Industry news

The volume and economic contribution of skilled migrants is set to reach record heights according to new research from global recruitment consultancy, Harvey Nash. The research predicts skilled migrant workers will contribute over £77 billion to the UK economy by 2012. They will support 650,000 jobs through their spending on goods and services.

The Future Flows report compiled for Harvey Nash by the Centre for Economics and Business Research (CEBR) predicts the number of highly skilled migrants is set to rise to 812,000 in 2012 representing an increase of 14% over the next four years. Skilled migrants already account for 2.5% of the country's total workforce and contribute over £36 billion worth of output. This is set to increase to 2.8% and over £49 billion respectively by 2012.

The research reveals highly skilled migrants hold and support over a million UK jobs, a figure which is set to hit 1.5 million in four years' time. But as well as filling and making jobs, highly skilled migrants' spending supported £8.4 billion of the UK's gross value added (GVA) in 2007 and this is set to rise to £13 billion in 2012. [Gross value added (GVA) is the difference between output and intermediate consumption for any given sector/industry. That is the difference between the value of goods and services produced and the cost of raw materials and other inputs which are used up in production. (Definition taken from National Statistics website, March 2008).]

Launching the report, Harvey Nash chief executive, Albert Ellis, commented: "Skills are critical to the UK economy, but critically lacking in our current workforce. Far from undermining the UK labour market, migration is vital to future economic stability, helping to fill in the gaps created by older and under-skilled workforces and make an important economic contribution. Businesses need to embrace skilled migration, recruit from wider social groups, as well as offer flexible and rewarding working practices for home-grown talent, in order to safeguard their long term and global competitiveness."

A number of core industries are set to benefit from the influx of skilled migrants. The IT, telecommunications and transport sector will require an extra 19,000 skilled migrants by 2012 as demand rises for e-commerce and software specialists – their contribution is expected to add £16.2 billion to the sector. Skilled migrant output is also expected to grow by 44% in the utilities sector between now and 2012 and continued demand for trained nurses will keep the majority (over 30%) of skilled migrants working in the education, health and government services sectors. Foreign workers will contribute £17.2 billion to the latter by 2012.

The majority of these highly skilled migrants come from the European Union, including new accession states such as Romania and Bulgaria. Other significant flows come from Asia and Africa. London is and will continue to be the biggest beneficiary of the skilled migrant workforce. In 2012, approximately 365,000 skilled migrants will live in the capital, with a further 100,000 working in the South East and 49,000 in the East of England.

Tata Consultancy Services (TCS) has been selected to provide FormSigner PRO, its flagship enterprise Electronic Signature platform for financial services leader Prudential Financial (PFI).

"The industry is picking up in the area of e-signing that doesn't require client-side hardware such as signature pads, resulting in tremendous cost savings and convenience. TCS is proud of its expertise in the electronic signature area and the quality of our product," said Dr. Kamlesh Bajaj, Global Head, Information Risk Management Practice, TCS. "It is extremely encouraging for us to have a customer like PFI select our e-signature platform."

The Information Risk Management and Insurance Practice of TCS worked closely with PFI to conceptualise and implement an e-signature engine built on the FormSigner PRO platform that enables relatively seamless integration with existing PFI applications and allows the company's Individual Life Insurance business to sign documents electronically.

FormSigner PRO is an advanced digital certificate-based application providing authentication, non-repudiation and integrity to online forms, uploaded documents and Web pages. The application enables companies to digitally sign and authenticate Web-based transactions by applying digital signatures to electronic forms-based processes, providing assurances over the source, privacy and accuracy of electronic data. Digital signatures provide persistent evidence that a transaction has been authorized, helping businesses avoid any legal difficulties or loss of revenue, resulting from a business dispute.

Tech Mahindra has signed a five year deal, valued in excess of US$350m, to provide BT with application maintenance and support services for their business-critical BSS and OSS applications and platforms.

These services will be delivered from Tech Mahindra’s state-of-the-art Centres of Excellence (CoE) at facilities in India and a new facility being setup in the UK to monitor BT’s core business processes.

Clive Selley, Managing Director, Wholesale Service Design for BT, said: “This deal links our Application Portfolio performance to our business performance. Tech Mahindra’s experience and expertise on both, the business process as well as IT Systems makes it the perfect partner for value realisation and achievement of BT’s objective to become number one in customer service. The five year period and confirmed business will enable Tech Mahindra to take a long term view on innovation and service excellence."

Sanjay Kalra, President, Tech Mahindra, said: "This deal showcases Tech Mahindra’s strengths in delivering business critical services that have so far been hidden under “business-as-usual” application support. We are delighted at the confidence BT has shown in us and this contract will further strengthen trust and partnership between our two companies.”

Indian IT outsourcing company Wipro has used its conference in Bangalore to announce plans to open two more software centres in the US and to create hundreds of jobs in the UK.

The strategy is part of the emerging trend of 'reverse outsourcing', characterised by Indian companies such as Tata and Wipro expanding into their customer's home markets, and also using the economic downturn to snap up European bargains.

Wipro chairman Azim Premji said the company planned to recruit more than 1,000 people in the US to new software development centres in Michigan and Atlanta. He has also said he wishes to make some European acquisitions, potentially starting in Germany.

In the UK, Wipro (which is India's third largest IT outsourcing provider) plans to create hundreds of new jobs by opening a centre in the South East, and is reportedly considering further centres in the Midlands and Scotland.

Axon has won a 10-year strategic IT outsourcing contract with Wolverhampton City Council. Savings are estimated to reach £60m.

Axon will replace the council's outdated computer systems, helping to create a more efficient back office that will cut administration costs. Real-time data access will also help the authority to improve its financial management and budgeting.

The contract is one of the most significant in the council's recent history, said chancellor Andrew Johnson, cabinet member for resources, governance and support services.

"People will experience faster and more convenient access to essential services which will be delivered more cost-effectively," he said.

"For our staff, it will mean opportunities to serve the public in an environment that will invest in developing their skills in customer service and IT. Many will be trained to work with modern systems that will cut unnecessary costs and reduce the frustration of red tape.”

Although an increasing number of business process outsourcing (BPO) decision makers understand the critical role of IT in BPO success, many don't know how to act on this knowledge when undertaking a BPO project, says an EquaTerra market study. The study also found that buyers in the Americas and Europe are still uncertain about how to account for IT solution options in the BPO sourcing and solution design process.

These are the key findings from EquaTerra’s third annual Assessing the Role of IT in BPO Success market study. Respondents to the 2008 survey included more than 250 BPO decision makers in North America and Western Europe. All respondents were responsible for HR, finance and accounting, or procurement BPO decision making in organizations with minimum $/£/€100 million in revenue operating across all major industry groups.

Additional key findings from the 2008 market study include:

Perceived importance of the BPO service provider’s IT solution to BPO success

• The average score given to the importance of the BPO provider’s IT solution was 4.36, up 17 percent from the 2007 edition of the study

• Eighty-eight percent of 2008 study respondents cited the provider’s IT solution as being somewhat or very important to BPO success

Most critical attributes of BPO service providers’ IT solutions

• Flexibility to adopt to buyer process specificities

• Cost-efficiency, so the provider can pass on additional savings to the buyer

• Ease of use for end-users (eg, via self-service tools, strong reporting)

Top enterprise software preferences in BPO

• Buyer preferences for IT solutions in BPO: While the majority of buyers are open to considering BPO service providers with different IT solutions, they have clear IT solution preferences

• Buyer preference for enterprise software solutions: When entering into BPO efforts, most buyers prefer to continue using the same commercial enterprise software solutions they currently have in place

Stan Lepeak, EquaTerra’s MD of research, said: “Although IT is linked to business process performance, EquaTerra consistently finds the IT topic, and often the buyer’s IT group, under-represented in the BPO process. As a result, poor planning around IT needs and issues in BPO frequently becomes a common root cause of BPO problems.”

Similar to prior years of this assessment, the internal IT group was the lead source of advice on IT issues in BPO processes, cited by just over half of the respondents. However, while 75 percent of US respondents identified the IT group as a key source of advice, only 31 percent of European respondents did so. In the 2007 survey, 63 percent of US respondents cited the IT group as a source of advice, compared to 44 percent in Europe.

While these rankings overall are positive, they still show that a relatively large number of the BPO buyers do not meaningfully include their IT group in BPO efforts. While this approach has potential risks, EquaTerra asserts that BPO buyers must seek external IT subject matter expertise if they truly feel their IT group cannot provide the needed support, or if the IT group does not step up to the challenge.

Prudential UK has announced the closure of its recent £745 million business process outsourcing (BPO) deal with UK outsource provider, Capita. The 15-year 'billion dollar deal' (actually $1.5 billion) is the largest of its kind in the UK insurance market, and revolves around the outsourcing of life and pensions sales administration.

Building on a relationship between the two companies that began in 2003, the deal will see the outsourcing of Prudential UK's life insurance intermediary admin services, the transfer of over 3,000 employees in the UK and India, and the sale of Prudential UK's Mumbai-based captive operation.

Electronic payment systems software provider ACI Worldwide has announced a seven-year agreement to outsource internal IT services to IBM.

As part of the deal, IBM will provide ACI with global infrastructure services including management of mainframe, storage and related server platforms, data network monitoring and management, and end-user support services.

For its part, ACI will retain responsibility for its security policy management and on-demand business operations.

The deal is estimated to deliver ACI operating cost savings of $25 million to $30 million over the course of the contract, providing the company with advanced technology and enhanced service capabilities.

David Morem, senior vice president of global business operations at ACI, said, "This agreement allows ACI to focus on its core competence in developing, delivering and supporting payment solutions for our customers.

"By outsourcing infrastructure management to IBM, we can leverage their worldwide resources to consolidate our datacentres, upgrade hardware and software, and standardise on proven tools and processes to improve our operational performance in our on-demand business and IT infrastructure.

"IBM will bring enhanced disaster recovery capabilities and more stringent security standards to our IT systems, reducing our risk exposure, and provide an IT foundation that can grow very cost-efficiently as ACI's global business expands."

Philip Hausler, vice president for the banking industry at IBM Global Technology Services, said, "This agreement reflects the broad range of services IBM can offer to help customers maximize their efficiency and leverage modern technology. We look forward to serving ACI and adding value to their worldwide business."

The deal will include incremental cash costs of approximately $4 million in severance expenses, transition costs and professional fees in 2008 and is expected to be cash-positive for ACI due to a decrease in capital expenditures.

In addition, ACI expects to incur up to $5.5 million of transition-related charges in 2008 for which cash payment will be deferred and paid out in periodic installments in years 2009 through 2012.

Inflexible contracts mean that businesses should now seek "transformational deals" from their end-user workplace services (EUWS) providers through 2008, says a leading analyst

Research by technology and business process outsourcing analyst NelsonHall finds that EUWS is now a "fairly mature market" in the US and Western Europe, with "widespread buy-side [customer] interest" in remote management, offsite support and self-help portals.

The findings are within NelsonHall's latest global research paper, Assessing The End User Workplace Services Market The strongest service growth in EUWS will come from network-centric or unified communications-based services, which will grow from four percent of the overall EUWS market in 2007 to 20 percent by 2012.

However, customers should use their negotiating muscle the secure better deals, advised Dr. Katy Ring, Information technology outsourcing (ITO) research manager at NelsonHall. She said, "Most of the current installed base for end-user workplace services has in place inflexible contracts that are not well-suited for the changing workplace policies of buy-side organizations or for remote services delivery.

"The global device estate for end-user workplace services is changing in terms of requirements for the way functionality is accessed by devices. Because of the technology and workplace policy changes happening in the EUWS domain within organizations, there are benefits to seeking outsourced transformational deals in 2008 and beyond.

"Key challenges for the development of the EUWS market are moving end-users away from reliance on on-site support, negotiating new pricing models, and developing flexible contract structures," continued Ring.

"In the traditional EUWS model, a significant proportion of on-site support and/or local field services personnel are required. This is the main cost component that is reduced with a virtualised service delivery capability."

On average, the field services component can contribute 40-50% of the total cost of the traditional EUWS contract, said Ring. "This cost is not eradicated by a virtualized model but it can be reduced by 30% so that it comprises around 15 - 20% of total costs."

The mature market for outsourced EUWS means that many customers are on their second contract in this area, or expecting to renew between 2008 and 2010. There is widespread interest among customers in taking advantage of cost savings from increasing remote management of device estates, access to self-help portals and the use of lower-cost, off-site support staffing and help desks.

This makes interesting reading alongside an observation by Gartner analyst Ed Thompson at yesterday's Gartner CRM conference in London that increased demand for self-help portals is a classic hallmark of a serious economic downturn.

During such times, said Thompson, organisations cannot afford to experiment with new technologies and business models and tend to focus on cutting costs rather than pursuing new business.

By 2012, EUWS revenues will move from a managed service installed base dominated by traditional offerings to an installed base dominated by remotely managed offerings, said the NelsonHall research.

Movement to remote management within existing contracts is unlikely to occur until those contracts are ready for renewal.

The European market is slightly ahead in the adoption curve for remotely managed EUWS because some key local vendors such as Getronics, Siemens, and Fujitsu Services have been active with more advanced service offerings for longer than the large global providers that dominate the American market.

The research also found that green IT audits and advice will become a standard component of EUWS offerings as increasing numbers of organizations wish to market themselves as environmentally aware.

This is a challenge for many providers, said Ring. "Many vendors currently lack a green IT advisory service within their EUWS portfolio," warned Ring, "and yet this will become an increasing buy-side requirement. Particularly as the ability to offer green IT audits and advice for EUWS clients will also assist organizations looking to adopt low cost thin-client solutions."

Indian outsourced services providers are casting around for ways to bill their customers more, while avoiding obviously inflating costs, says research published today.

Analysts at Forrester Research have cautioned that a dose of economic reality is entering the offshore services market in India as labour costs in that country rise, skills are increasingly in demand, and the Rupee appreciates against the spiralling dollar.

Indian service providers are struggling to maintain profit margins, and although providers were initially more focused on finding ways to insulate their clients from local inflation, says Forrester, today they are equally focused on finding ways to charge clients more for similar services.

"Sourcing and vendor management professionals must understand the insulation techniques as well as the newest pricing tactics in order to negotiate the best deals today," advises chief author of the report, analyst Stephanie Moore. While rates themselves have been subject to fairly minimal increases, "important price increases are often embedded elsewhere", she concludes.

The report advises CIOs to pay particular attention to rates for onsite visits by offshore specialists, which often escape close scrutiny, together with definitions of the working week, and clauses referring to currency inflation and travel.