Industry news

As we all know, business process outsourcing (BPO) has taken off in recent years and now we are seeing this form of outsourcing overtaking ITO in growth. The BPO sector has evolved into a vibrant and competitive market and we have seen many new players from all corners of the globe enter the fray. Contact centres are synonymous with BPO and contact centre vendors provide the most customer centric service of the entire outsourcing industry.

As a result, contact centres have a love/hate relationship with the public (more hate than love usually) and end users tend to do as much as they can to hide the fact that they outsource their contact centres (especially if that service is offshored). As the outsourcing industry changes shape and technology advances, contact centre providers are evolving and adjusting their service offering. So, how are contact centres changing? What has technology done for the contact centre industry? And above all, what does all this mean for the millions of customers than engage with contact centres every day? sourcingfocus.com spoke with various industry experts to find out.

Chris Hancock, Managing Director of GasboxDMG, a high tech contact centre service provider believes that there is a “diversity of opinion in the business world on what contact centres can do.” Mr Hancock goes onto highlight that some use contact centres to provide “support in the most cost effective way possible”, this type of cost centric service lends itself to offshoring and is the type of service that first springs to mind when the words call centre are mentioned. However, Mr Hancock also identifies a modern, more sophisticated, contact centre, one which “best develops a relationship with the customer” and in turn can “determine the customers emotional attachment to the organisation.”

The contact centre has certainly evolved from low level outbound sales, such as the famed dinner time double glazer (although he still seems to call). Simon Gresswell, Director of ProtoCall One, believes that contact centres have become more intrinsic to a client’s business, “We are offering more. We are using different media to interact with our customers and we are finding that customers are expecting contact centres to have the information they need.”

Technology has obviously been key in the evolution of the contact centre and vendors are incorporating multi-channel communication into their service offering. As a result, innovative technology such as automated self service or voice recognition are being rolled out and, according to recent research from BT and Nortel, this is not to the detriment of customer service. The study found that 71 percent of US and UK consumers would be happy to receive a call that used voice recognition to inform them that their plane, train or bus will be late while 80 per cent would look favourably on automated calls that informed them of the time of delivery of goods to their homes.

Ruth Rowan, Head of Global Propositions and Marketing, CRM at BT Global Services believes that this form of automation is becoming more accepted, “Automation has been one of the success stories of the last few years. The research looked at 1000 consumers and found that customers were happy to interact [with automated services] where appropriate.”

This was echoed by Mr Gresswell, “ProtoCall One’s SMS offerings tend to be of an outbound nature such as SMS for travel alerts and other useful information.”

Mr Hancock believes that contact centres have become “much more diverse in the way they communicate with people. In the early 90’s it was purely voice-led communication. Now contact centres can use any number of communication channels including web-chat and instant messaging.”

However, despite this automation and plethora of technological advancement one fact remains, when a customer needs something a little more than information, voice wins every time. The BT and Nortel research revealed that 53 percent of UK respondents are happy to check timetables through voice recognition but only 23 per cent felt happy enough to use the same interface for actually purchasing tickets. We may all just want a quick automated service that allows us access basic information fast, but we want to speak to real people when we have anything more serious to address.

Customer service should be the first thing on the boardroom agenda, although it rarely is. But, the cost savings associated with automation are just too good to be ignored. According to Ms. Rowan and the BT/Nortel research it costs £6.50 for an agent to handle a base level inquiry, compare that to £0.70 for an automated interface and you would be pushed to find a financial director who doesn’t leap at the opportunity.

It’s clear that the contact centre has evolved into a more sophisticated offering. But, voice still remains intrinsic to a call centre’s service. SMS, web chat and instant messaging all add to the customer experience however they need to be implemented intelligently to work well. We are still a long way from a voice-free service offering as human contact is simply just too influential on customer satisfaction.

Sainsbury’s has signed a five year agreement with IBM, to transform its supply chain network. IBM will help Sainsbury’s enhance its customer experience by implementing new systems, which aim to increase stock availability for customers.

The new IBM solution, which is based on the ‘Wesupply network and visibility application’, aims to provide a platform to help Sainsbury's and approximately 4000 of its suppliers, find smarter ways of managing overall supply chain performance to support the continued growth of the business. The Wesupply service will allow information flows to be streamlined and afford greater visibility of real-time supply chain performance.

Tim Goalen of Sainsbury’s commented, “We were looking to enhance our collaboration with suppliers without a significant increase in cost, while continuing to introduce greater intelligence into our supply chain.”

There has been lots of conflicting news about the outsourcing world this week that has got the Round-Up’s head in a spin. It has been reported that India’s strong hold over the outsourcing domain is set to waver. Apparently, there are not enough skilled individuals to take up the bounteous employment opportunities that have resulted from the Indian outsourcing boom. The answer? To send the European workers whose jobs had been outsourced over to India to take up their previously owned job positions on foreign soil? With current UK job prospects it might not be a bad idea.

However, Gartner has also published a report spouting praise about India’s position within the outsourcing market. Apparently the old outsourcing giant is looking good for 2009. What to believe? You decide…

On a less perplexing note, the news on sourcingfocus.com has been all good in respect to EDS. The company has signed an ITO contract with The California Department of Corrections and Rehabilitation. The contract is a 4.5 year engagement, designed to transform the agency’s ‘digital environment’.

It is hoped that the affiliation will help to improve productivity, accuracy and ultimately, enhance staff, public and offender safety.

Additionally, EDS will create and manage the image capture, database, information storage and server environment where offender information will reside.

EDS has not stopped there this week. Continental Airlines has also them up to transform its Flight Planning Services. The contracts aim it to reduce flight operating expenses and create efficiencies for Continental by automating some aspects of flight planning.

EDS Flight Planning is the fourth component in EDS’ flight operations suite being implemented at Continental. EDS is also currently developing EDS Air-to-Ground Messaging Services, EDS Load Planning Services and EDS Aircraft Movement Services for Continental. What a lot of branding. Before you ask, no, I don’t work for EDS’s PR team.

That’s enough on EDS for this week. Now on to more general news in regards to outsourcing. To be more precise, knowledge process outsourcing (KPO). According to a new Datamonitor report the KPO market represents a significant growth opportunity for vendors.

Ed Thomas, is the analyst for business process outsourcing (BPO) at Datamonitor and author of the report. He points out that, throughout the evolution of the KPO market, one feature that has remained constant is the leveraging of offshore delivery models. “India has been the focal point for the KPO industry since its inception. Increasingly, however, KPO vendors are adopting a multi-shoring approach to service delivery.”

Datamonitor has identified eight key locations that have emerged in recent years as viable options for KPO service delivery, including China, the Philippines, Sri Lanka, Hungary, the Czech Republic, Canada, Mexico and Brazil. The report assesses the strengths and weaknesses of these geographies and looks at how they can form part of a vendor’s multi-shore delivery model.

But what’s this? More conflicting evidence?

On another contrary note, PA Consulting expound the dangers of multisourcing. In a report this week, featured in our news analysis, the consultants found that outsourcers simply don’t understand what they are getting themselves into with multisourcing.

Who’s saying what? Who’s right? Who’s wrong? Who knows? What a confusing week. Now where did I outsource those employees?

The maturing knowledge process outsourcing (KPO) market represents a significant growth opportunity for vendors, according a new Datamonitor report.

“KPO represents the next stage in the evolution of the outsourcing market,” says Ed Thomas, analyst for business process outsourcing (BPO) at Datamonitor and author of the report. “Unlike BPO, which refers to the transfer of mainly transactional, non-core processes to specialist providers, KPO involves the outsourcing of core business processes, for example planning and auditing, which require a high level of domain expertise.”

Within the report Thomas points out that, throughout the evolution of the KPO market, one feature that has remained constant is the leveraging of offshore delivery models. “India has been the focal point for the KPO industry since its inception. Increasingly, however, KPO vendors are adopting a multi-shoring approach to service delivery.”

Datamonitor has identified eight key locations that have emerged in recent years as viable options for KPO service delivery, including China, the Philippines, Sri Lanka, Hungary, the Czech Republic, Canada, Mexico and Brazil. The report assesses the strengths and weaknesses of these geographies and looks at how they can form part of a vendor’s multi-shore delivery model.

Thomas also notes that KPO enables clients to tap into large pools of talent and leverage skills in niche areas, which otherwise would not be open to them. “By improving efficiencies and freeing up resources within the client’s own organisation, KPO can help to improve customers’ time-to-market, a business benefit which goes beyond simply delivering ‘your mess for less’ services in the style of transactional outsourcing.”

The report also finds that despite recent trends towards consolidation, the KPO market remains extremely fragmented. When the hype around the industry was at its height during 2004/2005, new vendors claiming to provide KPO services would appear on an extremely regular basis. While many of them have not survived, a significant number did, and are still operating.

Thomas adds that, despite recent consolidation, scale is of lesser importance in KPO than BPO. “Whereas BPO vendors typically harness economies of scale to deliver significant cost savings, the main selling point of KPO is its ability to deliver targeted, domain-specific knowledge, with scale playing less of a part in a vendor’s go-to-market proposition.” Niche providers are therefore capable of competing with, and even outperforming, the giants of the outsourcing industry.

Cathay Pacific has extended its ITO contract with Unisys Australia for the development and management of its passenger service and logistics management systems. The new contract will run until 2012.

Under contract terms, Unisys will host and manage the Airline’s passenger service system, enabling Cathay Pacific to generate flight schedules, display seat availability, manage flight inventory, record passenger bookings, and handle passenger check-in and departures at airports across its network. The Logistics Management System suite of cargo applications enable Cathay Pacific to manage its cargo operations including inventory control, bookings, warehouse operations and customs interfaces across its world-wide network.

W Y Chow, Manager of IT Operations for Cathay Pacific, “The Unisys passenger and logistics solutions are mission critical applications. In today’s competitive aviation market and business environment, it is important to work with a partner like Unisys who understands our industry, the nature of our changing business and the need for system reliability and uptime to service our customers. The system availability provided by Unisys has exceeded our requirements.”

Continental Airlines has signed an agreement with EDS to transform its Flight Planning Services. It is hoped the update will reduce flight operating expenses and create efficiencies for Continental by automating some aspects of flight planning.

As part of the agreement, EDS will develop and implement its proprietary planning systems ‘EDS Flight Planning Services’. This will be delivered using a software-as-a-service (SaaS) model.

“The EDS Flight Planning Services will allow us to take full advantage of our modern fleet capabilities, achieve significant fuel savings and increase our operational flexibility,” said Mark Moran, executive vice president of Operations at Continental Airlines. “Our strong working relationship and successful track record together made EDS the right choice to deliver industry-leading flight planning technologies, which will seamlessly integrate with all our flight operations services.”

EDS Flight Planning is the fourth component in EDS' flight operations suite being implemented at Continental. EDS is also currently developing EDS Air-to-Ground Messaging Services, EDS Load Planning Services and EDS Aircraft Movement Services for Continental.

“Effective flight planning will enable Continental to reduce costs and increase operational efficiencies,” said Eric Harte, vice president and leader of the Consumer Travel Industry Group at EDS, an HP company. “The EDS team will combine deep expertise in the airline industry and applications development to transform Continental's flight operations environment to optimise its cost per available seat mile.”

The urgent need for cost savings is fueling demand for outsourcing, according to advisory firm, EquaTerra. In its Q109 Advisor and Business/IT Service Provider Pulse Survey, EquaTerra reports that 57 percent of the service providers polled, including the largest U.S. and Indian companies, have seen a 26 percent increase in their new deal pipeline for the first quarter.

While the deals were smaller in scope, mirroring a trend seen in other recent research reports, they grew in number as organisations decided cost-saving initiatives could no longer be postponed.

“We’ve been citing pent up demand for outsourcing in our past two quarterly Pulse surveys,” said Stan Lepeak, managing director of global research for EquaTerra. “These deals are beginning to flow as the need to control costs outweighs reluctance to initiate major change efforts like outsourcing in the midst of an economic crisis and regulatory uncertainty.”

Some of the key findings from the report include:

• Demand for business process/information technology outsourcing rose significantly in the first quarter with 49 percent of EquaTerra’s client-facing advisors citing increased demand (up 11 percent from last quarter) and 57 percent of the service providers polled reporting a surge in their new deal pipeline, a 26 percent improvement over Q408.

• Service providers (62 percent) expect demand to stay strong in the second quarter, up nine percent quarter-over-quarter and 14 percent year-over year.

• Over 75 percent of EquaTerra’s advisors reported buyers are currently focused on short-term (less than 12 months) cost- saving deals versus process improvement or access to external talent, and are pushing service providers to finance/defer/absorb any upfront change/transition costs.

The economic crisis is reshaping business operating models

EquaTerra sees indications the worldwide recession may trigger a fundamental shift in the way organisations do business in the next decade. The scope and severity of the economic downturn is forcing organisations to make deep workforce cuts and introduce radical changes to methods of service delivery. Economic survival/liquidity is driving most initiatives and EquaTerra advisors report some organisations have no choice but to essentially transform their operating model.

Additionally, instead of bringing work back onshore, experienced outsourcers are expanding initiatives and migrating/consolidating them with existing service providers to gain economies of scale, preferred pricing and better terms and conditions. Buyers entering the outsourcing market for the first time are focused on short-term deals with a clear return on investment. These buyers have a propensity to select A-list providers, indicating a desire to go with proven performance to ensure quality and enhance the chances of a successful outcome. Both categories of buyers are sharpening their negotiation tactics and keenly monitoring ROIs.

Overall, the economic crisis has prioritised outsourcing as a tool to achieve critical short- term cost reductions and drive significant, often overdue, overhauls to back-office service delivery models. “Ironically, despite populist backlash, the recession is likely to break through remaining resistance to outsourcing as business becomes more adept at using the tool to cut cost and improve efficiency,” said Lepeak.

sourcingfocus.com readers can obtain a copy of the Q109 Pulse survey by contacting Stan.Lepeak@equaterra.com

Interest in strategic document outsourcing has grown as companies look for ways to cut expenses and capital costs during the economic downturn, according to Gartner. However, organisations must ensure that outsourcing print and electronic document publishing improves customer communications without sacrificing quality, efficiency and confidentiality, the firm says in a new report.

Strategic document outsourcing is the subset of business process outsourcing focused on the publication of customer communications, including content creation, multimedia presentation and incoming document processing. The outsourced documents may be transactional forms, sales collateral, direct-marketing materials and more. The documents may be published in physical or electronic media, or a combination of multiple media.

"Strategic document outsourcing offers organisations the opportunity to eliminate print- and mail-related capital expenditures while potentially reducing material and postage expenses" said Pete Basiliere, research director for Gartner. "Outsource providers facilitate the targeted, relevant customer communications that can not only retain and grow the client base but also increase revenue."

Engaging a provider shifts the labour, material and overhead costs to the provider, which, because of its expertise and aggregated volume, has the ability to publish the communications for less, even when a profit margin is added onto its costs. Equally important, strategic document outsourcing providers often have the latest hardware and software, in addition to the well-trained personnel, necessary to implement targeted, relevant CRM-based communications. These providers can reduce the number of generic messages that organisations send, replacing them with fewer and more powerful communications that generate increased responses and higher revenue.

However, organisations that engage a strategic document outsourcing provider must realise that producing highly customised solutions may drive up the provider’s costs and prices. Limited paper choices, envelope window locations and other standards enable the provider to efficiently produce a high volume of a variety of customers’ applications while also providing appropriate business continuity processes. Certainly the provider understands and supports brand differentiation, but an insistence on customised solutions for non-differentiating business processes drives up provider costs and drives down the quality of service.

Several providers with multinational resources offer centralised coordination, production of targeted and regionalised content, and "distribute then publish" capabilities through facilities around the globe. Organisations with a multinational "footprint" must consider outsourcing their regional and global document publication, whether physical or electronic, to a provider that has the footprint that matches their own to facilitate and maximise brand control and messaging while constraining costs.

"While certain kinds of marketing materials have long been outsourced and to produce them in-house would be an anomaly, business communications have been outsourced only when management felt potential issues of control, confidentiality, tight deadlines and the mission-critical nature of the work would be assured" said Mr. Basiliere. "Whether the communications are in print or electronic media, or are campaigns combining the two, strategic document outsourcing enables organisations to focus on their core products and services while entrusting customer communications to a specialist service provider"

Gartner’s recommendations are available in the following report "Strategic Document Outsourcing Improves Customer Communications"

The Co-operative Financial Services (CFS) has chosen Infosys’ Finacle™ Universal Banking Solution to power its business transformation initiative.

As part of the programme, CFS will replace systems across its back-office in the retail banking and corporate banking businesses with Finacle™. This initiative will also include the implementation of Finacle™ core banking, CRM and e-banking solutions across their home-market operations in the UK.

David Anderson, Chief Executive at The Co-Operative Financial Services, said, “Deploying the right technology is critical to creating a client-centric business based on our core principles of value, fairness and social responsibility.”

According to Infosys, the Finacle™ platform is in use in over 60 countries worldwide.

No financial details were released.

It seems that Spain’s star is finally on the rise in the outsourcing world.

It seems that Spain’s star is finally on the rise in the outsourcing world. Too long in the shadow of India and Eastern Europe as near and offshore solution, Spain is now becoming the thinking company’s destination of choice.

Forrester’s recent research (Spotlight on Spain ) supports this claim by suggesting that companies should take another look at Spanish providers. The country has a large, highly-educated labour pool, sector expertise and relatively low labour costs. So Forrester argues that, for established and new outsourcers, Spanish providers offer a nearshore complement to existing offshore programmes in countries such as India. In the financial services sector we are increasingly seeing experienced Spanish resources being used to support complex IT projects such as business process redevelopment and IT transformation.

Compare this with India where the outsourcing sector is suffering from attrition, wage inflation and skills shortages, meaning that its cost advantages are beginning to narrow against European rates. Add Spain’s strong cultural and linguistic ties with Latin America, which allow the potential to scale and Spain, plus somewhere like Brazil, start to seem a good alternative to India or Eastern Europe.

So, for European companies, Spain’s proximity is ideal – offering better collaboration opportunities and closer working relationships – smoothing out the soft issues, such as management overheads and repeated internal change requirements, which can affect any programme.

In the financial services sector, with São Paulo (Latin America’s financial centre), as close as 3 hours from Europe (GMT-3) it’s relatively easy to maintain a close tie with an outsourcing partner and benefit from the likelihood of an improved cultural fit between the two enterprises.

Forrester sees the issue of how and where to outsource continuing in these straightened economic times; claiming “there is no doubt that interest in remote IT delivery is in the rise”. With compliance issues driving outsourcing in the financial services sector, enterprises need to be sure they have the most efficient, and therefore cost-effective, outsourcing strategy. Perhaps now is the time to consider a Spain plus Brazil alternative to traditional outsourcing destinations?