Industry news

At the beginning of April, Martyn Hart, chairman of the NOA, wrote a blog post for Sourcing Focus about a trend towards onshoring and nearshoring in SME manufacturing companies. I believe this trend is not just confined to manufacturing, which is heavily reliant on the price of raw materials, but is also affecting other areas like IT outsourcing. Anecdotal evidence from consultancies like Cap Gemini, as well as the financial results of companies like Logica, are pointing towards this.

Over the past 30 years or so, offshore outsourcing centres have evolved greatly. Recently several have been grappling with high inflation and strong exchange rates against the pound, which has pushed prices up. Some destinations have been a victim of their own success, unable to keep service levels high as they grow incredibly rapidly. This is particularly true at the moment as we have just been through a massive spike in demand for offshoring. At a recent event I attended in the UK, delegates were complaining about the levels of churn at their outsourcers and how they felt they now had the ‘C’ or even the ‘D’ team working on their business. Unchecked hygiene factors like this can incrementally push companies away.

The TPI Global Quarterly Index is also showing a decline in the large outsourcing contracts that offshore destinations excelled at. I believe this is for a range of factors that have been brewing for a while. Innovation and quality have been hot topics in the outsourcing industry for some time. Yet many of the contracts and service level agreements that companies hold their offshore outsourcers to are not conducive to producing these - in particular innovation. In fact, traditional outsourcing contracts can be quite the opposite. I get the impression that instead of altering the way their agreement is structured, some companies are just starting afresh. Furthermore, nearshoring is no longer new and some organisations simply want to try something different. While they may not move all their outsourcing away from offshoring, they may well put some of it into a new model.

As outsourcing matures, new drivers are vying with price. This too is gently pushing UK businesses away from far-flung destinations and towards Europe. Skills are taking a higher precedence, attracting organisations to the destinations with the highest skill-level for their requirements. The growing popularity of processes like LEAN, just-in-time and Agile mean companies are looking for closer relationships with their partners. For some organisations cultural affinity can play a key part in fostering those all-important inter-team relationships: there are several European sourcing destinations that the UK has close societal ties with. Other organisations may feel that shorter time differences and closer geographical proximity can help foster greater collaboration.

The upshot of trends like these is that nearshore destinations become more attractive and more affordable for UK companies. The UK media, or at least some sections of it, have been hyping up this reduction in demand for offshore, but I think that it is a natural part of the outsourcing growth and evolution cycle. And I certainly don’t think offshoring is dead – far from it. There will always be demand for it and it will always remain the right solution for some outsourcing needs. However, as the industry matures and develops we are seeing more of an even balance in the shape of the industry.

The connection between outsourcing client and supplier is often fraught. Misunderstandings, miscommunications and disappointment are a frequent feature of the relationship, with both sides becoming frustrated by problems. One client-side industry insider believes that as many as 80 per cent of clients feel dissatisfaction with their outsourcing. Given the critical role outsourced functions deliver for businesses, this is an alarming figure.

While suppliers absolutely need to address this issue, there are some straightforward but crucial steps that clients can take to maximise the value of their outsourcing contract, as well as making sure it doesn’t become a time-consuming and toxic relationship.

Viewing an outsourcing contract as an ongoing partnership rather than a straight handover is an important first step.

A report published this year by Accenture into how to achieve high performance in business process outsourcing validates the importance of this partnership approach. It found that nearly 85 per cent of high-performance businesses consider their outsourcing provider to be a strategic partner. This contrasts with only 41 per cent of typical performers having this mindset. Clients need to be more realistic about sources of value and what role they’re going to have to play to get that value. By consulting with their outsourcer as more of a partner than a supplier, clients can tap into their specialist knowledge for the benefit of their business. This will deliver the value creation, or transformation, that many clients want to see from outsourcing contracts.

It’s important to look at the effect outsourcing will have on the business as a whole; it cannot be seen as a process in isolation as business units are interdependent. Monitoring and measurement are essential to the success of the contract, especially if your company is using more than one supplier.

Trends in outsourcing have seen contracts getting smaller, as well as fragmenting, as companies look for the ‘best in breed’ in each field. Some outsourcers are forming consortia made up of a range of companies - each with different specialities - that allow them to tender for contracts.

Having specialist suppliers provides great flexibility and efficiency for the client, but it does present complications. As the number of parties involved goes up, it dramatically increases the amount of processes and ‘moving parts’ that need to be monitored.

It is crucial for the client to know how each is contributing to the business. But how can they keep tabs and track each process? How to tell where efficiencies could be made? And how to fix a small problem before it becomes a big problem?

Software available now allows minute by minute tracking of outsourcing results. No longer do businesses have to rely on slow, expensive reports that are out of date by the time they are issued. This technology offers a relevant and effective means of tracking all the moving parts of a business to give a greater control over the multi-layered processes. Monitoring software allows several providers to be tracked. Not only does this empower businesses to get better results from using multiple specialist outsourcing providers, it offers an efficient way to manage risk.

Software that provides a central dashboard to monitor all the elements offers clients a way to manage risk when moving their business from a single big supplier to multiple specialist providers.

A final important consideration for clients is to be very clear about what you are hoping to achieve. Often clients can assume that their outsourcer has understood something that they haven’t clearly outlined, and assumptions are never safe. Clearly defined objectives at the beginning set the contract up for success. If something is not working out as planned, articulate this to your supplier and work together to find a solution. Don’t wait until something has gone really wrong to address it.

In summary, clients should see outsourcers as an extension of the business. It is not enough to assign a contract and then expect the outsourcer to run with it independently. Put in place a tool that can drive and measure the value obtained from an outsourcing contract. The more the relationship is seen as a partnership and the more open the communication, the more successful and valuable results will be for you and your company

Can you define your business and your specialities?

Moneypenny is the UK’s leading telephone answering and outsourced switchboard provider. With over 250 staff, we look after in excess of eight million calls a year for businesses of all shapes and sizes - from sole traders right up to multinational corporations. Our award-winning service incorporates dedicated legal and property teams and is endorsed by the Law Society and Home Sale Network respectively.

How do you differentiate yourself from your competitors?

Moneypenny was born out of frustration with traditional telephone answering services. Businesses don't want to deal with nameless, faceless objects. They want to deal with real people, with real characters and a real understanding of their needs. Moneypenny Receptionists are employed for their can-do attitude and professional approach. Each trained on the importance of customer care and the quality of service, they are as much a part of our clients’ teams as they are ours. Moneypenny is not a call centre. Far from it. One visit to our UK-based office will demonstrate that. No timed breaks. No listening into phone calls. No battery farm desks. No scripts. Clients that joined us in 2000 are still with us today and our staff turnover is negligible. Moneypenny is much more than a telephone answering service, more than a place to work and so much more than a supplier. We're a family business with family values.

In your opinion - what are the top 3 outsourcing hot topics / trends at the moment?

1.

Client experience

A telephone switchboard has to be one of the clearest demonstrations of ‘client experience’ within a business. Having to wait for an available operator, or hearing out of office announcements, creates instant frustration even before the customer has had chance to state the reason for their call. Companies who fail to address their telephone answering issues are putting themselves at a clear disadvantage, jeopardising existing client relationships and also that crucial first impression to prospects.

2.

Saving Money

Now more than ever, businesses are looking for ways to reduce costs and make savings to the bottom line. Telephone support allows businesses to reduce switchboard operating costs in a number of ways. They no longer have the variable cost associated with costly temps and reception head count can remain constant and at an optimum level for the business. Despite the lower costs, high service levels will be maintained and new opportunities captured at all times.

3.

Outsourcing partnership

Historically, the process of outsourcing was largely mechanical in its approach. Lack of synergy between a business and its outsourcing partner led to repeated contract failings. It’s crucial that businesses realise the importance of trust and the need to actively manage the relationship on a long-term basis. An outsourcing contender must understand you and your business; offer ways to measure the success of your partnership; and finally, demonstrate that you are as important to them as they are to you.

Can you give some examples of best practice at Moneypenny?

Moneypenny understands that businesses need to know and trust the supplier they’re choosing to work with. For this reason, we will always hold a new client’s hand every step the way. From introducing them to the person who will be responsible for delivering our product, to talking to the company’s line provider and telecoms engineers about diverting calls – we’re in it for the long-haul. The exceptional calibre of our team and the technology we offer has been recognised by a Queen’s Award for Enterprise and being nominated by the Sunday Times as one of the Best 100 Places to Work.

What does the future hold for Moneypenny?

As part of Moneypenny’s Law Society-endorsed telephone answering provision for the legal sector, we will be offering a dedicated Business Continuity and Disaster Recovery product for law firms from July 2012. Due to repeated requests from clients, we are also looking to offer 24-hour telephone answering provision from September 2012. The future for Moneypenny and our clients looks bright.

42 per cent of participants in the 2012 Survey of IT Professionals – Outsourcing claimed that their IT outsourcing agreements have cost them more or significantly more than originally planned. Moreover, 64 per cent suspected that outsourcers have made up more work to earn extra money from their organisation.

These shocking results are a strong wake-up call for the industry: service providers who are taking advantage of their position of trust are ruining the market for all IT outsourcers. Sadly, it is often the larger service providers that rely on their big name to get business which are overcharging for their services, rather than concentrating on delivering an excellent service and making their customers happy.

These outsourcers usually offer set packages where all additions have an extra cost. For instance, they will support only a certain number of calls for their fixed monthly fee; if these calls increase (often due to factors outside of client control, such as system failures or sudden increase in business) then they will be billed for all the extra volume. If the client’s structure and strategy changes and they need to adapt the IT service to cater for their new needs, even when it is a small change, this will also come at a cost. It is easy, then, to run up a bill of way more than expected.

Not all providers are sharks, though: many offer transparent and flexible solutions, where they do not charge for every little change or add-on increasing their monthly fee by far more than the initially agreed price. These are normally smaller, niche providers that have calved themselves a position within the market based on the delivery of effective and efficient Services which are fit for purpose, scalable and enable their customers Service to flex without substantial investment. These suppliers compete through their consistent quality of delivery and customer feedback. They are trusted partners and therefore they behave in a trustworthy way – simple as that.

Apart from the cost of an IT outsourcing service, there is little doubt with regards to the value of this practice. The survey, in fact, revealed that 67 per cent of respondents trust the quality of the work performed by their IT outsourcers to be about the same or more than work carried out by in-house staff.

Over the course of this blog series we have looked at how EDI and digital signatures have fared against one another within commonly contested categories, including tax compliance and other regulation within Europe. The European Commission is making strides towards promoting e-Invoicing adoption and in the advent of this changing environment it is important to know which platform is best for your company.

In this final blog, we will look at how EDI and digital signatures compare when it comes to building communities between trading partners. A community of integrated trading partners is an important aspect of e-Invoicing so that all companies can connect and collaborate with each other.

If we start with digital signatures, it is hard to define the format’s ability to create a trading partner community. This is essentially because digital signatures are used for evidential purposes only. Pure-play e-Invoicing providers that leverage digital signatures often rely heavily on web portals as a means of connecting trading partners, and it is these portals which can build a sense of community as multiple buyers and suppliers are empowered to connect and communicate with one another.

Web portals tend to not be popular with suppliers. As web portals do not offer integrated solutions, from one ERP to another, the ability to send/receive invoices is limited. This creates extra workload for the supplier’s AR team having to re-key data. For companies issuing significant volumes of invoices this is not a practical solution and perhaps only suits micro-suppliers. As larger companies use e-Invoicing more and more, suppliers are forced to use multiple portals to work with their different large buyers. This splits the workload across different entry systems and increases maintenance and complexity, so it is understandable to see why this would be inconvenient.

Contrast this with EDI and it is evident that community is inherent to end-to-end EDI processes. EDI requires trading partners to set up networks between one another to facilitate secure document exchange. However, despite its integration pedigree, EDI can be slower in building these connections between trading partners due to the more technical nature of the network. EDI’s biggest strength – reliability and security in VANs – can also be a weakness when trying to connect diverse communities very quickly.

e-Invoicing providers have made extensive use of internet technology and portals to facilitate flows between smaller companies and their larger buyers, particularly in the goods not for resale (indirect materials) space. In response, B2B integration (EDI) companies have also developed similar innovative and cost-effective internet-based community solutions, and combined with SME enablement tools are pushing B2B integration into the cloud to connect both direct and indirect material supplier communities. In the indirect materials market, where no specific business model has achieved critical mass, the door is still wide open.

When building communities, neither digital signatures or EDI has a significant advantage over the other. So when deciding what solution is best for you company the truth is that either solution, or both in parallel, can work for your different business needs. Be sure that the service provider you work with has a comprehensive trading partner enrolment program, to connect your trading partners with the integration solution that suits them and in the shortest possible time.

At GXS we have years of experience working with companies around the world and recognise this diversity by offering both EDI and digital signature solutions. I hope that the insight provided over this series has helped to inform and educate those wanting to learn more.

As more companies begin to dip their toe into the water that is the use of cloud - or those who were early adopters begin to ramp up the scale and breadth of their use of cloud services - one thing is becoming apparent. If a cloud service is one based, according to common definition on “internet-based computing, whereby shared resources, software, and information are provided on demand”, then ultimately that disaggregation of supply from the method of delivery should mean that infinite resources are available to a user.

The reality, of course, is that when organisations adopt cloud computing, they typically do so by subscribing to a service from a cloud provider. In doing so, they are anchoring the services they consume to the capability of that provider – their systems, assets, locations, and delivery methods. Which of course provides its own boundaries and limitations.

Taking that to one side for a moment, another current trend and increasingly common term is that of crowd sourcing – the concept of taking a requirement and outsourcing it to a community who can all contribute to the delivery of that task. This is being used for a variety of activities, including things like software development – and is arguably the foundation of the approach to the ongoing iteration of open-source software code.

So, what if we could combine these two concepts? Imagine being able to crowd source cloud services....to effectively take our computing requirements and rather than tether them to a single provider, distribute them across a broad community of cloud service providers. This would not only spread the load, and decrease any limitations in the supplier, but would also create a dynamic, competitive market where more of the volume could migrate to the supplier with the lowest price and best value service.

Such approaches are increasingly possible. By relying on automated systems to provide cloud governance which can aggregate supply of services, validate pricing, dynamically provision environments across multiple providers, distribute workloads appropriately, and monitor the quality of the services being provided. Indeed, if we are going to truly exploit cloud services, surely the only way to truly complete disaggregation of requirements from the assets delivering against those requirements, is to do exactly that – to crowd source the cloud.

The Government has released details and guidance on end-user devices which it believes can 'deliver best value and technological approaches suitable to government needs along with, scalability for government.'

The strategy states that The End User Device (EUD) Programme – Conceptual Framework is a deliverable of the EUD Programme and presents a multi-tier reference architecture and Solution Framework for End User Devices. The framework is introduced and the four levels of the framework are described:

Level 1: Overview - is the top level of the framework into which components at lower framework levels fit, presenting a device-centric and centralised infrastructure view of EUD.

Level 2: Conceptual - provides an additional level of detail describing the specific components that describe the scope of the EUD. This is the reference architecture for EUD, with each component defined, and an associated RACI matrix illustrating the team responsible for the component definition and solution guidelines from the overall ICT programme.

Level 3: Solution Guidelines - provides EUD Solution Guidelines for suppliers and government departments to refer to at all phases of a transformation programme. Good practice guidelines and examples of EUD strategy compliant products and solutions are provided along with reference to industry analyst views of the products maturity, strengths and weaknesses.

Level 4: Specific Implementation Guidelines – Level 4 details how the framework may be used to describe a specific technology implementation detailing the technology used and choices made for each component.

US software giant Oracle has allocated an extra $10bn (£6.4bn) to buy back shares, as fourth quarter results came in ahead of expectations.

Net income for the three months to the end of May was $3.45bn, up 8% on the $3.2bn the company made a year earlier. Total revenues were $10.9bn.

HP Lands Multiyear Agreement to Enable P&G's "Always On" Operating Environment

HP Enterprise Services has announced that Procter & Gamble (P&G) has signed a multiyear agreement for HP (HPQ) to help provide an "Always On" operating environment that enables the consumer-goods leader to keep products moving on time, from production all the way to shoppers' carts in the retail store.

Under the terms of the agreement, HP will be accountable for the comprehensive systems reliability of critical P&G processes, such as manufacturing, procure-to-pay, order-to-cash, physical distribution and financial close.

Prime Minister David Cameron is leading a high level delegation of over 25 companies this week to Mexico.

Prime Minister David Cameron is leading a high-level business delegation this week to Mexico, which is hosting the G20 and B20 summits in Los Cabos.

He is accompanied by Chancellor George Osborne, Trade & Investment Minister Lord Green and over 25 UK companies, institutions and universities including Diageo, Rolls Royce, Virgin Atlantic and the Confederation of British Industry (CBI). Also travelling are Business Ambassador Tamara Mellon and pottery designer Emma Bridgewater.

Lord Green said: “Almost two hundred years ago, the UK was the number one European exporter to Latin America. British expertise helped to build Mexico’s railways and canals, but UK firms currently account for less than one per cent of Mexico’s imports. We need to turn this performance around in one of the world’s most promising markets.”