Industry news

Aon Benfield, one of the world’s premier reinsurance intermediary and capital advisors, will extend its contract with Xchanging and transfer further operational work to the BPO provider. The new seven-year contract is an extension of an existing contract for insurance broking services.

Stewart McCulloch, Head of Xchanging UK, said: “This agreement confirms the significant attractions of our Broking processing platform established in 2006”.

Swedish logistics company Green Cargo has signed an agreement with Capgeimini France to implement the latest SAP transportation management applications. Green Cargo expects the software will help it to better monitor shipments and maximise customer relationships.

CSG Systems International, a leading provider of customer interaction management and billing services, has entered into a multi year contract with Infocrossing, part of Wipro, to provide outsourced infrastructure services.

Under the terms of the agreement, Infocrossing will consolidate CSG’s servers and manage their mainframe and information storage environments, which will be migrated to Infocrossing’s data centers. Infocrossing will provide the data center computing environment for the delivery of most of CSG’s customer care and billing services, allowing CSG to remain focused on its core business.

“We selected Wipro Infocrossing because of its deep data center expertise, rigor and proven process and methodologies,” said Bret Griess, CIO and SVP Operations, CSG Systems. “This agreement is aligned to our IT initiatives and supports CSG’s business goals of expanding our market and extending our reach into new verticals. We are excited to work jointly with Wipro Infocrossing to modernize, improve and expand the IT functionalities supporting the core business of CSG Systems.”

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.

Infineon Technologies AG (IFX), one of the leading semiconductor manufacturers has signed a deal with TCS to operate and maintain software systems within Infineon’s supply chain management landscape.

Infineon CVP IT & CIO, Michael Schmelmer commented: “By focusing on cost effectiveness and customer satisfaction, TCS brings to the table a very compelling delivery model which meets Infineon objectives and provides an excellent opportunity for being a long term strategic partner for IFX”.

The Infineon operations will be delivered out of Munich, Germany and Bangalore, India.

Avis, the worldwide car rental provider, has signed a contract with BT Spain to provide telecommunications services for Avis Alquile un Coche (rent a car) S.A., Avis Contact Centers S.A. and Avis Rent a Car Portugal. BT is now responsible for the companies’ WAN in Spain and Portugal, the WAN infrastructure for the Avis call centre in Barcelona, as well as for the management and proactive monitoring of the car rental company’s network.

The agreement, worth almost 4.5 million Euros, will last seven years. The deal also includes the provision of 3G backup services and 24x7 maintenance for the organisation’s most critical central offices.

Perot Systems Corporation, an Indian ITO provider, is to expand its facilities in India to cater for continued global growth. The company currently operates facilities in Bangalore, Chennai, Coimbatore and Noida and will open the new 23,617 square-foot facility in Chennai at the end of March. The new location will accommodate approximately 353 new seats for the company.

Vardhman Jain, MD at Perot Systems insurance and business process group, commented, "The services provided from the new facility will include processing highly complex and knowledge intensive, high-volume, high-value transactions for our healthcare provider, healthcare payer, life insurance and F&A clients around the world".

The University of Cambridge and Infosys have signed an agreement to undertake research in engineering, management and business, architecture and pharmaceuticals. Both partners will explore opportunities and implement research initiatives.

Professor Alison Richard, Vice-Chancellor, University of Cambridge added, "We, at Cambridge, are convinced that sustained collaborative research in business, science and technology has a pivotal role to play in the world today, and I am certain that this collaboration will create further exciting opportunities for us both in the years ahead.”

Speaking about the research partnership, Narayana Murthy, Chairman of the Board, Infosys Technologies said, “This collaboration will create an opportunity for some of the best minds engaged in academia and at Infosys to come together to identify and create relevant solutions in the areas of engineering, business, architecture and pharma."

Iceland has signed a seven year ITO deal worth over £11.5 million with Getronics.

The contract, a renewal of a previous deal, will run until 2015 and it includes 24x7 server hosting and systems management support. The fixed annual contract will be implemented throughout the UK.

Mark Pearson, IS Director at Iceland, commented, “We’ve built up excellent rapport and trust”. He also added, “The changes made to the contract have provided us with stability and security in terms of our IT platform in the current financial climate.”

Dave Baldwin, Managing Director at Getronics commented “We know Iceland’s business extremely well and have invested time with key contacts and stakeholders throughout the re-negotiation process. This has enabled us to completely align our technology and service provision with Iceland’s requirements and as the renewal was instigated by Iceland this speaks volumes for the working relationship we now have in place.”

The Ukrainian Hi-Tech Initiative has begun research for the “Central and Eastern Europe IT Outsourcing Review 2008”. The research will look at the state of the IT outsourcing market in Central and Eastern Europe.

The review will examine indicators of development in IT Outsourcing across central and Eastern Europe. The report will cover market volume, number of professionals, number of IT companies providing outsourcing services and individual labour costs to end users. This research will also look at the expert opinions about the impact of economic recession on global outsourcing development, particularly on the development of outsourcing in CEE region.

The Ukrainian Hi-Tech Initiative will work with various local bodies to collect and collate data on the region. Those involved include the Baltic Outsourcing Association, Hungarian Service and Outsourcing Association, Employers’ Association of the Software and Services Industry – ANIS (Romania), Bulgarian Web Association, and the Association of IT & Business Process Services Companies.

Valerica Dragomir, Executive Director at Employers’ Association of the Software and Services Industry (ANIS) commented, "The lack of analytical information about outsourcing services in CEE region prevents Central and Eastern European companies from demonstrating their potential in outsourcing services provision. That is why the decision of CEEOA to conduct the Central and Eastern Europe IT Outsourcing Review in an annual format will help the customers to receive a regular and reliable source of information on the development of IT outsourcing services market in the Central and Eastern Europe"

When complete, readers will be able to view the report at ITONews.eu, readers can also subscribe by emailing subscription(@)itonews.eu specifying “Central and Eastern Europe IT Outsourcing Review 2008” in the subject line.