant software as a service (SaaS), infrastructure as a service, and application development as a service: all hosted externally and delivered over the internet.

There was nervous laughter when I shared a comment from a US cloud computing CEO that the term was invented to give large consultancies something to sell to global enterprises. Renting out your MIPs is hardly a new idea... but I digress.

From Avanade's report, however, most of the executives surveyed equated the cloud primarily with SaaS. Of the companies using cloud computing, 60% said it was within business applications, such as CRM; 40% for HR services; 33% for wikis and other collaborative tools; 33% for webmail, and 20% for social media and networking.

But in terms of the overall response, by a five-to-one ratio executives said they trust bespoke, on-premise systems more due to perceived security risks and a loss of control over data and systems when using hosted services.

Among early adopters, however, cloud computing investments are increasing after reported upfront cost reductions and improved responsiveness.

With the UK being a longstanding outsourcing market for potential providers, Avanade also found present and future implications for outsourcing. Avanade's Kamran Ikram said that the UK is lagging behind the US in cloud uptake partly because of existing long-term, large scale outsourcing deals.

Introducing cloud models internally can disintermediate the benefits of tradtional outsourcing and vice versa, suggested Avanade – which implies that it's 'either, or' for many customers. And it's not just a matter of introducing cloud models when existing contracts run out, as customers still have to drive the payback from those earlier investments.

If you ignore the view that the term was invented to baffle people so companies like Accenture can explain it to you, cloud computing is also a threat to traditional consultancy. "Who has the skill to intermediate between cloud providers?” asked one Avanade executive. Indeed. And this from a consultancy!

In the UK, organisations are more risk-averse than in the US, the survey found. Forty-eight percent of UK organisations said they are keen to adopt new technologies that will save them money, but 65% said they tend to wait until technologies are tried and tested before adopting them – against two-thirds of US companies who describe themselves as early adopters.

That said, 78% of UK respondents said they are familiar with cloud computing concepts, compared with 61% worldwide.

Breaking out the UK findings, the report reveals a mixed picture of IT decision-making in the recession: existing internal IT systems take too long to upgrade, said 42% of respondents, with 45% describing them as too expensive.

However, of the companies that solely use existing bespoke or on-premise IT systems, 75% said that the downturn has not spurred their interest in cloud computing models, with the remaining 25% saying it had actively decreased their interest.

So you can all sleep easy. For now.