Industry news

The Department for Work & Pensions’ outsourced Work Programme has seen 207,883 people enter work under the shared services programme.

The Work Programme, based on a pay-by-results basis has seen the greatest value of any back-to-work initiative, according to figures released on Tuesday by the Employment Related Services Association (ERSA).

While the overall figures have been high, only 31,000 people had reached the three or six month period that resulted in the suppliers reaching the pay-for-results stipulation.

Minister for employment, Mark Hoban, said: “While these figures show progress is being made, the government is clear that there is more to be done. Each provider has a performance development plan and the department is managing them vigorously to constantly improve performance. Formal contract letters requiring improvement have been issued to those providers with the lowest performance to date.”

Capita has announced the a offer to acquire a majority stake in Staffordshire County Council’s education services division, for £32 million over a three year period.

The outsourcing giant aims to achieve over £2 billion in revenue from the purchase over the next ten years.

Capita is heavily invested within education, providing IT systems and pension services to educational departments. The majority control of Staffordshire’s education division by Capita if approved would see the creation of a highly competitive shared services organisation with the potential for aggressive expansion.

A report from the IDC has forecast that Android and iPhone devices will have replaced BlackBerry devices in 2012 at enterprise level.

IDC estimated that iPhones would be the most popular device purchased for business while Android devices will have ranked as the most popular devices for employees in 2012.

The decline of the BlackBerry was explained by IDC as stemming from reduced developer and consumer interest.

A new data centre is set to open in Birmingham in March next year, the complex is expected to be worth as much as £60 million.

The complex known as the Data City Exchange data centre will offer low energy usage and scalability to users.

Mark Barrow, strategic director of development at Birmingham City Council, said: “The new data centre will create significant employment opportunities across the city and help support some of the local businesses in the area.”

Warwickshire NHS Trust and the University Hospitals of Coventry are looking for suppliers for new IT hardware with a contract worth between £50 million and £100 million.

The four-year contract has been put out for tender through the group purchasing organisation HealthTrust Europe.

The Trust and hospitals will be able to divide the contract between multiple suppliers to ensure quality and specialisation in areas including supply, support and device specific items such as enterprise servers.

Orange Digital which manages Everything Everywhere’s digital services has migrated services to Amazon’s Web Service (AWS).

The move comes as EE seeks to reduce operational costs and increase services handling of demand.

The move to AWS will also allow for scalable services and delivery during times of increase demand which will improve EE’s output during high traffic periods.

EE have also employed AWS to test and improve development times of products, Neil Jennings, lead enterprise architect for Orange Digital, said: “AWS has removed a barrier, so time to market is dependent almost entirely on developing software and deciding what we want to do.”

MoD spending for telecommunications and IT totalled £3.6 billion between 2009 and 2011.

The total figure accounts for a significant portion of the total government IT budget, with expenditure including the modernization of IT infrastructure.

Recent IT contracts have included the outsourcing of payroll and personal services to CSC and support contracts with BMT Defence Services and IPL to improve system services and usability.

The implementation of effective computer controls and systems could have prevented the loss of £1.4 billion at UBS from the actions of a rogue trader, according to the Financial Services Authority (FSA).

Interim CEO Sergio Ermotti at UBS revealed that UBS IT systems had detected unauthorised access but that no action had been taken.

A FSA report detailed that the, “The computerised system operated by UBS to assist in risk management was not effective in controlling the risk of unauthorised trading”.

As businesses scramble to make efficiency savings, outsourcing is one topic which is rarely left out of the conversation. But many outsourcing customers complain that they are not achieving the level of innovation from their suppliers that they had hoped for. In the first in a series of blogs, Gareth Thomas, managing consultant, Hudson & Yorke, examines common pitfalls and shares his views on a three-step plan to ensure that ICT outsourcing contracts deliver the necessary levels of innovation.

Part 1 – communication and strategy is key.

Why do some ICT outsourcing contracts fail to deliver on their promises? With both private and public institutions under increasing political and economic pressure to rein in costs and shift to purely cost-based success metrics, many leaders are looking for strategies which will enable a refocus on the core mission of their organisation. In ICT, this often means taking a closer look at shared service approaches or alternative sourcing strategies, and finding ways to make them work harder; more efficiently and effectively. However to remain competitive and to adapt to future change it is important that organisations do not forget that innovation is essential for success in long-term outsourcing contracts.

The term ‘outsourcing’ can sometimes be bandied around as though it’s a silver bullet, or as though outsourcing is some sort of commoditised solution for cost-cutting. In truth, it is a broad term which encompasses any number of different sourcing models. All too often, organisations subject themselves to a “one-size-fits-all” sourcing model which does not take into account the characteristics of their business and its unique strategic goals. This can result in businesses signing up to outsourcing agreements which are unsuitable for their business, and although the short-term cost objectives may be delivered the long-term strategic benefits, that can only be achieved through innovation and a properly designed model, are often sacrificed. But how does a business know which particular model is best? What makes specialised models right for certain organisations? What needs to be considered and established to ensure an ICT outsourcing contract delivers the innovation you require?

The first step is a workable strategy and constant communication. Innovation can mean different things to different organisations and to different stakeholders within those organisations; so it is essential that these expectations are communicated clearly to all stakeholders. Considering what is an acceptable level of risk is also vital. Some businesses have a natural appetite for risk, others do not, and this is often linked to business strategy. Some organisations have extraordinary levels of ambition, and will accept above average levels of risk if doing so will enable them to achieve their growth targets.

The place of innovation against other, often competing sourcing objectives needs to be considered too. In particular it is crucial to be mindful of the fact that a high priority for cost-reductions above all else could potentially conflict with innovation objectives as suppliers will seek to strip out all non-core service costs. Once an innovation strategy is defined it should be communicated clearly and consistently, both internally and to potential suppliers.

Many of these considerations boil down to a question of what the organisation wants to achieve from innovation. There are myriad different drivers behind innovation: one business may want to innovate to cut costs, while others may want to improve service quality or reduce time to market for new products. Keeping sight of the overarching objectives throughout the process will ensure that any innovation is fit-for-purpose, rather than being change for change’s sake

Ten years ago, a self-built data centre would have almost certainly been the clear favourite over an outsourced option amongst CIOs. Fast forward a decade, however, and it’s clear that this is no longer necessarily still the case.

Magnified by the fractious economic climate, the idea of a self-build data centre project is becoming a thing of the past for many organisations. This is for a number of reasons, from the intricate implementation of planning, designing and building, to the initial capital investment. A survey of IT leaders by data centre operator Sentrum, reported that 78% of respondents outsourced part or all of their data centre operations. When probed on their rationale for making these decisions, a reduction in costs, dynamic scalability and improved DR/BCP capability were cited as some of the core drivers for their adoption of data centre outsourcing.

Nevertheless, choosing to outsource your data centre provides just as many impediments as it does benefits. While we’ve seen an increased number of organisations following this path, the results seem relatively hit and miss, ranging from glowing references to those who describe awful mismanagement and inadequate levels of customer service. With this in mind it’s worth considering some of the key steps to ensuring your service expectations are met when outsourcing your data centre operations.

The first mistake that many organisations make is to outsource their data centre problems onto a service provider. All too often, enterprises lack governance and understanding of their IT platforms, believing that outsourcing alone, will fix the problem. Without understanding what their service level requirements are, an organisation will struggle to establish clear SLA agreements with their provider. Indeed, this habitually results in mixed service delivery expectations from the customer and the provider. Essentially, it is crucial that the organisation improves the maturity of their infrastructure governance and run it as affectively as possible before progressing with the outsource transition. Typically, the most successful outsourcing projects are those transferring already productive services.

The second mistake, is in not understanding that the agreement with an external provider should be seen as an ongoing collaboration. As such, it is vital to ensure you have the correct people in place to direct the relationship management with the third party. To supplement this, it is vital to view the service provider as an extension of your IT organisation. Fundamentally, there must be an acceptance to consciously transfer knowledge and implement learning and training periods for both organisations.

This means constructing a viable transition schedule to establish how each entity will communicate with one another for areas such as Incident, Change, Problem and Request Management. This is an essential but often overlooked facet of the outsourcing process. When not undertaken correctly, this can lead to disjointed and inconsistent service offerings, resulting in customer dissatisfaction.

Additionally, there are concerns that data centre outsourcing can result in a lack of intimacy between the business and the IT operations. Consequently, there is value in the IT function retaining the architectural direction and control of their IT systems. Through maintaining operational control, the IT function can facilitate key stakeholder engagement and transform business needs into solutions, whilst consulting with the service provider about these efforts.

Concurrently, whilst data centre outsourcing offers the potential to cut expenditure, it should not solely be viewed as an attempt to press for a rock bottom cost. Establishing a clear and precise cost for work model is essential. In cases where a customer is chasing after the cheapest possible solution, they can be seduced by the “Men in suits” promising them a premium service on a shoestring budget. This can result in the service provider downgrading the resources assigned to a client’s account, either through numbers or replacing experienced professionals with lesser skilled alternatives in order to fit within the agreed charging model. Consequently, a situation will ensue which results in the service provider having to allocate resources which were initially not in their scope of costs. Therefore, resulting in an unexpected annual operational expense to the customer.

In summary, data centre outsourcing should be seen as a collaboration between your organisations IT function and the data centre provider. There are recognisable benefits provided by outsourcing your data centre operations. However, to realise these benefits it is crucial to ensure your organisation:-

1. Establishes clear SLAs with your data centre service provider.

2. Implements transparent cost models with the service provider.

3. Retain architectural ownership and control of your IT Systems.

4. Accept the integration of third party providers as an extension to your organisations IT functions.

Ultimately, considering your data centre outsourcing initiative as a means to simply cut costs and divert the ownership of issue’s elsewhere, will contribute towards degraded service levels and the potential failure of your outsourcing attempt.