Industry news

The growing trend for British firms to send jobs overseas has helped boost employment in the UK, creating thousands of jobs, according to new research.

Economists at the Globalisation and Economic Policy Centre (GEP) at the University of Nottingham say their research contradicts common perceptions that British firms are exporting jobs overseas to India and China simply to cut costs, leaving many here unemployed. It may also suggest that its use as an easy electioneering tool both here and in the US may be misconceived.

GEP economists analysed data from more than 66,000 UK firms over a ten-year period from 1996 to 2005. The results of the study – the largest ever carried out into offshoring – showed that far from increasing unemployment in the UK, the policy had resulted in the creation of 100,000 extra jobs and an increase of £10 billion in turnover.

According to the study, firms that offshore part of their production process or service provision overseas become more efficient. This boosts productivity and turnover and as a result these firms grow and end up employing more people at home.

GEP Centre Director, Professor David Greenaway said: “People fear their jobs are being exported to countries like India and China where labour is cheaper, but the picture is far more complex than that and much more positive."

That said, the perception that offshoring equals unemployment and poorer service is deeply entrenched in the UK consumer psyche, brought on by poor experience of public-facing offshore services, together with rising domestic unemployment and an increasing gap between the better off and the most poorly paid workers. That perception is also embedded in many sectors of the workforce, particularly in manufacturing.

sourcingfocus.com's own offshore survey in April found that the vast majority of consumers would prefer to receive UK-based provision, even if it meant paying more for goods and services. In some sectors and regions of the population, only single-digit percentages of people described themselves as happy with offshoring.

Professor Greenaway confirmed that there are losers from offshoring, most notably in the levels of staff 'churn' “Offshoring does lead to increased job turnover and a change in the skills mix in a firm. The winners are those who have the skills required by firms that are offshoring and growing; the losers are those who cannot adapt.

“The lesson for policymakers is that offshoring is to be embraced, not feared, but we need to continually invest in upgrading the skills of British workers

to increase their adaptability and help smooth the transition from one job to another.”

However, that adaptability is required at all levels of the organisation. As sourcingfocus.com has found at all of this year's outsourcing conferences, often senior managers, such as CIOs, find themselves without the requisite skills to manage a chain of offshore partners located in other parts of the world; some leave and join outsourcing companies as a result.

Of course, communities that have built up around the provision of labour power within the UK, particularly those centred around manufacturing facilities, are usually the hardest hit, and it is a much greater challenge to provide those workers with new skills. Few may care about the newly efficient organisation that has uprooted itself overseas – although some companies do so in order to survive.

That said, the research also exploded another offshoring myth. Report co-author, Dr Richard Kneller said: “The common perception of offshoring is that its largely low paid call centre jobs being exported to lower wage economies like China and India, but that’s not the case.

“If you think of manufacturing and the production of parts, then it is skilled work. If you look at car manufacturing, Ford may make engines at Dagenham but gear boxes in Spain; if you think of Airbus – Britain makes the wings and engines, France the bodies. Most offshoring is actually to similarly developed European nations and the US, where the language skills are better.”

At the core of this is essentially the offshoring of risk: a risk shared is a risk reduced, and many analysts now portray the 21st century company as a globally distributed network of suppliers united around a brand name. This does not just apply to major engineering projects, but also to consumer and business technology, among countless other areas; Apple is one company that is now a carefully managed network of suppliers and IP owners, united by a powerful brand message.

Britain is a major beneficiary of offshoring, said Kneller. “In the services sector Britain has a reputation for areas like finance and creative media, and overseas firms will offshore work in this area to UK firms.”

Arguably, this is the logical conclusion of the 1980s Tory project of turning the UK into a skilled finance and services centre at the expense of the manufacturing sector. How long that vision may play out is now a moot point, as low-cost, high-skill countries such as India will inevitably begin to eat into the centre of the UK economy over the next five years.

The GEP research findings are to be presented at a major conference on offshoring to be held at the University of Nottingham later this month, which is expected to attract some of the world’s leading economists and experts on the subject as well as senior figures from the policymaking community.

• Intellect has just launched an online survey into the future of offshoring. See today's separate story to take part in the survey.

Regulators are becoming ever-more aggressive in penalising companies which do not comply with data security and data protection requirements, imposing fines on them and publicising data breaches. Intellect, the UK technology trade association, believes that companies which fail to take data issues seriously will be subject to increased scrutiny and will compromise the trust that staff and clients place in them.

Intellect is publishing a checklist for avoiding the common data security and protection issues encountered in outsourcing projects. If followed by IT outsourcers and their customers, the guidelines will greatly diminish their chances of losing or compromising data, breaching regulations and facing fines.

The guidelines provide a clear overview of the types of issues outsourcing projects might encounter, when the best time to address them is and which party is legally obliged or best placed to deal with them. For each of the seven stages of a project Intellect provides a checklist of data security and protection related actions that must be taken, ranging from determining the volume of data that will flow between outsourcer and customer, to procedures for destroying retained data at the end of a project.

David Evans, senior data protection practice manager at the Information Commissioner’s Office, comments: “Outsourcing IT operations often involves the transfer of personal data to a third party, either in the UK or overseas. For an organisation to retain the trust of its staff and clients it is important that their outsourcing complies with the Data Protection Act. This means ensuring that personal information is stored and processed securely, that is accurate and up to date and accessed only by those with justifiable reason.“

The data protection laws of the EU require careful consideration in the context of outsourcing, especially where personal data is transferred outside of the EU. The guidelines have been written with this in mind and also include information on non-European countries that have data protection laws, including the United States, Canada, Russia, Dubai, Korea and Australia.

John Higgins, director general of Intellect comments: “The money that outsourcers and their customers pay in data breach fines would be better spent improving data security processes, so these breaches don’t occur in the first place. Consumer data is a highly valuable commodity and should be treated as such. Companies recognise their responsibility towards consumers’ data but don’t always understand the best way to achieve this. We believe our guidance can help address the situation.“

Outsourcing and offshoring are an integral part of business in the 21st century. But they do mean that companies have to be more vigilant than ever in assuring the security of the data their customers trust them with. If followed by both outsourcers and their customers, our guidance will help ensure consumers’ details remain secure.“

The guidelines state that vendors and customers must work together more closely to anticipate and address data security and protection issues, which may affect the success of their project. The lead-time that anticipation provides can be critical to developing efficient solutions.

The guidelines are available to download free of charge from www.intellectuk.org/dataguidelines.

Times are tough for IT departments. Talk of recession is widespread, and the fear of an economic downturn is already having an effect on organisational spending, with predicted job cuts and budget tightening. When crisis threatens, CEOs are faced with the tough task of maximising revenue while reducing their outgoings, and often the IT department is the first port of call when it comes to cutbacks, despite its ability to increase efficiency and provide significant cost savings.

But unfortunately for CIOs, just as their own organisation is looking to make savings, so many of the suppliers and vendors they work with are increasingly seeking out ways to minimise revenue losses. For software vendors, this means getting tougher on software licenses - and particularly identifying when organisations are using more software than they are legally entitled to. As such, a growing number of software developers are exercising their legal right to audit customers’ software usage to uncover potential under-licensing, and dealing severely with firms found to be in breach of licensing conditions.

As a result, the current economic climate makes it more crucial than ever to ensure the organisation is correctly licensed, as a non-compliance fine could be devastating, crippling the IT department and potentially incapacitating the whole business. But how can the CIO juggle the need to control expenditure against protecting the organisation against the risks of fines and unwelcome negative publicity?

In simple terms, the trick is to avoid two common mistakes - under-licensing or over-licensing. Said like that, it sounds very simple, but in truth managing licenses is somewhat more demanding. While there will always be a small minority of CIOs who turn a blind eye to licensing laws, in the hope that the savings made will outweigh the potential risk of an audit, it is more likely that mis-management of software is done through ignorance rather than complicity.

It is easy for those responsible for the organisation’s compliance to lose sight of how software is being deployed and used across the IT estate. The ease with which software can be downloaded, installed and shared across multiple PCs means that even if the IT department thinks it has software procurement under control, actual usage can quickly outpace planned deployment.

But while this shortcoming is unintentional, it can still be seen as illegal activity and can leave businesses perilously at risk from vendor audits and subsequent fines. Alternatively, they may be so aware of the potential legal proceedings they over-invest on licences, just to be on the safe side. As such, what is needed is a solution that gives the IT department complete governance of their networks.

Software asset management (SAM) offers the key to both minimizing the risks associated with under-licensing as well as eliminating wasted purchases of software or renewal of unfavourable maintenance contracts. SAM is based on having both technology in place to understand what’s happening on the network as well as adopting best practices to manage IT operations, thus forming the foundation for effective software licence compliance.

Adopting best-of-breed SAM technology can quickly provide CIOs with a clear understanding the IT assets deployed across their IT infrastructure - which in its own right can lead to a significant ROI as redundant purchases are avoided and under-used assets are re-deployed.

The right SAM tools then make it far easier for CIOs and senior IT staff to record license entitlements and compare these against actual usage, giving an at-a-glance view of whether money is being wasted through unused software or whether the firm is at risk through over-usage. In reality, it is likely that both under and over-licensing will be found - meaning that while some new licenses will need to be purchased, the cost of this can be offset by savings in surrendering unnecessary software or renegotiating support contracts.

Tracking software usage (as opposed to simply detecting whether an application is installed) is critical to spotting opportunities to save costs. For example, removing unused software will eradicate potential over-licensing or re-deploying the application elsewhere in the organisation will avoid duplicate procurement.

The main thing, however, is that armed with this information, CIOs can rapidly take steps to put the situation right - simultaneously avoiding risks and driving savings.

One organisation that has seen the benefits of SAM first hand is the Telegraph Media Group, publishers of the Daily Telegraph. The Group saved £100,000 on over-licensing through implementation of SAM. With 1,000 employees and even more desktops, laptops and servers at five sites across the UK, the Telegraph Group implemented an automated software solution, which allowed the IT department to more accurately determine how much software was on the network and therefore what their licensing position was. In this case, they were immediately able to see that they were significantly over-licensed, allowing them to renegotiate their license contracts and redistribute any licenses which weren’t being used.

In the past, there has been a perception that it is hugely complicated and unwieldy to deploy a SAM project. However, recent developments which combine technology and best practices in an integrated ‘package’ have dramatically simplified SAM adoption and speeded up the time to see a return on investment.

Not only can businesses save money, but knowledge of IT assets can also improve productivity by increasing visibility across the company and ensuring that everyone is using the appropriate software efficiently. Since IT networks are prone to regular change, it is not enough to carry out a solitary audit and assume that the findings will remain the same. SAM recognises the need for constant awareness and enables businesses to alter their licensing status as and when necessary, helping companies to make the most of their assets.

In a time of uncertainty and instability, organisations cannot afford to take a gamble on software licensing, and with effective Software Asset Management in place, not only can this situation be easily resolved, but the CIO can actually prove their worth to the business by demonstrating tangible ROI.

e-Borders is a multi Government stakeholder programme aimed at further securing the UK borders. It involves the design and implementation of a database of data for all passengers travelling into and out of the UK. The data will be compared against suspect lists created by UKIS, HMRC, UK Visas and the Police, so that the Agency can decide whether to take action at the port of entry/exit.

Smarter Procurement Planning

The procurement process for a complex project can run to many months / years. Careful planning is required from the outset. Key success factors include:

Market sounding

Market engagement such as the OGC Concept Viability Process can be invaluable in ensuring that there is a sufficient source of supply and that the procurement will foster sustainable competition. Early engagement will also enable potential suppliers to consider forming alliances where a broad range of skills or niche suppliers may need to be involved.

Going to market only when ready

Once formal engagement begins there will be a step change in the level of customer and bidder resources and a resultant increase in pressure to achieve results. The planning and review process should ensure that the procurement goes to market only when ready, i.e. when there is certainty over budget and scope.

Certainty of scope from the outset

A significant reason for delay in complex procurements is lack of clarity over scope. Time spent prior to engaging with the market to ensure that the programme is clear about the scope of the requirements, the potential cost and the available budget will save significant delay later in the procurement. Changing scope once bidders are engaged will doubtless give rise to increased costs for all parties involved against pressure to complete the procurement within the original timeframe.

Factoring in contingency from the start

It's unlikely that all possible outcomes of each stage in the procurement can be predicted at the outset. Project planners must be realistic in setting the timeframe for the procurement. This will reduce the chance of delay in contract completion (and subsequent implementation) and therefore the need to increase the budget for the procurement. These are hard messages to sell within a procurement programme, and careful and realistic planning is essential.

Holding readiness reviews

At each stage of e-Borders a readiness review was held. These involved a group of independent reviewers reviewing key documents and analysing whether the procurement was fit to move to the next stage. Also the process focused the procurement team on ensuring that the documents were ready for scrutiny. The programme planned for the results of the review and made time and resources available to deal with the outcomes before proceeding to the next stage.

Managing a multi-stakeholder project

e-Borders involves a number of Government and industry stakeholders. At the outset of the project the Programme developed a stakeholder engagement strategy focused on:

Knowing the role of each stakeholder

What are the roles of each stakeholder? On the purchasing side, who takes the lead and how do others ensure their views are heard. It was essential to engage stakeholders early and ensure all parties involved were clear on their role in the procurement and post go-live.

Documenting the relationship

A series of memoranda of understanding were developed at the outset documenting the parties' objectives and their roles both in the procurement and post go-live.

Governance is key

In complex multi stakeholder procurements, governance arrangements will be needed for each stage. The e-Borders model balanced the complexity of the stakeholder relationships (adapted to reflect government, carrier industry and supply side needs).

Governance arrangements must be sufficiently flexible to adapt to emerging issues at each stage of the project, sufficiently comprehensive to allow stakeholders to have their say, but workable in terms of time and resource commitments.

Ensuring the contract is workable - Use of the OGC Model Contract

e-Borders was one of the first complex procurements to go to market after the OGC issued its model contract and guidance. The Programme was able to adapt the contract to the bespoke requirements of the project.

OGC guidance is now well developed. It should be used to consider the following:

What is the proposed commercial model?

For more complex procurements, it will be helpful to develop a set of Key Commercial Principles – these aid development of the contract and can be used to explain the shape of the deal to governance boards and the wider stakeholder group.

What will the shape of the contract be?

The procurement / legal team will need to consider whether the structure of the model contract will need amendment. Are all schedules appropriate, are any more required?

No two projects are the same

Every project has its individual features – therefore ensure that sufficient time is set aside in the procurement plan to develop the draft contract to cover all aspects of the procurement.

Key Messages

As highlighted above, problems often arise due to setting unachievable goals, being unclear about the scope and the funds available to procure it, conflicting stakeholder demands and moving from stage to stage without assessing readiness.

It would be unrealistic to suggest you can prevent any of these issues arising. However being aware of the possible problems and delaying factors at the outset and planning how they will be addressed will reduce the likelihood of your project making the headlines for all the wrong reasons.

As companies continue to move to using multiple providers for their outsourcing services, the number of reported megadeals (worth more than $1 billion) awarded to a single service provider has declined, according to analysts at Gartner. In 2007, 10 outsourcing megadeals were awarded, a decline from 12 in 2006.

“The decline in reported outsourcing contracts can be partially explained by the fact that outsourcing is now ‘business as usual’ for many enterprises,” said Kurt Potter, research director at Gartner. “There is more outsourcing activity, but fewer deals on average are reported and this creates the false impression that outsourcing is decreasing.”

In terms of megadeal total contact value (TCV), the total for the 10 megadeals in 2007 was $12 billion, the lowest level reported during the last eight years, with the closest level being that of $20.3 billion in 2001. Average contract value (ACV) of megadeals also continued to decrease, from an average of $2.6 billion in 2006 to $1.2 billion in 2007.

“While further TCV erosion may be driven by the irreversible trends of global delivery and IT services industrialisation as many leading-edge organisations move into their second and third generations of IT outsourcing, they may be looking at deal expansion to include wider application or business initiatives,” said Mr. Potter. “Although these opportunities are likely to evolve from a single-provider to a multiple-provider engagement, in some cases, historical ties between provider and recipient may retain the potential for megadeals.”

Of the TCV of all outsourcing deals reported in 2007, Gartner said megadeals represented 39.4 percent of the contract value and represented only 6.8 percent of the number of total contracts in 2007, down from 7.4 percent in 2006. Although deals with less than $50 million in TCV continued to increase and reached 39.5 percent of the total number of contracts, they only represented 3.3 percent of TCV for 2007.

“Many providers are pursuing smaller contract strategies as a consequence of the new market realities, new competition and natural market pressures toward commoditisation, which reduces per-unit pricing. These strategies are often in the form of pursuit of smaller contracts from larger clients, or larger contracts from smaller companies,” said Mr. Potter. “Many clients want to test providers’ contracting practices, capabilities and cultures before moving favoured providers into larger contracts, or organisations are using smaller doses of outsourcing to delay larger outsourcing adventures. Many providers are forced to pursue larger contracts to meet growth expectations. Despite this pressure, providers should continue to evaluate different or at least accommodate go-to-market and product portfolio strategies for smaller clients.”

Gartner has maintained an outsourcing contract trends database since the early 1990s as a means of tracking the activity and trends in the outsourcing market for public and private organisations. All of these contracts publicly disclosed their dollar value and the duration, as well as the nature of their services and the name of the client and the outsourcer. The database is a comprehensive history of all publicly disclosed contracts, but is representative. Contracts from more than 400 outsourcing vendors, 12 industries and the major global regions are included.

Release Consulting, an independent IT consultancy specialising in the music and entertainment industries, has this week finalised an agreement with Universal Music Group (UMG) to service its international IT digital initiatives department.

In fact, the new specialist outsourcer was spun out of Universal in February this year by its founding MD, Will Lovegrove. The ambition now, he says, is to build out into new areas from the foundation stone of music-giant expertise that he and his team have acquired.

“I was working inside Universal for five years and built what I thought was a very high-performing technology team in a media company and we've taken that team out and formed a consultancy. Our ambition is to carry on doing what we were doing for Universal but for other similar types of company. Obviously other music labels spring to mind, but also broadcasting companies and publishing companies as well.”

Release Consulting says that it offers entertainment companies the opportunity to benefit from the IT expertise behind the systems that enable Universal's international digital supply chain.

However, the real core of the new company's business is not entertainment or the media, necessarily, but intellectual- property-based organisations of all kinds, and how they digitise their assets and manage them.

“We were involved in setting up the IT systems, workflows and processes to help Universal exploit its digital audio archives,” says Lovegrove.

“So [such assets might be] sitting over here in an archive system surrounded by metadata designed for a specific purpose, but they perhaps need to be over there instead, so new metadata needs to be written, and then the material needs to be sent out over corporate systems. At the end of that process is consuming the material in an online form in an online channel by retailers or consumers.

That process and that learning and expertise that we've developed, I think could be applied to broadcasters and publishers as well, where intellectual property is at the heart of that process. ”

For many organisations, those archives may date back decades, perhaps? “Yep, absolutely,” says Lovegrove. “We understand archives, we understand incomplete data. We understand that data collected a number of years ago may not have all the things a company needs to do things with it in today's age. So we understand a lot of the issues and complexities of companies that deal with intellectual property."

In fact, Lovegrove's business is in many ways a traditional IT outsourcing one: “On the practical side, we understand international media companies, we understand how projects are governed with multiple stakeholders in multiple countries – with language barriers and time barriers,” he says.

“On that very pragmatic basis we understand how projects can work in international environments, in large companies. Where I see those kinds of indicators then I see where we can add value and have a meaningful conversation.”

Of course, broadcasters are ahead of the game in the UK, with the BBC's iPlayer and its plans announced this week to digitise its entire archive, or at least create a webpage for every programme ever broadcast.

“What happened to music five years ago is now happening to other vertical sectors today,” agrees Lovegrove. “They are making advances and tackling issues such as making their archives available and deciding whether to use their own software or other people's software, and which stage in the value chain do they want to occupy and what does that mean for their own internal resources and how they change and adapt and evolve.”

For Lovegrove, though, these conversations should happen internally before Release is called in. “What I've seen with companies that deal in intellectual property is that they are investigating as many different strategies as they can. Strategic business planning is not one of our billable services.”

Music, cinema/video and broadcasting are three industries that are being rewritten by the day by Internet-based businesses, from the original Napster – which, aside from all the noise about piracy, arguably proved both the business model and the market of online music distribution and saved the industry billions of dollars in R&D – to YouTube, Bebo, Amiestreet.com and MySpace.

Does Lovegrove have any bets of his own about what business model might succeed? “My opinions are as a consumer. I get involved where by and large a company has already set out its strategy and they want it executed.

For myself as a consumer, I like and want subscription services to prosper. I worry about advertising based services... I understand how they might work with very established, very famous high-profile stars, but the music business is also about nurturing new talent and I don't see how they would get a share of the revenue stream from advertising, when the media buyers don't understand who they are and what they do.”

For Lovegrove, then, his business is not about how innovative the strategy might be – that is down to the customer – but instead about making it work. “That is the real challenge. However innovative your business model, your back office systems must be geared to operate in a certain way. There's innovation in business models in the front office, but being able to to fulfil those is where I tend to be involved.... and how you relate those innovative ideas to a major [label].”

So the media companies may be hedging their bets up front, but Lovegrove's money is invested in the thing that never changes: the backroom; the real engine of any business.

A "damning", confidential Joint Intelligence Committee report into the security situation in Iraq, and a top-secret document assessing the weaknesses of terrorist network al-Qaeda have been found on a Surrey-bound commuter train, and handed in to the BBC.

A nationwide police hunt for the missing documents had been set in motion, only for a passenger to find the seven-page document – wrapped in a business magazine – on a train out of Waterloo. The papers belonged to a senior official.

This latest security breach is yet more evidence that private or top-secret data is being entrusted to public officials who have little regard for, of knowledge of, security protocols, and that even the most basic security measures are not being followed by the Government and its agencies in the handling of sensitive information.

The security lapse is the latest in a woeful list of preventable public-sector breaches, which have included the loss of data on 25 million child benefit claims in internal post, mislaid personnel records for the armed services, the loss of patient details by several NHS trusts, dozens of mislaid or stolen government laptops, and the mishandling of data on driving tests.

Each of these cases was preventable, and all are inexcusable. The private sector has not been immune, but the public sector is in the employ of British citizens and is entrusted by them with our national security, and our individual security.

The time has surely come for a bottom-up assessment of security and data management procedures, rather than the top-down approach favoured by a Whitehall that is fond of throwing money at projects, but which has scant regard for training, staff, and management.

Let's say it again: security is about people, not about technology; security is about policy and good management, not about the size of the deal; security is about the most junior employee in the office, not the CEO or the minister; security is about not sitting on a crowded train with top-secret documents while clinching confidential deals on your mobile... it's not about hackers and firewalls.

One can only imagine the arrogance and stupidity of the official involved, flouting conventions concerning encryption and location as he joined bankers and brokers on the train home, the document nestled in his copy of the FT like some advertising insert.

Indeed, it's becoming clear that the Government's attitude to data is akin to the City's attitude to stocks and shares: they're things to be traded, and are only of value en masse. In a portfolio of stocks, you hope to win more than you lose. It's a national scandal and until Whitehall reviews security at every level, all plans for a national ID scheme should be put on hold.

Proctor and Gamble, the consumer goods giant, has selected BT for an ITO contract worth over £330 million.

BT is tasked to provide a broad and integrated portfolio of services in support of P&G's IT requirements. This includes WAN infrastructure across more than 1,100 locations in more than 82 countries and the migration of P&G’s legacy infrastructure across to state-of-the-art, high-speed network technology. BT will also manage security, conferencing, remote access, voice and IP telephony services and Internet services.

By standardising the technology used across the business P&G hopes to benefit from greater cost efficiency and control whilst increasing quality of customer service.  The network infrastructure and associated applications are also designed to ensure compliance with numerous policy, regulatory and security standards.

ICAP plc, a major force in financial information delivery and brokering, has selected Accenture to develop and maintain its EU credit-trading platform.

The five year project will be delivered through Accenture’s Global Delivery Network, which includes over 50 delivery centres across five different continents.

James Dawson, Business Manager of credit products at ICAP, said: “This initiative is designed to increase the capabilities and cost-efficiencies of our credit-trading platform in order to continue to drive growth in an increasingly dynamic and evolving global marketplace”.

Steria, a European leader in the deployment of transport IT systems, has been chosen to deploy a large-scale taxi management system for Aéroports de Lyon.

The new system, to be delivered in partnership with IES, Representative and FTPC, aims to reduce passengers' taxi wait times significantly and give the Lyon-Saint Exupéry Airport means to monitor and manage taxis much more efficiently. The airport, which caters for up to seven million passengers annually, hopes the system to play an integral part in ensuring well managed and regular taxi services for customers.

This new contract follows similar systems rolled out at the Paris Charles de Gaulle and London Heathrow airports.