Industry news

Emerging markets have shown signs of economic slowdown, after a period of rapid and protracted growth, according to HSBC’s monthly purchasing mangers’ index (PMI).

Economies including China, Brazil and India which have seen economic growth rates as high as 10 percent in the past, have reported a reduction in their growth, with emerging markets PMI reaching its lowest rate since August 2012.

The recent report reflects the impact of slow growth in mature markets, with emerging markets relying on demand from developed nations to bolster growth. Areas including manufacturing and service industries have been hit by reduced demand for exports.

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In an economic climate in which budgets and resources are being tightened, it has become more important than ever for purchasing decision makers to select the right supplier.

In light of this, how can those in charge of the procurement process select the right service provider? Some may choose to appoint a service provider based on price, but how can they see past suppliers’ initial promises to ensure they will fulfil the business’s needs?

After all, a supplier may promise to deliver at a lower price than others, but may not have the capability to deliver on this in reality. It is essential that service providers are not only able to fulfil the brief to meet current operational targets of the business, but are able to grow as the company changes, in order to also deliver on future business aspirations.

Another course of action for clients to consider is to outsource their entire back-end function to one supplier. Many businesses may outsource specific functions to a range of different suppliers, but this often results in a more fragmented process, with hidden cost.

By appointing one supplier to manage an entire cycle, it is not only cost-effective, saving time and resources on another tender and pitch process, but also helps to build a long-term relationship based on trust with that supplier. Additionally, from an operations perspective, it is much easier and more convenient to have everything handled by one company in one place.

However, service providers must also have the technical capability to deliver on what they promise at the pitch. Technology is crucial to ensure a robust infrastructure is in place. This technology should be bespoke to fit seamlessly with the business’s own systems.

Flexibility is another key area when searching for a supplier. Some suppliers may have the ambition but lack the capability to react to busy periods. Here at Prolog, we are often able to scale up during busy periods to meet client demand, and this should be a vital part of any supplier’s strategy; offering the right blend of services and resources to fulfil client needs.

Finally, it is imperative in the procurement process to choose a supplier that truly understands the market in which your business operates. If a supplier has in-depth knowledge of the market, they will be able to make suggestions that demonstrate insight and add value to the company both in terms of sales and in expertise.

The macro-economic crisis of 2008 had a major impact globally across organizations – mainly because they were unaware with the speed and the magnitude of the financial meltdown. Management at all levels of organizations was mostly caught unawares when they had to deal with the relentless decline in their organizations’ financials - top line, margins, stock prices etc.

In order to cope with the situation, most CEOs chose the most obvious route and opted to ‘cut’ costs. In a majority of the organisations, IT (Information Technology) investments have traditionally been perceived cost intensive, primarily due to lack of understanding of the benefits by the senior business executives. And more importantly due to the CIO’s inability to articulate and quantify the clear business benefits that the organisations were getting from the IT spends, which on average equated to between 2% to 3% of the overall budget.

As a result, IT became a major focus area for “cost cutting” and further evidence of this came in the form of the changes in the CIO’s organization. Since the crisis began, the reporting line of the CIO in a lot of cases moved from the COO to the CFO, to manage the cost cuts. IT deployments across industries were slotted into two distinct buckets – “Run the Business” and “Change the Business”.

“Run the Business” (RTB), also known as “Keeping the Lights on” – did just enough to ensure that the IT organizations met their obligations to the business and kept the IT services running. This included the entire stack – from underlying IT infrastructure, platform and applications. The general directive across organizations was to cut down the cost of RTB between 25% to 30% and in most cases also leverage the saving for “Change the Business” (CTB) initiatives which are in line with organizational priorities.

The CTB initiative was a new experience to the IT departments as they were not used to working closely enough with the business to be able to understand the requirements specified. The rapid pace of change was another challenge for the IT departments. The days of long drawn out projects had effectively ended. Business wanted a clear ROI in a short duration and they needed someone who inherently understood what the business wanted.

The macro-economic crisis has shaped IT departments into nimble units that can have a clear understanding of the business, and the ability to demonstrate ROI, while keeping the existing costs under check. Some steps taken towards this by the IT departments include, hiring strong business managers who have a strong appreciation of the business and technology, and with strong program and project management capabilities to become more agile in their delivery. And more importantly, these managers could identify growth pockets, leveraging technology, to add to the organization’s top line.

This has been and continues to be a long journey and a lot of work still needs be done to reach an Utopian stage, where IT is perceived as a business imperative and not just a necessary evil.

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Rail operators East Coast have outsourced communications and IT services to O2 Unify, in a deal valued at £2.6 million, which will see a consolidation and restructuring of core infrastructure services.

The three year contract will see O2 oversee a redesign of infrastructure across 23 sites in England and Scotland operated by East Coast.

The contract will also see O2 and its parent company Telefónica provide direct mobile support and media engagement including travel information services.

Over the lifetime of the contract, East Coast is expecting to generate cost savings of £1 million from the redesign of services.

East Coast Finance Director Tim Kavanagh, said: “As a business, we were looking to simplify the way that we ran our communications in order to make savings- we also wanted to streamline our processes to create easier, more user-friendly systems that benefit East Coast employees and our customers.”

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Jaguar Land Rover has announced investment plans totalling £165 million with the creation of 700 new jobs at its new engine factory near Wolverhampton.

The new factory, which is set to become operational in 2013, with the first engines for next generation Land Rover and Jaguar models being delivered in 2015, will now employ a workforce of 1,400.

In a statement the company said: “Jaguar Land Rover's new engine manufacturing centre in the UK is essential to support the company's long-term strategic growth plans and will be the home for a new generation of technologically advanced, lightweight 4-cylinder low emission diesel and petrol engines. "

The investment announcement comes as welcome news after the UK’s manufacturing sector contracted sharply in February after being impacted by bad weather and reduced demand from abroad and domestically.

Jaguar Land Rover creates 800 jobs in Solihull

IT services provider is to buy rival bankrupt firm 2e2 for €24 million, the deal will see Logicalis acquire the European operations of 2e2 in Spain, Ireland, the Netherlands and the Channel Islands, but excluding UK operations.

The acquisition is designed to boost the expansion of Logicalis within Europe with an eye to overseas opportunities by gaining contacts in new foreign markets.

The acquisition will see Logicalis add over 480 employees to its operations and an additional £100 million from new revenues.

O2 has also moved to aquire assets from the bankrupted company as it is separated and sold, with 2e2’s joint IT services venture O2 Unify being bought up by the telecommunication giant.

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Cloud infrastructure provider Savvis has opened a new UK data centre in order to meet increasing demand for cloud and managed hosting services from Europe.

The site based in Slough is an addition to existing facilities which now account for a total square footage of 100,000. The new Savvis site is the sixth data centre situated in Europe with over 50 centres located around the globe.

Jeff Von Deylen, president of Savvis, said of the new site: “We have nearly doubled capacity in Slough to meet growing demand and give businesses in the region the services they need to grow”.

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IBM has announced that it will migrate cloud computing services to open source platform in a move to increase customer customisation and flexibility.

Enterprise level cloud computing software hosted on vendor free open source software will allow companies to build and structure their own cloud deployments while allowing developers to increase platform delivery times and condense cloud operations.

IBM senior vice president of software Robert LeBlanc, said: "Just as standards and open source revolutionized the Web and Linux, they will also have a tremendous impact on cloud computing. IBM has been at the forefront of championing standards and open source for years, and we are doing it again for cloud computing".

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A seven year contract to operate the government’s first Shared Service Centre has been secured by BPO firm arvato. The centre is the first public sector shared service unit to be operated by a private sector firm.

The centre itself is designed to provide BPO services to the Department for Transport and associated agencies. The centre is part of the Cabinet Office’s next generation of shared service facilities, which forms part of a new strategy designed to generate savings of as much as £600 per year.

Matthias Mierisch, CEO & Chairman of arvato UK, said: “Our solution provides a new operating model for back office functions, using industry best practice, economies of scale and standardised processes to deliver improved value for money and service quality”.

The centre represents the government’s response to criticism from the NAO regarding the public sectors employment of cross-sharing between parliaments and the promotion of unification. With a centralisation of services, an additional shared service centre will have its management privatised alongside arvato, with a view to driving efficiencies.

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The latest data from research giant Gartner has led to expectation of an 18 percent growth in the public cloud market in 2013, with an overall value of $131 billion compared to $111 billion in 2012.

Cloud spending is being predicted to reach a total of $677 billion within the next three years, with almost half being spend on cloud advertising.

Much of the growth in the coming years is expected to come from emerging cloud markets, including Eastern Europe, Latin America and Asias. While these new markets represent rapid growth for cloud uptake, Gartner predicts that Western Europe and the US will continue to count for high level spending, accounting for more than 80 percent of new market.

"Evidence of this growth is found in the increasing demand for cloud services from end-user organisations, met by an increased supply of cloud services from suppliers", said Ed Anderson, research director at Gartner.

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