Industry news

BT Ireland has launched a new remote IT management service, BT Innovate, which caters for IT management in the SME space. Managing director of BT business, Liam O’Brien, says the launch is the result of five years of tactical acquisitions in the space and is aimed at offering smaller businesses cost-effective resilience.

A study by IT Recruitment specialist CV Screen has found that permanent IT Salaries in the UK have risen by 4.1% over the last 12 months.

The research, which monitored over 11,000 advertised positions in the UK during Q1 2008, concluded that the average advertised salary for an IT professional in the UK is now £34,217.

CV Screen’s Matthew Iveson commented “The continued high demand for IT professionals has continued to put upward pressure on IT salaries.” “There are certain technical skills where there is still a considerable war for talent with candidates with strong skills in areas such as .Net, C# and PHP inundated with opportunities” continued Iveson. With regards to the outlook for salaries in 2008, Iveson commented “The IT Jobs market is holding up well in spite of the wider economic problems. It is likely that as a result of the rising costs of living in the UK that more candidates will seek to move for financial reasons, thus putting further upward pressure on IT salaries.”

Hewlett-Packard has confirmed strong second-quarter results in the wake of its industry-shaking acquisition of EDS last week. The technology and services giant reported net revenues of $28.3 billion for the quarter, an increase of 11% year on year.

HP Services revenues increased 12% year on year to $4.6 billion, with strong growth in Outsourcing (14%). 70% of the company's revenues now come from outside the US, with business growing particularly fast in Brazil, Russia, India and China.

During the conference call, CEO Mark Hurd batted aside industry concerns about the complexity of turning the massive deal into a well-integrated and managed cultural fit and said that the EDS deal would extend HP's reach into enterprise accounts, encourage new business and bolster outsourcing margins.

Analyst firm Ovum said: "We still have some serious questions regarding the forthcoming EDS integration, but we suspect that in the short term HP's consistent financial performance of the last year, coupled with Hurd's continued focus on cost savings, effective execution and streamlined operations, will lead many to give HP some leeway as it leads EDS down the path toward 'the HP way'.”

Public sector bodies are facing a number of critical barriers in seeking to reap the benefits of shared service initiatives, according to a report published by law firm Browne Jacobson.

These include a lack of available resources, workforce opposition and risk-averse organisational cultures.

The Shared Services Survey 08 is the result of research carried out among 178 senior public sector managers in the health, local authority, social care, education and fire service sectors.

The research found that the primary barrier to implementing shared services, as identified by public sector managers, is a lack of adequate resources. Two thirds of public sector managers (65%) were concerned about a lack of financial resources, while 59% identified insufficient manpower. Resource challenges were particularly evident within the social care and education sectors, where 85% and 71% of managers expressed concern over financial and human resources respectively.

Dominic Swift, head of the Shared Services team at Browne Jacobson, said: “Having the necessary financial and human resources in place is a vital component if the full potential of shared services is to be realised.”

When asked to define shared services, the vast majority of respondents talked about ‘sharing, collaboration and the pooling of resources’. Surprisingly only one in four public sector managers (26%) referred to cost savings and end benefits.

Swift says: “Government is guiding the public sector to drive significant cost efficiencies while improving public services. Yet only a small minority of managers list these among the aims of the shared services agenda.

“This raises an interesting question: is it widely assumed that shared services will mean greater efficiency and translate into significant cost savings or have public sector managers not fully engaged with the government’s ambitions to drive efficiencies through shared services projects?”

When quizzed on who they believe is the driving force behind shared services, public sector managers principally identified senior management and central government. Over three quarters (77%) pointed to senior management, and over half (52%) Whitehall civil servants.

Frontline workers were cited by only 13% of managers – and customers by just a tenth (10%).

Swift says: “The momentum behind shared services is being generated internally – and from the top. It is critical that front line staff are equally engaged in the process right from the beginning. Managers need to consult with staff and customers in a consistent and coordinated way, consider the feedback received and decide together how to address any major concerns.”

The report also identifies a series of cultural issues, including internal opposition, risk-averseness and a lack of trust between partner organisations.

According to public sector managers less than a quarter (23%) of the workforce are active supporters of shared projects, while over a third (36%) actually oppose them. Opposition levels reach some 40% among fire services.

Over one third of public sector managers cite a lack of trust as a key challenge to implementing shared services. Concerns over partner organisations giving priority to their own issues, and a lack of authority over partner workforces, are the two principle barriers to establishing trust identified by the study.

Swift continues: “Clear consultation and communication with employees, unions and local representatives is essential if public bodies are to overcome cultural hurdles and internal opposition, and develop trusting partnerships.”

Close to half (41%) of managers identified the risk-averse nature of their organisations as a significant challenge to delivering shared services.

Ongoing liabilities and high exit costs are paramount among the risks keeping public sector managers awake at night. Close to three quarters (71%) cited these as key.

Other major risks identified are partners withdrawing from shared arrangements (cited by 66% of public sector managers); non-compliance with statutory procurement processes (61%); and inadequate consultation with staff (55%).

“Public sector managers are clearly concerned about a range of risks and barriers inherent in sharing operations with an external organisation," says Swift.

“Managers will undoubtedly need to undertake a thorough profile to identify and assess any potential risks – including financial, personnel, regulatory, compliance, data privacy and intellectual property.

“They should also ensure that all the partners are clear about their responsibilities and obligations and put in place the necessary legal and governance structures before implementation.”

• A PDF of the full report is available in our Whitepapers section.

The rise of legal process outsourcing (LPO) may have a significant impact on the numbers of junior lawyers in the UK, says one LPO specialist, and 2008 will be the tipping point.

Although LPO is in its infancy with a total industry population of perhaps 7,500 people, many legal functions. such as document drafting, analytics, and research are now being unbundled, commoditised and outsourced to India, along with locations such as South Africa and the Philippines. This will undoubtedly have an impact on the lives of people studying law in the UK, says Mark Ross, director of LPO specialist LawScribe.

Ross believes (unsurprisingly) that deregulation within legal services presents a great opportunity for the Indian market – from where the English lawyer's Los Angeles-based company draws its pool of talent.

One of the reasons for the law being one of the last industries to use offshore services is that large legal practices traditionally make money by “leveraging out their junior associates”, he says. However, now that the Indian legal sector is being liberalised and opened up to foreign law firms, all that is set to change.

In India, 70.000 lawyers qualify annually – that's double the number within the UK – and the economics of labour arbitrage within a traditionally expensive sector (especially in a downturn) will become attractive for many types of company. Fixed costs are are boon for any organisation grappling with its balance sheet, and LPO certainly promises more predictable pricing – on the surface at least.

However, the very nature of offshoring legal operations surely carries with it a whole range of additional elements, such as time, language, culture and distance (none of which have an obvious field in a spreadsheet), and that's not even to mention currency fluctuations.

Nevertheless, the UK may be the key. The US legal system is “hooked on the hourly rate”, says Ross, whereas the UK is more flexible, with fixed quotes becoming commonplace. That means that UK firms are more likely to look for ways of improving their margin.

BPO organisations are already declaring their intention to join the large accounting firms in dipping their toes into the LPO market, and India is set to be the major player. Infosys and Wipro are commencing LPO operations, and evidence is emerging of consolidation among pureplay LPO practices.

Now it is possible for law firms to be publicly listed and their stocks traded, shareholder value and a private equity mentality come into play, and that inevitably means downward pressure on costs.

2008 will be “a tipping point year”, says Ross as higher value work begins to move offshore. Soon, he claims, it will be attractive for law firms to acknowledge offshore work in their client portfolios, and this, in turn, will become part of a client's reasonable expectation.

Of course, the barriers are significant: the law is a nuanced, subtle and culturally charged sector, and local knowledge is at a premium – especially in the US, where state and federal laws are complex and sometimes contradictory.

Those 70.000 lawyers qualifying in India each year may have a good grounding in common law, but applying those skills in terms of local knowledge is a major challenge. Protectionism is rife, particularly in the US, and there are inevitably issues surrounding data confidentiality and regulation.

However, Ross counters that the huge scale of litigation in the US – you could fit the value of the rest of the world's legal market several times into that of the US – means that firms are looking further afield than the proverbial 'lawyer in the basement'.

Industry self regulation will emerge, says Ross, and companies are beginning to offer in-house training and qualifications for Indian lawyers training in the UK.

The closer cultural fit with India means that the LPO market may find its most fertile ground in this country – assuming of course, that deregulation doesn't see the rise of 'Tesco Law' before offshore providers get a look in.

We may still be some way from the heady days of 2000 which saw merger and acquisition levels in the telecoms sector peak globally at not far short of €500 billion, but the market is again seeing renewed levels of activity. According to figures from Thomson Financial the market emerged from a trough in 2004 of €36 billion to levels of more than €150 billion in 2005 and 2006.

Analysys Research’s Teresa Cottam comments: “M&A levels in the global sector were reported by Reuters at around €53 billion, but this figure hides a high level of transactions. We’re seeing significant consolidation of smaller players – particularly in high-growth markets – as well as telcos buying into new markets. An example of the first trend would be China VoIP buying Hangzhou Zhongfang; on the other hand you have KPN acquiring Getronics, which is part of a trend for telcos to strengthen their IT services portfolio for business customers. On the supply side consolidation continues to be significant and ongoing, with larger players absorbing technology-based start-ups to reinvigorate their product sets, or merging with rivals to create real scale and breadth of operation.”

And while combining businesses to increase geographical coverage or to extend into new domains might make commercial sense, consolidating the businesses effectively can be a significant challenge.

“A traditional IT objective in telecom M&A,” notes M&A expert Peter Sokoloff, “has been to migrate acquired companies onto the same standardised platforms. In practice this is usually a devilish task, requiring years and many millions in costs to accomplish. Further, the integration is rarely fully completed and IT execs can expect to contend with disparate systems, and installing the band-aids necessary to get them to cooperate, for decades to come.

"Management focus is usually driven by a desire to standardize front end systems like billing and customer care. But these, in turn, must tie into a multitude of other applications such as workflow, inventory, service activation, provisioning, and so on, each of which also taps into deeper network-level elements.

"The objectives set by larger carriers when contemplating integration are usually to drive greater cost efficiencies. While this plays well on Wall Street, this is where the trouble always begins. When the objectives of the integration are not driven by better customer service and improved network performance, the risk increases of serious execution errors and certainly causes countless headaches for the IT crew.”

Sokoloff cites the example of Sprint/Nextel where at the time of the $70 billion deal, Sprint predicted $12 billion of savings from reduced capex and opex.

Says Sokoloff: “The savings were expected to be achieved as a result of expenditures of $1.2–1.8 billion over 2006 and 2007. This past December Sprint announced a $29.5 billion loss, mostly relating to goodwill write-down of the purchase price paid for Nextel. How much of this loss might be attributed to fall out from integration and conversion issues has not been made public, but several reports have cited integration issues as contributing factors. At the end of the day, IT integration after an M&A rarely creates the cost efficiencies which look so great on paper.”

Peter is spot on in his assessment, but my question is whether this situation is acceptable. Wouldn’t it be of great interest to acquirers, business managers and shareholders if they were able to guarantee the efficiencies predicted at the point of acquisition? Shouldn’t they do more than accept these impressive-looking numbers on face value?

For all those that are still digesting their acquisitions or who now have a new target in their sights, my recommendation is to spend time and effort scrutinising how complex IT consolidation is going to be delivered before leaping into the unknown spend.

Also it is critical to assemble a team that spans both the business and the technologists, because your business managers are best placed to identify and prioritise where the greatest needs and benefits lie. This, in turn, frees up your IT staff to concentrate on the important job of delivering the migration.

Next, expect that a business-driven migration will begin to show business benefits early and incrementally. You should not have to wait for a long – often unspecified – period of time wondering and hoping if and when you will see any benefits.

Time-to-benefits should be short and ROI should be quantifiable.

Finally, the migration method and tool you use should be flexible enough to adapt during the migration to accommodate the changing needs of the business. For example, at the beginning of the migration you might decide you would like to move your biggest customers over first, followed by all of those that select a particular new service (which can only be supported on the target application), followed by all of those that live in a particular locality, followed by a bulk load of the remainder. Many of today’s migration tools would not be able to deliver a migration in this fashion, because they don’t allow you to identify and prioritise different business data sets, but instead see a mass of undifferentiated customer records.

If you really want to realize the commercial and operational efficiency that you know is there then the choice is yours. Don’t accept old technology or tools not built to cope with business-critical consolidation. Don’t commission custom-built solutions and then wonder why your project is so expensive or takes so long.

There is an alternative to solutions that are high risk and slow to deliver. Instead demand that you are using proven, state-of-the-art migration technology that can easily support a flexible, fast and business-driven migration.

Business value does not have to haemorrhage out of the organisation. Technology is now available that will stop your IT infrastructure from bleeding the value out of your acquisition and instead delivers the business value you desire.

Could the familiar contact centre setting, where hundreds of customer service agents sit at terminals wearing head sets become a thing of the past? So-called 'homeshoring' is the latest contact centre ‘hot’ topic, with experts making big claims that increased home-based work could save the UK industry substantial sums of money.

Using advanced technology and communication tools, moving jobs from the confinements of a call centre to the home seems a financially attractive solution. Analysts at research firm Datamonitor forecast global growth in the number of home-based customer service agents of 36.4% (one of the strongest expansion levels of any outsourcing market sub-segments) between 2008 and 2012. Their research suggests that home agents will number 224,000 by 2012, forming part of the mainstream customer service environment.

While in many sectors, homeworking can provide jobs for people previously excluded from employment, such as parents, carers, older workers and those with disabilities, selection of home-based agents will be based primarily on requisite technical skills, with hours of availability a secondary consideration.

But could the creation of a diverse and stable home workforce that enhances the customer experience through improved service really reduce the dependence on physical contact centre facilities?

The concept of ‘teleworking’ from home has existed for almost 20 years and although homeshoring is considered to be similar, it is a very different and more complex proposition. It requires a skilled workforce with disciplined shift patterns integrated into the operation of a virtual contact centre. Specialists need access to real-time voice and data in a secure environment to answer customer calls via skills based routing.

Despite 7.5 percent of the UK workforce working from home at least once a week (source: Office of National Statistics), very few ‘traditional’ contact centre advisors are afforded this option. Perhaps the practical realities of homeshoring prevent the idea from truly taking off.

Dale Saville, president EMEA for global customer care provider Sitel explains his reservations on the future growth of at-home agents. “Homeshoring is a buzzword at the moment, but recent data being collected in the United States indicates the likely global perspective. Some 250,000 agents are predicted to become homeshore agents in the next five years, a relatively small proportion of the three million labour force already working in contact centres. There is much talk of how homeshoring will double or treble in size over the next five years, but these statistics start from a small base.

“Homeshoring is not really a labour arbitrage opportunity or a cost solution but a service flexibility and specialisation solution. The issue of infrastructure management becomes more problematic in the homeshore environment than the contact centre arena. I believe the cost savings argument for at-home agents is not as powerful as the demand aspect which is specialised skills.”

“Even though systems and processes can be carefully placed to ensure smooth delivery of service from the home, many managers will lack confidence in their ability to ‘manage at a distance’ and some will not have faith in their staff's commitment to be as productive as they would be in a contact centre.”

With 2008 the year when the homeshoring phenomenon is predicted to take-off, business continuity managers will need to allow for the advantages and disadvantages of the homeshoring phenomenon. There are only a relatively small number of contact centre environments that would be ideally suited. Anything with financial regulation and implication cannot be performed at home due to information security concerns.

“We don’t see it becoming a large fraction of the contact centre space; it’ll be an important part but not a large part. This is primarily due to security and PCI compliance issues. I’m not sure that homeshore environments will be able to fulfil these requirements. But homeshoring has some very big advantages where unique fractural labour forces are needed within peaks and valleys of demand.

“People tout the value of the current at-home agents in terms of their education levels and retention rates and this raises the interesting issue of self-selection. Will those who opt to be a home-based call centre agent be more motivated, professional or disciplined than the average call centre job applicant and hence have lower attrition rates?

“I think that certain types of “case oriented” work will be nicely addressed by home-based agents. This type of work will typically involve more complex transactions that require research and investigation where the caller expects a longer resolution period. For example, medical claims processing needs a significant amount of data collection and analysis prior to a response versus the instantaneous response of directory assistance."

Saville concludes, “I think homeshoring will be an important, but small part of the overall customer service delivery model. It will fill specialised requirements for fractural labour to address peaks and valleys of demand and unique skill requirements that are difficult to recruit to a single call centre site. I am less sanguine about homeshoring as a cost reduction strategy.”

Capgemini has announced its ‘Business Aware Application Outsourcing’ model.The consulting, technology and outsourcing services company says that the new approach, which combines software as a service (SaaS) and Web 2.0 elements, takes application outsourcing "beyond its traditional focus as an IT cost-reduction mechanism towards a business services focus and a platform for innovation".

Now that businesses are demanding that their CIOs drive more value from their IT, with systems that are managed and evolve in line with the business that they support, application management is becoming increasingly important as it is at the intersection of IT infrastructure and business processes. Capgemini’s application outsourcing service framework ties traditional services, such as applications management, testing and modernisation, with new offerings such as ERP utility and 'mashup' applications development.

Paul Spence, head of Outsourcing Services, Capgemini, said: “Our clients want an outsourcing partner who can not only help them to contain their IT costs, but also help them to take advantage of technology developments such as SaaS and Web 2.0 to deliver more flexible and responsive IT that evolves in line with their business needs. This helps companies effectively apply emerging technologies to create opportunities for business growth, while continuing to manage IT costs."

Cleaning and maintenance company Mitie Group has reported a 21 percent rise in annual profits, citing increased customer outsourcing activity as companies struggle to cut costs.

Mitie said pretax profit for the year ended March 31 increased to £70.6 million pounds on revenues of £1.4 billion. Mitie's guidance for fiscal 2008 included an upbeat assessment of future outsourcing opportunities as the financial climate worsens.

Hart District Council has selected Capita Local Government Services in a BPO deal worth £9.6 million. The deal, lasting nine years will see Capita deliver the council’s revenues and benefits services.

Under the contract, Capita will assume responsibility for the collection and administration of revenues, council tax and housing benefits using innovative, effective technology and processes. The council hopes to save £500,000 through the deal whilst working with Capita to improve service delivery.

Viv Evans, Corporate Director of Hart District Council, said, “Local authorities across the country are continually looking to make service enhancements whilst achieving integral cost savings. As a rapidly improving district, our partnership with Capita will help us to harness the best technology, processes and people for the modernisation of our revenue and benefit service.”

23 of the Council’s employees will transfer to Capita under TUPE regulations. The combined Council and Capita team will review current processes and IT systems, working towards the development of greater choice for citizens in how they liaise with the revenue and benefits team. The Council will also consider the introduction of mobile technology for visiting Council officers.