Industry news

Worcestershire County Council and the supplier firm Liberata signed a £5.2m seven-year contract.

Liberata will introduce new technology solutions to local public bodies in order to supply human resources, health and financial services through a process that is expected to save more than £2.2m and affect 106 jobs over the seven year-period.

The deal also includes maintenance, technology solution management and support, and will mean the creation of 25 new apprenticeship posts.

The council’s member for transformation and commissioning, Marc Bayliss, said: “The commissioning of these services meets our aim to create a lower and more transparent cost of service while also ensuring our commitments to schools and other customers can continue to be delivered now and in the future”.

The new process is due to start on the 1st of February 2016.

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Related: HP to transform Worcestershire County Council ICT

Cognizant – the American service provider with over two-thirds of its employees based in India – gained more new business (or added more incremental revenue) in 2015 than Wipro, Tata Consultancy Services and Infosys combined.

Cognizant achieved $12.41 billion in overall revenue for 2015, $2.15 billion of which was made up by incremental revenue achieved in the 2015 calendar year. Meanwhile, India’s three largest software firms only racked up $1.96 billion in new revenue between them ($1.18bn for TCS, $570 million for Infosys and $211.5 million for Wipro).

Experts have claimed that, as an increasing number of outsourcing deals come to incorporate cloud computing and data analytics, this substantial gap between Cognizant and its home-grown Indian competitors will only grow larger in size.

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Related: India affirmed as “last BRIC country standing” beating China’s growth for second year running

Norfolk County Council and Updata Infrastructure – part of Capita IT Enterprise Services - reached a £20m deal to enhance network services in council schools, buildings and libraries.

The first stage of the framework includes a £10m contract to install and manage a wide area network (WAN) and local area networks (LAN), unified communications and mobile communications across the council. The contract will also include ten apprenticeships and two undergraduate work placement each year during the contract period.

Norfolk County Council’s head of procurement, Al Collier, said: “This contract will reduce costs and enhance IT services for public sector staff and for schools, allowing them to deliver the best possible service to people in Norfolk”.

“Other public sector organisations and local people may also take advantage of the frameworks”, he added.

In addition, the deal will include the upgrade of a multi-channel contact centre, improved broadband connections for schools, enhanced internet filtering services and the latest educational technology.

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Related: Serco secures £85 million Norfolk and Norwich University Hospital extension

Despite China’s economic deceleration, its outsourcing industry experienced very positive growth during the year of 2015.

Shen Danyang, a spokesperson for the Ministry of Commerce said: “Chinese companies inked service outsourcing contracts worth $130.9 billion” - a rise of 21.5 per cent compared to 2014. “Nearly half of the offshore deals were related to information technology services”, he added.

Contracts with businesses from the two major Chinese trade partners – the United States and the European Union – rose by 17.5 per cent and 17.6 per cent respectively, while contracts with Japanese businesses fell by 9.8 per cent.

China is today the world’s second-largest service outsourcing providers after India.

The Chinese government sees this sector as the new big vehicle to boost employment as well as the domestic economy.

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Related: China’s stock market closes early on the first trading day of 2016

Cornwall Council announced yesterday that its contract with BT Cornwall has been formally terminated, after the latter decided against appealing the High Court’s decision to end the deal.

BT Cornwall had lost an injunction back in December to prevent the council from ending the 10-year contract. The High Court granted Cornwall council the right to severe ties with the telecoms company, after BT reportedly failed to meet performance targets, one of which was to increase job levels.

The deal saw BT Cornwall running ICT and back office services, and involved 270 employees dealing with HR services, ICT, despatch, printing and telecare.

According to the council’s press release, “Work has been taking place to ensure that this process takes place as smoothly as possible and all services will be maintained. We are continuing to hold discussions with BT Cornwall over the payment of costs and the level of damages we will receive.”

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Related: High Court allows Cornwall Council to terminate £160m BT contract

The Information Services Group (ISG) has published this past week the Outsourcing Index for Q4 of 2015 - a quarterly review of the latest sourcing industry data and trends.

The report unveils a strong last quarter performance for the global outsourcing industry, which hit a four-year high total annual contract value (ACV) this quarter, in spite of a disappointing 2015 overall performance.

The Index, which only accounts for outsourcing contracts worth $5m or more annually, shows that the global industry’s ACV for Q4 rose five percent to $7bn. The ISG attributes the positive result to the closing of nine megadeals valued at more than $100m since last September.

The strong performance of the industry in the last months of 2015 was not enough to reverse a weak first semester. In spite of a two percent increase in the number of contracts signed, up to a record 1445, 2015 saw a decline in the total ACV of the industry of more than eight percent to $23.7bn.

The ISG singled out the decline in the total value of ITO contracts by 12 percent or $2bn this past year as the leading cause for the year’s dismal performance. This decline is attributed to more and more companies moving their IT infrastructure to the cloud. The report also shows that apart from a handful of large deals, the trend is for contracts to be worth less and for an increase in the volume contracts.

According to John Keppel, president of ISG, "The data this quarter and this year confirm more enterprises are sourcing than ever before, and they're paying less for those services, which encourages them to participate in the sourcing market even more".

"They're buying flexibility with cost variability, utilizing smaller deals more than ever as they revamp their processes around cloud, digitalization and automation. Outsourcing continues to have a strong value proposition as we exit 2015 and enter 2016", he continues.

It is not the first year that the global outsourcing ACV has deteriorated; the industry has seen a consistent yearly decline of ACV over the past decade - between 2012 and 2015 alone the average ACV declined by 20 percent. Average contract duration has also decreased in recent years; between 2012 and 2015 contract duration fell by 15 per cent, coming up to 3.5 years in 2015.

Europe, the world’s largest outsourcing market, had a strong Q4 performance with ACV rising 17 percent to $3.9bn. However, similar to the global trend, ACV fell by eight percent to $11.7bn in 2015 overall after a dismal first semester performance.

As for the UK, the industry’s ACV for the region fell by 19 percent to its lowest since 2009. Similar to the rest of the world, contract volume reached a new high.

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Related: ISG Finds Global Outsourcing Market in Decline

The Department of Work and Pensions has proposed its “2020 Vision”, the intention of which is to deliver more innovative, cost-effective services to its customers, as well as develop excellent supplier and stakeholder relationships.

In order to support this activity, the DWP will be holding a Market Engagement Event for Contact/Service Centre provision on 9th February 2016 where senior leaders from DWP will set out the 2020 Vision and define the transformation the organisation is undertaking. This will provide the opportunity for potential suppliers to feed back on the plans and suggest innovative solutions to work alongside DWP in the future to help meet departmental objectives.

Attendees will also get the chance to interact with the DWP finance director general, DWP commercial director and several senior officials working across operational and corporate arms of the business including digital, security and business transformation teams.

Although there is no specific procurement expected to follow from this event, the intention is to discuss ongoing engagement opportunities and meetings with potential suppliers at the event. The DWP currently manages four contact centre contracts, with an overall value of £81 million.

What with further government cuts and austerity measures being proposed, the outsourcing requirements of the DWP are expected to increase from 2016 onward, with future sourcing activities to be informed by the outcomes of this market engagement event.

Further information can be found here.

The Cabinet Office is launching a review of its IT outsourcing contract strategy – project “Ocean liner” – with the intention of moving away from a number of its long term outsourcing contracts that are due to expire during this parliamentary term.

“Ocean liner” comes with the Cabinet Office’s acknowledgement that many of these outsourcing deals have failed to deliver value and its claim that “the opaque nature of service delivery hides the fact that many [contracts] are not good value for money”. The review follows the National Audit Office’s “Open-book accounting and supply-chain assurance” report last year, where the NAO encouraged every government department to have a solid policy on when to demand more transparency from its service providers.

The Cabinet Office is likely to face criticism from lookers-on, who will speculate as to why the government is only choosing to review these contracts so close to their end-dates.

Recent NOA research has found that the days of the outsourcing megadeal are likely to be numbered, with the notice periods for contracts, along with the actual contracts themselves, expected to become much shorter in the future. The full report, titled Outsourcing in 2020, will appear in the Outsourcing Yearbook 2016 and be released in March 2016.

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Related: Whitehall hits 25 per cent SME procurement target

An international study, published by Infosys, found that four out of ten young people believe robots will be able to do their jobs within a decade.

The survey was conducted by ICM Unlimited and included around 1000 young people each in different countries such as Australia, Brazil, China, France, Germany, India, United Kingdom and the United States.

Half of the youngsters surveyed in the Western developed countries insisted on the limitations of their education. The skills gap displayed in the survey revealed that almost 80 per cent of the students globally have to learn new skills not taught in school. The rapid technology change requires a constant process of learning new skills which the schools are unable to provide.

Vishal Sikka, Infosys CEO, said: “Technologies have evolved far faster than what was thought possible even 10 years ago, while the educational system remains wedded to practices initially designed for agrarian societies 300 years ago”.

The study also found that youngsters from developing markets feel more positive about their job prospects than their peers in developed markets.

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Related: HP intends to cut 30,000 jobs through automation and offshoring

BT’s takeover of EE – which is expected to cost the telecoms services company £12.5bn – has been given the go-ahead by the Competition and Markets Authority, following a six-month inquiry into whether consumers will face escalating bills as a result of the merger.

John Wotton, chairman of the inquiry, concluded that the takeover is unlikely to cause “significant harm to competition or the interests of consumers”, a claim that had previously been made by Vodafone and TalkTalk, as well as other rivals. Direct competitors O2 and Three are also planning to unite forces, pending the result of the European Commission’s own inquiry, the verdict of which will be revealed in the spring.

It is possible that the BT-EE merger could result in an outsourcing strategy shake-up. BT Group is already an experienced buyer of outsourcing, with subsidiary company Openreach making the shortlist for two outsourcing awards in 2015: the “Outsourcing Works – Award for Delivering Business Value” at the NOA Awards and “Pan-European Buyer of Outsourcing Services of the Year” at the EOA Awards.

It was recently reported that BT is striving to create more sustainable supply chains, raising the company’s environment credibility through the introduction of a sustainability assessment tool that allows for supplier feedback.

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Related: High Court allows Cornwall Council to terminate £160m BT contract