Industry news

Nowadays more and more companies decide to outsource. This trend can be easily observed and comes as no surprise, since outsourcing can offer a myriad of benefits. If your organisation lacks specific expertise, outsourcing IT skills can be a smart business move.

Therefore, you would hope that suppliers and customers alike have learnt from the mistakes of previous deals. However, reading the trade press, this is not necessarily the impression one gets. On both sides of the outsourcing relationship companies seem to be making the same mistakes again and again.

That is exactly why we decided to offer some advice on how to avoid the most common risks and make outsourcing a success.

#1 KEEP COMMUNICATION LINES OPEN

Successful outsourcing is more than just pure cost-savings, which is often listed as the main benefit. However, on its own it is not enough, as projects can still fail. It seems that the key to successful outsourcing is open communication on both sides, therefore you should establish not only frequency but also a clear method of communication and use it.

For outsourced relationships to really succeed, the clients should clearly express their expectations, which will empower the supplier to deliver the best service. Be specific about what you want. This essential point is so often forgotten, especially by companies that are under pressure to quickly deliver something they don’t have the internal resources for.

#2 DEFINE THE SCOPE OF THE CONTRACT

Appropriate business agreement can be crucial to the success of your software development outsourcing. The contract must reflect what was agreed on during the negotiations - specify the scope of the project and focus on business outcomes that both sides want to achieve.

Make sure that your outsourcer understands your business needs. Provide a detailed plan and discuss it beforehand. However, remember that sometimes your initial requirements change along the way, so be open to suggestions.

#3 MAKE THE RIGHT CHOICE

How to choose the right supplier? It is important that you look for someone with knowledge and expertise, who will always try to deliver software developed according to industry’s best practices. Look for outsourcers with vast expertise, who have similar goals and will understand your business.

Last, but not least, pay attention to time difference and location – they say that travel broadens the mind, but in case of software development outsourcing, trust us, the closer the better.

#4 BE AVAILABLE

Despite the common belief that outsourcing will free you of additional workload, this is not the whole truth. No matter how good your vendor company is, no matter how much expertise they have, you still need to remain involved, because nobody knows your business as well as you.

You should be responsive and always have up-to-date information on what is currently happening in your project. Your commitment can have very tangible effects on the outcome. It is certainly easier to achieve if you base your cooperation on partnership rather than just client-vendor relationship.

#5 LET GO

Allow your outsourcing company to implement their own way of working. Trust that they are the ones who want what’s best for your business. Concentrate on what you want to achieve with outsourcing software development, not how you want it to be done.

Try not to get caught up in micromanaging, let them work according to their processes and leave the room for your outsourcing provider to define the “how”.

This, of course, is not the end of the list. One thing you should keep in mind though is that outsourcing, as with any other business venture, comes with risks. In order to avoid them you should keep an open mind, adapt to changing requirements and, last but not least, hire the partner you trust.

Successful outsourcing requires commitment from both sides, unless you want your recipe for success to turn into a recipe for disaster.

If you want more tips on how to make outsourcing a success, download Future Process's catalogue.

Future Processing is an experienced Polish company that specialises in providing offshore software development services.

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Capita has struck an acquisition and mortgage transfer agreement with the Co-operative Bank and its subsidiary Western Mortgage Services, in a deal valued at £325 million.

Capita will manage the bank’s mortgages; the deal involves the acquisition of Western Mortgage Services and the transfer of 327 WMS employees. The outsourcing giant will ultimately be servicing over 200,000 mortgage accounts and £20 billion of lending.

"Capita will work with The Co-operative Bank to deliver an enhanced service for customers. This will be done by drawing upon Capita's existing and wide-ranging commercial debt-servicing capabilities and its heritage of large-scale customer service transformation across a range of industries,” said Andy Parker, chief executive of Capita.

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Related: Groupe Acticall announces acquisition of Sitel

Sopra Steria Recruitment (SSR) has announced that it has been appointed by Crown Commercial Service to assist the Crown with driving savings for the taxpayer, and improving the quality of commercial and procurement activity.

SSR will also act as a supplier of IT professionals to the Non-Medical Non-Clinical Temporary and Fixed Term Staff Framework agreement. This framework will be used by NHS bodies and wider government organisations to procure contingent workers.

Pete Holliday, managing director at SSR, said: “Securing a place across this framework is a great achievement for SSR. Through this agreement we are proud to be supporting the government’s policy to centrally manage the procurement of common goods and services through an integrated commercial function at the heart of the government.

“We have the experience of already having made placements under the previous framework for IT-contingent labour, and will be accelerating this as demand grows in 2015 and beyond; helping government reduce the cost of resources whilst ensuring a flexible workforce continues to enable the NHS. This win helps cement the SSR aspiration of growing as leaders in recruitment transformation.”

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Related: Leeds City Council appoints Sopra Steria to provide specialist IT services

Frank Casale, founder of The Outsourcing Institute and the Institute for Robotic Process Automation (IRPA), has taken on a new role as president of US business at arago, a German high-tech company that specialises in automating processes through self-organising technology.

One of Frank’s key responsibilities at arago will be building the firm’s client base in North America, using his market knowledge and extensive business network to help firmly establish arago’s presence in the US.

On the subject of his new role, Frank Casale said: “When it comes to intelligent IT automation solutions, arago is the most exciting company to talk to. Within the next few years we will experience crucial changes in corporate IT environments and arago’s AutoPilot software will be a trailblazer for the entire industry. I am very excited to be part of the arago team.”

“Frank’s expertise will enable us to gain a strong foothold in the U.S. market. This is our first move in the market and we are excited to further grow the U.S. leadership team and operations in the coming months,” said Chris Boos, CEO of arago.

The German-based tech service provider is backed by KKR, a leading global investment firm. Philipp Freise, a KKR partner, commented: “arago’s smart solution AutoPilot is the next generation of intelligent IT automation. We invested in arago because we believe in its massive growth potential and unique technological strength. The U.S. market is the logical first cornerstone of arago’s international expansion.”

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Related: IGATE executives take top roles at Capgemini

G4S has announced that it has successfully secured a ten-year contract with EDF Energy valued at £80 million overall.

The worldwide secure outsourcing group will be providing security services for the construction of a nuclear power station at Hinckley Point, Britain’s first new station in a generation. G4S will be responsible for onsite security management, which includes access control, perimeter security, and visitor search and screening.

The deal is still subject to a final investment decision. G4S is expected to deploy 300 of their own staff, a small addition to the estimated 25,000 jobs the full project is expected to create.

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Related: Protestors Wreak Havoc at G4S Meeting, Security Fails to Confiscate Mobile Devices

The ISG has released the results of its Q2 EMEA ISG Outsourcing Index, revealing that a quarterly record of 169 contracts worth €2.2 billion were awarded in the region for the quarter, representing a 23 per cent increase in annual contract value (ACV) since the prior period.

The quarter only saw two mega-relationships (contracts valued at €80 million+) formed, meaning that the growth in contracting activity and value was largely down to a larger number of small deals. Buyers of outsourcing are currently favouring shorter deals at a lower value, in order to avoid getting locked into cumbersome contracts where the technologies and operating models involved could become obsolete before the outsourced operation is completed.

The United Kingdom was a key contributor to EMEA’s success, with ACV gains of almost 150 per cent year-on-year.

For more information view this ISG slideshow.

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Related: Global outsourcing surges to all-time highs in first half of 2015

The CEO of Centrica, a widely renowned buyer of outsourcing, has announced that 6,000 jobs will be cut from the organisation by the close of 2017 as part of the group’s plans to focus on being “a customer-facing business”.

Iain Conn, who took over Centrica at the beginning of 2015, has seen British Gas’ profits reach £528 million during his six months in charge, already equalling profits achieved throughout 2014.

His intention is now to scale back operations in oil and gas exploration and production in the North Sea region, and concentrate instead on making Centrica an excellent supplier of energy and customer service, connecting homes and providing “smart” energy technologies.

5,000 of the job losses will take place in the UK; about half of the total number will be subject to redundancies. Conn added that 2,000 new jobs will also be created, making the net reduction of employees about 10 per cent of Centrica’s total work force.

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Related: Could Centrica’s Success Be Due to an Imminent Takeover?

Executives and shareholders at British service provider Capita were given cause to celebrate recently, after the group announced an 11 per cent increase in pre-tax profit for the first half of 2015, supported by £1.6 billion in major contract wins.

The group also expects revenue growth to accelerate further throughout 2016, largely due to the substantial new contract agreed with the NHS back in June which will involve Capita transforming the health service’s back office operations.

Capita CEO Andy Parker told Reuters he expects the demand for outsourced IT administration to grow in the near future, particularly where the public sector is concerned.

"I still think there is a demand to improve administration efficiencies and drive cost savings for the public sector. I think it's still critical," he said. "The government announced earlier this month some pretty swingeing cuts to budgets - central government and across the wider public sector - and I think organisations like ours will continue to be one of the options that they will use to help them to drive out those savings."

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Related: NHS and Capita consider administrative cuts to achieve savings and frontline improvements

Over the past 12 months, Tata Consultancy Services, Wipro and Infosys have shed over 100,000 employees between them, achieving greater size and scale instead through the adoption of automation and other newer technologies such as cloud computing.

The Indian Economic Times has reported that at least two of Indian’s top ten outsourcing firm CEOs have called metrics such as the gross addition of employees “irrelevant” and said that companies are starting to take highly strategic approaches towards managing attrition.

Higher attrition rates, in the region of 20 per cent, are now seen as the new norm, unlike in the early 2000s when firms like the service providers mentioned were recruiting tens of thousands of new engineers alone each year.

Business for the likes of TCS and Infosys is getting increasingly competitive, with the latter overtaking the former in North American revenue, volume and growth in the first quarter of this year. The continent is currently a key market for India’s IT suppliers.

In reaction to the lost business, TCS is going beyond automation to increase its competitive offering, with plans to train 100,000 new digital professionals by this time next year.

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Related: Tata Motors procures Accenture’s services to cut down on bureaucracy

Xerox CEO and chairwoman Ursula Burns has announced that her company will be overseeing further restructuring in the latter half of 2015, which is likely to involve haemorrhaging 3,000 of Xerox’s 140,000 worldwide workers.

This reduction in headcount is expected to mainly impact the organisation’s services business, rather than alternative areas such as the document technology arm of the company.

The announcement has come after a second-quarter report displaying a seven per cent decline in overall revenues for Xerox.

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Related: Fuji Xerox wins AU$33 million Australian government contract to replace legacy applications