Industry news

Patni, the IT/BPO provider, has developed a suite of services to address the rapidly changing financial services landscape.The new array of services is designed to address cost and efficiency pressures experienced by companies during mergers and acquisitions, divestitures and conversions of internal IT systems that directly impact the overall technology infrastructure.

“The financial services industry landscape has been altered irrevocably, and the changes and challenges facing this industry are likely to continue through 2010,” said Fred Cohen, Practice Head of Patni’s Global Asset Management Practice.

The services will be delivered by Patni’s Asset Management Practice, led by Cohen out of Patni’s North American headquarters in Cambridge, Massachusetts.

Shared Service Organisations (SSOs) have achieved dramatic improvements in cost and productivity, according a report from The Hackett Group. Owing to this, business expectations are now forcing companies towards a second wave of value creation through complex outsourcing arrangement, the report says.

Hackett's latest Book of Numbers research finds that companies seeking to move up the value chain are implementing a multi-layer shared services model that incorporates transaction processing centers in low-cost regions, centers of excellence, and high-level onsite support for analysis and decision-making. Many SSOs have also expanded beyond finance to incorporate functions such as IT, procurement, and HR -- in fact, an "everything in G&A" approach is leading edge. At the best SSOs executives make sourcing decisions relating to scope and geography within a continuous improvement and customer service culture.

Results from the research, which examines shared service operations at more than 150 global companies, is featured in Hackett's latest Book of Numbers research volume, "World-Class Shared Services: Expanding Beyond the Transaction." The research also features case histories on shared service successes at Hewlett-Packard and Royal Philips Electronics.

"With a nearly 50% increase in use over the past three years, shared services has become the standard approach to corporate finance," said Hackett Finance Shared Services Advisory Program Leader Dr. Penny Weller. "These centers have played a critical role in helping reduce the cost of finance. Today, typical companies spend almost 40% less on finance operations than they did in 1992. World-class finance organisations, which spend only half of what typical companies do, have seen even greater cost reductions."

According to Hackett Finance Advisory Practice Leader Bryan Hall, "Across the board, the results shared services has helped companies generate is quite impressive. Our research finds that 65% of all companies with SSOs have cut costs by 21% or more, with some seeing savings of over 60%. At the same time, they're showing dramatic improvements in productivity, quality, and customer service."

According to Hackett European Advisory Services Director Roy Barden, "As next-generation SSOs move beyond pure transaction processing, world-class SSOs are evolving towards a three-layer model. Most have established large-volume transaction processing centers, often in low-cost labor markets. In addition, they've established centers of excellence which are responsible for service delivery and are the primary interface to the business leaders. These are often much closer to the business geographically. Finally, high-level knowledge workers are likely to be co-located with the business units, so they can serve as on-site business partners. All this puts them in a better position to provide value-added services such as decision support and reporting and analysis. Within this three-layer model, we're also seeing a growth in multifunction SSOs, incorporating a wide range of back-office operations beyond finance.

"We're also seeing several other emerging trends," said Barden. "Many companies are also now making second-phase movements of operations from near-shore locations to low-cost labor markets, and most are already doing significant work offshore, either through SSOs or outsourcers. The use of outsourcers is certainly on the rise. Overall, leadership at top SSOs are transitioning to the role of sourcing strategists, evaluating and managing a mix of internal and external options, including offshoring and outsourcing."

Consultancy firm Accenture Ltd has hired Duff & Phelps to advise on its possible acquisition of the Asia business of BearingPoint Inc, according to a Reuters report

BearingPoint Inc, which provides technology and management consulting services to the U.S. government, filed for Chapter 11 bankruptcy protection on Wednesday.

Skandinaviska Enskilda Banken AB (SEB Group), a North-European financial group, will process its SEPA Direct Debit transactions with Equens, one of Europe's payment processors.

SEB is one of Northern Europe's financial groups that have affiliates in eleven European countries. The foothold gained in Sweden is a next step in the continued expansion of Equens' position throughout Europe. Equens is already processing payments in eight European countries. The parties signed the agreement last Friday.

Edwin Echl, Global Head of Payments Operations at the SEB Group commented "Equens has a strong presence in the European market. This, combined with its pan-European market coverage, were our main reasons for choosing them. Outsourcing the processing of SDD payments is one of the first steps in our strategy to centralise the payment services of the entire SEB group."

As the UK's finances deal with body blow after body blow, with even the chief executive of Starbucks weighing in to talk down the economy – presumably from 'Grande with Cream' to 'Tall and Skinny' – hardware and services giant HP says it will cut staff wages.

The Palo Alto-based giant has said it plans to trim salaries by an average of five percent rather than contemplate new tiers of redundancies. Executive salaries will be reduced by 10-20% as part of the strategy.

Last autumn the company announced 25,000 layoffs in the wake of its purchase of EDS, and says that 9,000 of those jobs have already gone.

HP announced this week that revenues are slightly up, but year-on-year profits have fallen by 13%, with its cash-cow hardware businesses most seriously impacted. Those results were broadly in line with analyst expectations.

However, HP's services revenues ballooned with a 113% increase, mainly due to the EDS acquisition last year. Outsourcing is keeping HP in the black.

CEO Mark Hurd told analysts that services moved "counter cyclical" to the rest of the economy as companies turned to companies like HP to help them slash costs.

He also hinted that HP may be benefiting from Satyam's troubles in India.

In a company email leaked to the press Hurd said wage reductions were planned to avoid further job cuts.

"When I look at HP, I don’t see a structural problem of that magnitude," he said. "There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimisation process. But at a company-wide level, I don’t believe a major workforce reduction is the best thing for HP at this time."

Hurd will take the biggest salary cut of 20 percent, with senior executives losing 10-15% of their remuneration, and other employees 2.5-5% out of their wage packets.

In the UK, union Unite has reacted angrily to the proposal saying that workers would "be astonished" that a corporation posting profits in the billions would propose to slash salaries.

Once again, it seems, outsourcing and UK jobs are butting heads in the national press.

SWIFT, the financial messaging provider, has announced a three-year managed services contract with BT.

BT will provide a solution which connects SWIFT’s strategic offices across Europe, the US and Asia.

The contract includes the implementation of five systems, supporting equipment and software. Furthermore, BT will provide managed services including 24/7 helpdesk support and on-site maintenance.

Francis Vanbever, CFO SWIFT, said “We were attracted to BT’s complete service offering. Based on our existing relationship with BT, we are confident that we have chosen the right conferencing partner.”

Large financial firms signed 33 percent fewer transactions and divested heavily in captives during the fourth quarter of 2008, according to Market Vista: Q4 2008, a report on global outsourcing and offshoring activity from the Everest Research Institute.

“The decrease in outsourcing transaction activity is primarily on account of deferred spending by large financial firms; however, we expect outsourcing and offshoring activity in the financial sector to pick up during 2009,” said Eric Simonson, Managing Principal, Everest Research Institute. “The fourth quarter also saw Citigroup and Lehman Brothers shed off captives. Reducing fixed costs and increasing flexibility through third-parties are key reasons for captive divestiture by financial firms.”

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 Q4 report also includes a special section on emerging locations including Johannesburg, Ho Chi Minh, Istanbul, Bangkok, Guatemala City, San Salvador, Kiev and Cairo.

Other insights for the fourth quarter 2008 activity include:

• Overall outsourcing transactions decreased 6 percent compared to the previous quarter but was higher than the first and second quarters of 2008

• Total ACV increased by 11 percent from US$3.2 billion in Q3 to US$3.5 billion in Q4, primarily due to the signing of multiple large contracts. IT outsourcing contracts accounted for over US$1.9 billion; contracts with ITO and BPO accounted for about US$1 billion

• For the fourth consecutive quarter, Europe accounted for a significant portion of the outsourcing market. Despite a marginal increase in market share from 39 to 41 percent from Q3 to Q4, transaction signings decreased by 2 percent and ACV dropped 41 percent

• Captives activity was dominated by set-ups in India, China and other Southeast Asian countries: 22 new announcements occurred in Q4, compared to 22, 18 and 16 in first three quarters, respectively

• In Brazil, currency depreciation in the last few months has resulted in a 12 percent reduction in operating costs, restoring labor arbitrage opportunity to 2007 levels

• Destinations in Africa are pursuing offshoring investment, including the South African government and industry bodies that are taking initiatives to improve infrastructure, provide fiscal incentives and lower operational costs

• Reversing the trend from the previous quarter, aggregate US$ revenues across the group of suppliers declined by 2.5 percent. Revenues of traditional global suppliers declined by 3.2 percent, while those of offshore-centric suppliers increased by 3.5 percent

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, Satyam, Tata Consultancy Services, Wipro and WNS.

Everest will hold a Webinar on the report on February 19 at 8:30 am CST; 9:30 am EST; 2:30 pm GMT Standard Time. To register, please visit: www.everestresearchinstitute.com/Events/Webinars.

The U.S. Army's Product Manager Joint-Automatic Identification Technology office has signed a BPO contract with CSC under a subcontract with Savi Technology Inc., a Lockheed Martin company. Savi Technology is one of four companies to be awarded the Radio Frequency Identification (RFID) contract, which has a three-year base period and 12 one-year options.

The contract, valued at $428 million for the four firms, will see CSC provide training, warranty and maintenance, technical engineering, and hardware and software delivery and installation.

"CSC is honored to support the Army and its tireless efforts to protect the American people and our coalition partners," said James W. Sheaffer, president of CSC's North American Public Sector line of business.

According to technology research and advisory firm Gartner, Inc. the market for Business Intelligence (BI) platform software in Australia is forecast to reach a$174.8 million (US$152 million) in 2009, up 16.8 percent from A$149.6 million (US$130.1 million) in 2008.

Speaking ahead of the Gartner Business Intelligence and Information Management Summit in Sydney next week, Gartner analysts said BI platform purchases should be more resilient to a recession compared with some other software areas, but a tougher economic environment, together with stronger pricing pressures, would still hamper growth during the next five years.

Additionally, many organisations are still trying to get value from their BI investments, according to Gartner. Further investments by these organisations will be constrained until they determine how to get value from the investments they have already made.

For the fourth year in a row, BI applications have been ranked the top technology priority in the 2009 Gartner Executive Programs survey of more than 1,500 chief information officers (CIOs) around the world.

Ian Bertram, Gartner managing vice president and chair of the 2009 Gartner BI Summit, said that because BI has the highest priority for CIOs, it will fare better than many other technologies and management practices in the economic downturn.

“Businesses in this region will continue to prioritise BI because it's transformational,” said Mr. Bertram. “BI is even more important when times are tough. It can help find bottlenecks and inefficiencies or to expose areas that are profitable. We continue to see traction for solutions such as spend analytics, risk and fraud.

“The rapid growth in information generated from enterprise applications, the popularity of metrics-driven business initiatives and the growing need for regulatory compliance will also continue to drive growth in BI,” he said.

While market demand for BI platforms will be favorable, heavy discounting can be expected, according to Gartner. The effect of the market consolidation by SAP, Oracle and IBM is to reduce overall revenue because BI is often sold as an add-on or part of a larger solution bundle. This will keep overall revenue growth lower. BI investments are also likely to be subjected to increased scrutiny from finance, with CFOs doing final negotiations on pricing and maintenance.

Mr. Bertram said skills shortages continue to hamper BI projects in Asia Pacific.

“Mature markets such as Australia and Singapore continue to make investments but struggle with a gap in implementation skills. Limited BI skills in Asia Pacific will inhibit growth in license revenue, but it also represents an opportunity for service providers. Software vendors should work on improving usability, design appropriate learning programs, propose alternative delivery models and form strategic partnerships with local service providers,” he said.

The overall Asia Pacific BI platform software market will continue to grow at a respectable compound annual growth rate (CAGR) of 15.3 percent through 2012, reaching more than US$510 million by 2012, according to Gartner.

Australia will remain the biggest BI platforms software market in Asia Pacific through 2012, reaching A$243.8 (US$212 million) in revenue, followed by China. The local BI market will be sustained through maintenance revenue, which will become more pronounced in the slowing economic environment.

Kale Consultants announced that it has entered into a multi-year outsourcing contract with Wataniya Airways. As part of the deal, Kale will deliver complete outsourced revenue accounting and passenger audit services from its delivery centre. Kale will provide services to the airline from its Managed Processing Services centres in India.

George Cooper, CEO of Wataniya, commented, “Outsourcing our accounting and audit services to a specialist like Kale has been a key strategic step in our preparations to commence operations in January 2009. This will help us to keep our costs in line and build efficiencies to focus on devising competitive strategies in our core area of business”.