Industry news

The latest news in the United Airlines saga is that United has come to an agreement with its union - roughly 800 jobs will be kept, which were originally attended for outsourcing to outside vendors.

In early January, United announced its intention to outsource up to 2000 jobs across 28 US airports to outside contractors who could provide the same service for a lower cost.

The Machinists union has publicly accepted these 'reasonable adjustments', which have come after weeks of negotiation with United.

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Read this next: United Continental Holdings to outsource up to 2,000 jobs

On Monday, Cognia - a provider of cloud PCI compliant payment processing solutions - announced the news that Griffin Place Communications (GPC) will be its new business partner.

GPC is a relatively new contact centre outsourcer based in Wales. It entered into a contract with Cognia in order to provide 'secure PCI complian phone payment processing twenty four hours a day, all year round.'

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Read this next: Ventrica expands outsourcing contact centre and creates 80 new jobs

IBM has opened possibly its most innovative global sales centres in Cairo, Egypt, the move being just one of the company's many recent investments across the African continent.

The facility, worth roughly $3m, has been created as part of a three-year offshoring agreement with the Egyptian government to create more than 800 Egyptian jobs.

IBM has been present in Egypt since 1954, serving a range of clients across Africa the early twentieth century. IBM has expanded its presence and investments in recent years and can currently be found in 24 African countries.

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Read this next: Shop Direct signs 10-year deal with IBM

In outsourcing news yesterday, the Telegraph reported that Jon Cruddas, Ed Miliband's top policy chief, has said that the public sector should no longer allocate outsourcing contracts to firms that prioritise making money over 'social purpose'.

Cruddas is currently one of the Labour party members responsible for writing their 2015 general election manifesto. He has also been quoted saying it is 'staggering' that £10bn of UK public contracts are allocated to just 20 private sector companies.

A Labour policy along these lines could negatively impact on companies with the biggest government contracts - BT, Capita, HP, Serco and Vodaphone are all examples - not to mention the hundreds of thousands of British workers they employ and the billions of pounds that they generate for the UK economy.

The policy would also serve to reinforce claims that Labour's leadership is anti-business.

Kerry Hallard, CEO of the National Outsourcing Association, has responded: ‘Cruddas’s plans entirely miss the core premise of outsourcing: specialise in what is core to your business, then outsource the non-core to industry specialists who do them better and cheaper.

‘The UK public sector is the largest public sector market outside of the US – it has an enormous amount of services to provide and all within ever decreasing budgets. The austerity measures are not going away and engaging in outsourcing contracts with the private sector allows for these services to be delivered on time, within decreasing budgets and often to a higher quality.

‘To include more social outcomes when outsourcing, it would be more prudent for our next government to review its tendering processes and concentrate on developing its managers to become more intelligent customers. This would make them better able to maximize the value from outsourcing contracts whilst building ‘social purpose’ into the outsourcing contracts that they manage.

‘Cruddas would do well to remember that outsourcing is the second largest employment industry in the UK today and contributes more than £30bn to the Treasury, before he tries to destroy it!

‘Removing the public sector contracts will have far reaching ramifications for the entire UK outsourcing industry, its global competitiveness and significantly impact those UK employees within it, not to mention the coffers of the Treasury!’

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Xerox has undergone an impressive transformation over the past several decades. During its 77 years of business, the company has expanded from a manufacturer of printing equipment into a corporate leader spanning a number of industries. What’s more, in terms of strategy, attitude and culture, Xerox has become the epitome of what it means to be a great outsourcer.

Time and time again, Xerox has demonstrated that it’s not scared of change when it’s necessary for business. In 2009, the company acquired Affiliated Computer Services for $6.4 billion. It was a bold move that made the intentions of Xerox executives clear – they had taken their first step towards becoming a business processing powerhouse. More recently, in December 2014, Xerox announced its intention to sell its IT outsourcing, originally acquired through the purchase of ACS, for $1.05 billion.

Why did Xerox do this? Because the organisation is keen on growth, but simultaneously understands the need to focus on core activities. Xerox operates under the mantra: ‘focus on what you do best and outsource the rest’ - a highly effective business model.

What’s more, this commitment to focus has allowed Xerox to make exciting progress in the field of business processing: on 5th February, Xerox announced its new Mobility Analytics Platform which will process and visualise commuter data. This software will facilitate smart data-based decisions, improving services in the transport sector. And that’s just one of their new business processing innovations.

Recently, the president of Xerox Services Robert Zapfel spoke on the subject of automated processes potentially replacing agents in the near future, which has been concerning buyers and sellers of outsourcing alike. His answer was pragmatic: ‘at the core, when you’re in the services industry, you have to cannibalise yourself. If you don’t, someone else will cannibalise you.’ It’s vital to streamline your own business and ensure it operates at optimum efficiency. If you don’t, someone else will do so before long, and at that point your business will lose out as a result.

Xerox’s president, Andrew Morrison, had a more concise message: ‘culture eats strategy for breakfast.’ Every company involved in outsourcing must pay heed to these words. Strategy is nothing without the correct company culture backing it – this goes for both your own organisation and those that you outsource to.

So what’s the point of this piece, from an outsourcing perspective? Xerox is getting it right. The company is both pioneer and paragon – leading positive change in outsourcing, and acting as a prime example to all those who seek value from their outsourcing contracts. The following graphic describes our take on what Xerox currently stands for:

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According to the Independent, business process outsourcing (BPO) and business process management (BPM) giant Capita is facing an investigation from the UK cabinet over claims that it used a major government contract to short-change smaller supplier companies.

This outsourcing news became apparent on Tuesday, after a group of 12 suppliers took a complaint to the Cabinet Office and demanded an investigation into Capita. Three years ago, Capita signed a £250m contract to provide all civil service training as a model of how to open up the public sector to smaller businesses.

Those smaller businesses have now revealed that Capita took a minimum 20 per cent cut of the value of all contracts to administer that civil service training scheme.

Francis Maude, the Minister for the Cabinet Office and Paymaster General, said in the House of Commons: 'We've learnt a lot of lessons from this contract... It should not be working like this. I'm aware of the concerns and we're investigating them very rapidly to get remedial action. It is not acceptable.'

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Read this next: Capita win £5 billion health service contract

Over the next few years, widespread internet connectivity is expected across India as a result of the government's 'Digital India' initiative.

However, since the initiative was announced, it has become apparent that the country may not have a sufficient number of workers available who are fit to propel India forward into a new age of IT outsourcing.

The National Association of Software and Service Companies (NASSCOM) has warned that despite growth, the future of information technology outsourcing (ITO) in India requires a new set of skilled workers in new services such as digital technology, mobile apps and cloud computing, just before their flagship India Leadership Forum in Mumbai.

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Read this next: Outsourcing ‘Monitoring Drug Safety’ to India Works

Outsourcing research compiled by business process outsourcing (BPO) provider arvato and industry analyst NelsonHall has revealed that, of the £6.65 billion worth of outsourcing deals signed across the UK last year, only 8 per cent went offshore.

Debra Maxwell, Managing Director of arvato UK, said: ‘Outsourcing has mistakenly become synonymous with offshoring, yet our research demonstrates that UK delivery is continuing to play a fundamental role in the industry as customer requirements become more sophisticated.

‘This sophistication is perhaps most easily recognised in the field of customer services. Traditionally typified by voice and email communication, in 2014 it became the norm for these functions to be integrated with more sophisticated digital services like web chat and social media management.’

It’s also worth noting that the financial services industry was responsible for £1.1 billion of these outsourcing deals, and that energy and utilities contracts have grown by 187 per cent to £1.072 billion – the largest growth seen across all of the sectors.

However, most impressive of all was the fact that over half (55.5%) of outsourcing contracts struck in the UK in 2014 were first time deals. Our country is already a world leader in outsourcing - over 10.5 per cent of the UK’s workforce is employed by the industry – so this extreme rate of growth is particularly encouraging.

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Read this next: ISG research shows 7% growth in EMEA outsourcing market in 2014

In the latest outsourcing news, American outsourcing has a new frontier. Monitoring drug safety has grown into a $2 billion business, and outsourcing these responsibilities to India is becoming increasingly popular with Big Pharma companies in the US.

There are approximately 15,000 Indian citizens working in the industry, compared with the 200-300 involved in 2007. Critics of this particular BPO (business process outsourcing) example are concerned that relatively inexperienced workers are being trusted with jobs for which they’re underqualified. Any mistakes could have a drastic impact on the safety of numerous medical patients back in America.

However, this doesn’t appear to concern the Big Pharma organisations themselves. Companies such as AstraZeneca PLC, Novartis AG, and Bristol-Myers Squibb Co, all of whom outsource their monitoring of drug safety, will face multimillion dollar fines if any mistakes are made, and are even at risk of having their drugs pulled from the market.

So far, there’s been cause for joy rather than concern. Cognizant, a major outsourcing company, has confirmed that over 90% of its Indian pharmacovigilance workers have a bachelor’s degree in either pharmacy or a similarly relevant discipline. What’s more, Accenture PLC – which runs a large drug-monitoring operation in Bangalore – claims that it is meeting reporting deadlines for filing cases far more consistently than its clients did before they started outsourcing.

Perhaps interested parties shouldn’t be so quick to criticise companies the instant they opt to offshore. In this case, what was originally seen largely as an attempt to bring down labour costs has also resulted in quicker business operations with higher rates of efficiency.

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Read this next: IBM reducing its Indian-based Workforce

The multi-brand online retailer has agreed a deal with IBM to move to a hybrid cloud model to support digital and mobile transformation. It hopes it will improve customers online shopping experience and empower its workforce collaborate more easily and improve productivity.

Shop Direct’s brands include Very.co.uk, Littlewoods.com and isme.com. It delivers more than 48 million products a year and clocks up over a million daily visitors across a variety of online and mobile platforms.

Read this next: IBM confirms multi-billion dollar outsourcing deal with ABN AMRO