Industry news

In a week of hoaxes and profit warnings, spooked investors and sliding share prices, you have to wonder if this is a great time to buy outsourcing shares - or is public sector sourcing going through a period of disruption?

Disruption is often spoken about in terms of technology, but true disruption brings about new models, new behaviours, new ways of doing things, new players. Due to the length of contracts in the outsourcing industry - even though they are getting shorter they are still relatively long - disruption will never be an overnight thing, in the way that Pixar and Toy Story shook up animation or YouTube changed the way we use the internet.

No, disruption in outsourcing will be much more methodical than that; barriers to entry are huge in the public sector. I suspect that outsourcing’s disruption won’t be a Berlin Wall moment, but, behind closed doors, the evolution is picking up the pace.

Capita has announced a tightening of its new business pipeline due to backing away from proposals that seemed risky, and refusing to bid low to win deals. Serco took the opposite approach, bidding low, winning work and later, when it transpired that revenues weren’t quite as expected, it felt the pinch. But Capita is feeling the pinch a little too. Despite taking contrasting stances towards the government’s more bullish attitude to risk sharing, both these companies have seen investors cool on them this week.

I’d like to see disruption come about in terms of a paradigm shift for the whole industry when it comes to optimism bias. That doesn’t just go for the public sector’s propensity to pick the cheapest bid, rather the whole industry-wide culture of bidding low needs to become passé, if outsourcing is to truly mature. That the government is becoming more intelligent when it comes to risk-sharing is a good thing. But there wouldn’t be quite so much risk to bear if there was ultimate transparency from the outset, on all sides of the deal. I’m talking about an age of realism and openness, of succeeding and failing together, of adding value to the British public first and foremost, and worrying about profits and claw backs second.

For now, we will have to wait and see how the big guns’ business plans play out. Serco is selling off some private sector businesses to focus 100% on public sector work. Capita is concentrating on expanding its private sector efforts, and perhaps moving into Germany…and spare a thought for poor old G4S: on the same day it makes a positive PR play by selling Guantanamo Bay, some bright, yet malevolent spark illegally clones their website and announces a fake profit warning, bashing their reputation further and sending their share price spiralling.

You have to wonder, would that have happened to a company beloved by the public, such as Apple or Google? I doubt it.

Capita have been named as the preferred bidder for operations outsourcing contract for co-operative bank mortgages. The contract is worth up to £325m over a 10 year period and is due to start in early 2015.

Learning from Co-op’s mistakes – putting governance first

London-based outsourcing services company has purchased software firm Asidua for an undisclosed sum. With its headquarters in Belfast and offices in Dublin and Birmingham, Asidua employs over 130 employees and provides software and consultancy services to government and corporate clients in the UK, Europe, Asia and the US.

Civica has over 2,000 employees in 30 locations and provides IT and telecoms services to central and local government and healthcare bodies.

Gloucester City Council agrees IT outsourcing deal with Civica with targeted savings of £100,000

Burnley Borough Council will be going to tender for a ten year, £118m contract for their back office functions, licence services and IT support. They will be looking for a single provider to start in 2016 with the hope to cut costs of at least 15%. He incoming supplier will also be required to maintain existing service performance and quality levels while protecting current employees jobs through TUPE transfer and the secondment of council staff. The deadline for tenders is December 15 2014.

Esprit outsources IT to Mindtree

arvato have released their latest quarterly Outsourcing Index, which showed the value of outsourcing deals in local government increased by 164% during the third quarter of 2014 compared with the same period last year. The report also showed HR outsourcing rise by 24% year on year and that HR services represented a quarter of all UK outsourcing deals so far in 2014.

The Philippines outsourcing industry booming

ATOS has been awarded a £125m contract by the Ministry of Justice (MoJ) to provide end user computing services. The deal will include supply and maintenance of all devices (desktops, tablets, laptops, scanners, printers, cameras etc.), support for mobile client devices and distributed platforms hosted in local servers to support business applications. This will be delivered across the MoJ’s 2,300 sites including prisons and probation services centres.

Atos to run IT in the cloud for the Rio Olympic Games

Yesterday saw the official opening of the EE and Webhelp UK’s contact centre in Derby. The new contact centre demonstrates EE’s commitment to return 1,000 customer service jobs to the UK. As part of EE and Webhelp UK’s partnership they have pledged to deliver industry leading customer service and provide job opportunities for the local community. David Cameron cited EE’s commitment to UK jobs in his speech at the DAVOS earlier this year where he ambitiously branded the UK as the “re-shoring nation” and called for other UK companies to follow suit.

NOA responds to David Cameron at Davos

Fashion retailer Esprit has outsourced the management of their SAP applications to Indian IT services firm Mindtree with the hope of improving their back office systems which will then allow the IT department to focus on IT challenges facing the retail sector at the moment, adapting their technologies to changing consumer behaviour and therefore making them more competitive. 40 Mindtree staff will work on the contract including monitoring and maintaining the applications that support 300 stores and 7,500 points of sale across Europe.

Mindtree appoints new Head of Sales for UK & EU

A recent report from the Shared Services & Outsourcing Network examined the mid-market companies in the German economy. These make up 99 per cent of the country’s companies and are often described as the motor that drives the German economy. Interestingly, the report found that shared services were a common denominator for more than half of the sector, which goes to show that shared services are not the exclusive preserve of huge corporations.

Shared services can be a valuable way of streamlining business operations and delivering them in a cost effective way, but the heads of these shared services centres (SSC) face pressure from all sides. They face pressure from the Board, who are always looking to cut costs; pressure from outsourcing suppliers, who need to make a profit from the services they are delivering on what is often an aging asset base; and pressure from the business units, which are quick to speak up if they do not get the level of service they believe they deserve.

The ultimate aim of all SSC is to constantly provide a better, more efficient service, while driving out unnecessary costs and innovating. But all this needs to be done while keeping the ‘lights on’ and the business running as usual. And as if that isn’t enough, the move to multiple, niche outsourcing providers means there are more ‘moving parts’ to manage.

For an SSC looking to address these issues, there are three steps they should take to help optimise the function. The first is to identify the desired business outcomes and then work down through the different layers of the organisation to understand the business services that are needed to deliver these outcomes. This provides a clear understanding of the different services that contribute to the overall objectives and how they work together. This is especially useful as SSC often manage multiple outsourcing providers feeding into the business.

This allows SSC to move to step two, which is engaging with the business units using a common business language they understand, rather than meaningless tech jargon and service level agreement terms. By being able to talk the language of the business, SSC will ensure they focus on the priorities that will make the most difference to the strategic business objectives.

The third step is for the SSC to build a business service catalogue of the most popular delivered to the business and then charge the business units accordingly. By doing this, the business units are given a far clearer view of the services they are spending money on and they can then change their behaviour according to what they’re willing to pay for.

This enables SSC and the business to build a business performance management capability that shows how each service is being delivered and how delivery is improving over time. This will help SSC evidence to the business how they are contributing to its strategic objectives and delivering an increasingly efficient operation, against a backdrop of innovation and improvement.

Salesforce has opened its first European datacentre in the UK as part of a new strategy to build three facilities in Europe, it will next open in France and Germany in 2015. They intend to create more than 500 new jobs across Europe within the next year. The new centre based in Slough will be fully powered by renewable energy sources. Salesforce has delivered 42% growth in the European market year on year and will be using the new data centres to increase this further.

Salesforce data centre opens in the UK