Industry news

Research covering 630 contracts by KPMG has shown that cost is decreasing as a factor for the outsourcing of IT by businesses.

The research has shown that 70 percent of businesses are influenced by cost when looking at outsourcing IT services, compared with 83 percent from two years ago.

Other reasons for outsourcing services included the need for better quality services at 46 percent and 51 percent citied the lack of in-house skills for the cause for outsourcing.

Lee Ayling, partner in KPMG’s Shared Services and Outsourcing unit, commented: “Companies are now looking at how outsourcing helps improve the quality of service they can offer to customers".

Research from IT finance provider Syscap and research from investment and research body Nesta has shown that investment has fallen along with IT innovation and funding.

Syscap reported that IT investment fell by 10 percent while Nesta reported business innovation investment dropped £24 billion.

Geoff Mulgan, Nesta's CEO, said: "Everyone agrees that innovation is the only route to long term growth” and that “Other countries are making investment in innovation a top priority and the UK cannot afford not to do the same.”

Syscap’s CEO Philip White, commented: ““This trend in under investment in IT is not seen, for example, in Germany- quite the opposite”.

FirstGroup may receive an extension on its Great Western contract after the government has reportedly delayed issuing tender contracts.

FirstGroup has already served notice on its contract with the company set to terminate services on the 1st August, however the delays in issuing tender contracts by the Department of Transport may see the company carry on services into the summer.

FirstGroup used a clause in there contract to end services three years early. In continuing to provide services, FirstGroup will likely receive subsides for the extension.

After already being seen to be as the favourites, iCity have now been confirmed as the preferred bidder media centre developer.

Olympics media center to turn into cloud centre

The tech firm produced a bidding programme to development the Olympic media centre site into a datacentre. The tendering process had seen a runner-up pull out of the process, citing a process skewed towards iCity.

The iCity contract would see the creation of a datacentre, digital educational facilities and media studios, with a expected 6,500 jobs created.

Gavin Poole, CEO of iCity, said: “iCity will provide a sustainable legacy for the local community through the creation of thousands of jobs, apprenticeships and training opportunities".

Mobile payments via smart phones and tablets increased by 356 percent from the same time last year, according to a IMRG Capgemini report.

The report detailed a total spend of £34.9 billion by British shoppers during the first six months of 2012.

Richard Lym, economist at the British Retail Consortium, said, “Most retailers would agree the pace of technology is moving at a frightening pace, and they are having trouble keeping up as we move forward".

The head of retail consulting and technology at Capgemini, Chris Webster, said: “Mobile commerce is still the big story here, with average order values comparable to the full website”.

BP has selected ICT provider T-Systems to migrate existing Microsoft Exchange servers onto a private cloud service.

T-Systems will also be involved in upgrading the servers in there new location in a German based data centre. The transition will see the movement of over 100,000 mailboxes while providing smart phone access.

The new cloud based system will provide services to over 83,000 employees and the contract will cover a 5 year period.

Intel has completed the purchase of Whamcloud, a supplier of Lustre, an open source file system, in order to increase its high-performance-computing offering.

Lustre is used by many of the fastest supercomputers in the world, an area which Intel dominates, with 74 percent of 500 of the world’s supercomputers currently employing Intel processors.

Intel is currently focusing on increasing computing power by three times as much as current supercomputing powers.

In other news Intel has reported that it expects to see lower than anticipated growth for 2012, as mobile devices drew sales away from computer and laptop sales.

Procserve has received a award from the Department for Work and Pension (DWP) marking innovation in eMarketplace's improved access to contracts for small businesses while providing efficiency savings.

Working with the Department, Procserve’s development of its “Low Value Procurement (LVP)” solution allowed to shorten the time it takes to deliver vital training to DWP’s customers, significantly boosting the opportunity for a swift return to work and reducing the number of benefit claims.

The solution is designed especially to lower the barriers for small and medium sized enterprises (SMEs) to bid for the business of delivering this training provision and therefore represents an important “Win-Win” in two crucial areas.

The cloud-based platform allows the department to buy goods and services from a pre-approved group of suppliers through a centralised eMarketplace, which makes it easier and more efficient for both buyers and suppliers, supporting Government’s drive towards 25% of the value of public sector contracts being fulfilled by SMEs.

Nigel Clifford, CEO of Procserve, commented: “By embracing eEnablement in the approach to its business, DWP is leading the way and reaping major benefits."

Professional Services Special Interest Group

10th July 2012

The cross over between lawyers & consultants - how best to work together to get the optimum outcome for the client?

The objective of the meeting was to provide greater awareness of the respective value that can be delivered by lawyers and consultants on outsourcing engagements, and how this can be best utilised in future client engagements.

Marcel Horst, Excelsource, introduced this session with some thoughts on why and how lawyers and consultants could improve their work together. Client needs and trends were identified along with suggestions on how to improve engagement without compromising impartiality.

To aid discussion, Marcel suggested the attendees begin by looking at definitions of the two roles to discuss cross-over and the complexity between both roles and subsequent responsibilities.

Definitions

Consultants: Provide expert subject matter expertise, influences but have no direct authority to implement change, on a temporary basis offer more than what can be done in house.

Lawyers: Clarify rules of governance, licensed, protect the client’s interests, clarify and document all terms of the customer – supplier transaction, seek a best outcome to minimise risks and costs.

Protecting the client was iterated as one of the lawyer’s key roles and could be used in future role definitions.

Client Needs

The group then looked at the relationships between lawyers and consultants from the perspective of the client’s needs.

Paul O’Hare (legal director of the NOA, and partner at Kemp Little): “Relationship problems between lawyers and consultants can occur due to areas of overlap. It is important that activities are clear and transparent before any collaborative work.”

From a lawyer

- Turn a proposed transaction into a clear set of terms

- Help to negotiate the best outcome for the client

- Reduce client business risks by way of contract

- Bring together different company needs into one contract - commercial, operational, HR, and legal

- Clarify scope of retained and supplier deliverables - When the legal or consulting work involves outsourcing, the work retained by the client and the work to be delivered by the supplier needs to be clear or clarified (not clarity) This can sometimes be a challenge

- Comfort and a second opinion

- Independent perspective

From a consultant

- Subject matter expertise not available internally

- Broader industry perspective and benchmarks

- Past experience of services under consideration

- Speed of delivery and effecting change

- Independent perspective

- Temporary resource

Dominic Drydon, Olswang, agreed: “Chemistry is vital in lawyer / consultant relationships. Sometimes consultants have preconceived ideas about who should be doing what. Clarity on roles and responsibilities are vital and a client should take the lead on this. Standardisation between all three parties is equally important and can eradicate any confusion.”

Challenges and Trends

Marcel Horst provided a list of challenges and trends which led to a discussion about how the collaboration could be improved.

- Standardisation and Commoditisation

- Globalisation

- Flexibility

- Agility

- Cost pressure

- Changes in Legal Services Act liberalising the market creating competition

- KPO

- Divide and conquer

- Engagement is often mis-timed

- Improve definition

- Clarify roles and responsibilities

- Focus on business objectives

- Perception (hidden) costs

- Contracts vs. schedules

Mark Taylor said: “Schedules vs. contracts seems to be a common problem especially for documents which are in play internally and externally. The client should be made aware early on in the process that sometimes the schedules which are received are not detailed enough to work along with the terms and conditions.”

Paul O’Hare commented that business stakeholders should have a voice in the selection and choices of legal counsel. Mark Taylor agreed: “The chemistry with internal stakeholders is vital. Stakeholders need to be on board from the word go.”

From the discussion the following practical steps (how lawyers and consultants can work better together) were highlighted:

- Get the chemistry right early on

- Define the rules of engagement

- Seek to reduce the likelihood of not sharing information such as commercial detail between consultant and lawyer

- Analyse the opportunity

- Seek to reduce any barriers to communication within the client organisation

- Earlier engagement

- Assess key drivers and agree lead

- Share knowledge

- Packaging of advisory solutions

- Try it out

- Create a guide of how to create schedules

Paul O’Hare concluded: “Is there a risk that we are being too traditional in our roles? Could someone bring in a more integrated package that bridges the gap between lawyers and consultants? With the liberalisation of the legal market as a result of the introduction of the Legal Services Act, and other structural changes in the legal market, the emergence of organisations that can offer both legal and consultancy services as an integrated package is an increasing possibility.”

Adrian Quayle, NOA Board Member, said: “I think a good practical step from this forum is to try and look at roles and definitions in the services consultants and lawyers perform. Using a life-cycle as a guide to identity leads could be a possible way which these responsibilities can be identified.”

The full set of slides from this event can be found here.

In recent days news surrounding the Olympics has moved to the crisis surrounding G4S, London 2012 Organising Committee (Locog) and the Home Office, as news of security shortages emerge.

Recent headlines on the crisis include the likes of ‘G4S boss admits 'humiliating shambles' from the Telegraph, ‘Sorry is the easiest word for G4S - but it isn't enough’ from the Daily Mail and ‘Olympic failure leaves G4S in tatters, admits CEO’ from CBN news.

Yesterday Chief executive of G4S Nick Buckles said that he regretted ever taking on the Olympic contract. In many cases the headlines accurately describe the position of a company that has failed to deliver on such a public contract, a failure that has been seen by a worldwide audience.

While many developments and opinions have been released, news outlets have often failed to clarify the underlying causes which have led to the crisis.

G4S originally won the contract to provide security staff to Locog at the start of 2011 based on their ability to provide a highly competitive price in comparison to other offers. The contact originally required G4S to provide 2,000 security staff for the Olympics however G4S were called on to increase this number to 10,400 in December of last year.

The changes in the staffing numbers required by Locog in December are key to understanding the failure of G4S to provide sufficient numbers. For even a giant private company such as G4S, going from a target of 2,000 to 10,400 in a space of four months was going to present a significant challenge. Not only did the company have to increase recruitment by around 400 percent but Security Industry Authority applications (SIA) had to be processed for a further 8,400 trainees. This is further compounded as the government is responsible for the accreditation process, "One cannot start work until they have completed that. It's a bottleneck", said an analyst taking to the BBC.

The Public Accounts Committee in March, only four months away from the start of the Olympics, detailed that it was very concerned about the request for increased staff by Locog, saying that G4S faced a “significant challenge to recruit, train and coordinate all the security guards in time for the Games". The chair of the Public Accounts Committee, MP Margaret Hodge, said it was: "staggering that the original estimates were so wrong".

The result of crisis and the development of the story appear to revolve around failures on both sides, stemming largely in part from the late stage negotiation of further workers that G4S were unable to meet, failures in communication between the supplier and consumer and technical issues.

IT systems responsible for G4S failings

An analyst who wished to remain anonymous, commented to the BBC that “the government knew that the company would not hire people months off from the Games, that it would ramp it up much closer to the time they were needed," as this is standard practice for any company. This practice of delayed hiring however will struggle to cope when the contact requirements change in close proximity to the event.

Nevertheless the increase was accepted and payments were increased to G4S, who regally provide staffing numbers in the many thousands for other large programmes. Ian Horseman-Sewell, G4S's account manager for the Games, said to Reuters at the start of July that G4S could potentially run an event in Australia at the same time as providing staff over the Olympics.

While G4S have stated that they will pay for the resulting increase in military staff to fill gaps in their security provision and that they are likely to lose millions from failing to complete the contract, the public perception of the failure, which has been seen by a global audience and has seen shares fall, will damage the company the most.

Surrey police look to end privatisation after G4S Olympic failure

Currently G4S is being heavily criticised from within the Government. G4S chief executive Nick Buckles has faced a parliamentary hearing in which the failure was branded by a MP as “a humiliating shambles”. G4S have currently stayed on the defensive, taking criticism without attempt to point blame at Locog or Whitehall. There is a twofold reason for this; one is that G4S is partly culpable for the failure. Two is that G4S has gained many large contracts from the government and hopes to do so in the future. At this stage damage limitation does not include attacking a large client for its role in the failure, who may still be laying proverbial golden egg contracts for G4S in the future.

Teresa May is seeing that while many services can be successfully sourced to contractors, there is a need for direct communication from both supplier and buyer. The risk of a project cannot be outsourced. The failure of the Olympic security contract is one that will be felt heavily by both sides.

For G4S the disaster is not so much the failure to deliver on the contract, but more damage that the debacle has done to its reputation. Caroline De La Soeujeole, an analyst at Seymour Pierce who covers G4S, said she did not think G4S would suffer financially, saying to BBC News:"I don't think profits at the year-end will be significantly affected by this news" because a relatively small amount of G4S’s revenues are involved in the project.

While the story is still developing, it is clear is that both sides are now regretting the signing of contract. The contract is damaging for both sides, a perfect example of what can happen to contracts which fail to establish communication and effective management from both supplier and buyer.