Industry news

Huawei has won a contract to oversee managed services for O2’s managed services.

Huawei provide “planning and implementation” of O2′s network over five years. This will include building out new network infrastructure and handling broadcasts between the operator’s network and other UK communication infrastructure.

It will result in 56 staff currently involved in overseeing O2′s network moving as part of a TUPE transfer from O2 to Huawei, as well as a further 62 servicers.

Huawei UK CEO Victor Zhang said: “We are very pleased to announce our first major managed services agreement in the UK Huawei works with Telefónica in a number of markets around the world and today’s agreement means we are extending our relationship to the UK. Today’s announcement is an important first step in building a world-class managed services capability in the UK. The agreement is a long-term strategic commitment from both Huawei and Telefónica UK to deliver the best in class management of a core network.”

Unified business communications provider Daisy Group have opened the 12 tonne bomb proof door to its Manchester data centre.

The company has recently completed a £1m investment programme in the subterranean facility, situated within a former Bank of England bullion vault.

This investment has been used to improve Daisy’s infrastructure, increase network capacity and launch its CloudSelect, computing-on-demand offering.

Will Kennedy, Corporate Sales Director at Daisy, said: “We’ve been hosting data for more than 13 years and have seen the market and the demand for secure storage increase dramatically in that time. The new facilities and space that we have created in our Manchester data centre mean that we’re able to open up our world-class hosting solutions to any kind of business, large or small, that require secure and instant access to their data and applications.”

In addition to being 25 feet below ground, the data centre’s raft of security features also includes two metre thick granite walls and a 60 centimetre bomb blast corridor surrounding the data storage area. It is continuously monitored by 70 CCTV cameras and access is granted only to authorised personnel.

IT budgets have risen as small and medium businesses spend increased finances growing their IT infrastructure, according to a data from Spiceworks State of SMB IT survey.

SMBs with less than 1,000 employees have increased by 15 percent year-on-year with last year seeing a six percent rise from the second half of 2011 to the first half of 2012.

This growth equals an average current annual budget of £94,000, a rise of 5,500 from the second half of last year as SMB increase spending on new technologies including tablets and smart phone applications, as well standard technologies and IT services.

A public misconception of what outsourcing is has led to a view by the majority of the UK public that outsourcing does not help the Bristish economy, according to a survey commissioned by the National Outsourcing Association (NOA).

The survey’s findings showed that public opinion diverged wildly from evidence from a survey carried out by the Business Services Association (BSA) in 2011 which showed that outsourcing contributed eight percent of the UK’s GDP, standing at £14 billion in business taxes and £21 billion in income tax.

NOA chairman, Martyn Hart, said “The research shows that although the public is adamant that they don’t like outsourcing, for the most part, they do not properly understand what it is.”

Logica have reported a plummet of 80 percent in first quarter results in UK outsourcing compared to last year. Logica’s overall sales remained stationary for the first three months of the financial year at £974 million as global orders fell by 24 percent. The quarterly results could foreshadow a large reduction in annual sales next year.

Logica commented that low UK orders had resulted from two huge deals with the Serious Organised Crime Agency (SOCA) and Shell, and that excluding these deals Logica’s performance had only fell by 5 percent in 2011.

Anthony Miller, co-founder of analyst firm TechMarketView, said: “I see this as an even tougher marketplace for the outsourcing industry than last year. Perhaps even more so from Logica, as to win smaller deals it has to be more price competitive.”

Serco wins over 3 billion in contracts in the first half of 2012

Serco is set to meet their 2012 targets having won nearly 4 billion in contracts in the first half of the year.

The company is expecting to reach growth of 6 percent in revenue for the first half of the year after strong acquisitions at the end of last year and further growth in 2012.

Large UK contracts with the Royal Air Force, Navy and NHS providing training services and back office services.

In a statement from Serco Chief Executive Christopher Hyman, he said: "The start of the year has been pleasing. For the year as a whole we anticipate that further strong growth in Africa, the Middle East, Asia and Australisia (AMEAA), the improving UK outlook, and the delivery of cost efficiencies will see us meet expectations."

A survey sponsored by Finacle, the banking system division of Infosys, and carried out by Ovum questioned 65 senior executives at banks in Europe and found that 3/4 of banks in Europe are using out-dated core systems which are holding the banks back and restricting growth.

The research also found that 79% of the banks questioned blamed the complexity of IT and a shortage of the right in-house skills for complicating the replacement of legacy core banking systems.

Daniel Mayo, practice leader financial services technology at Ovum said: “There is a clear disconnect between market needs and market capabilities when it comes to core banking systems. Many banks are trying to restore revenue and drive growth through better servicing and cross-selling to their existing customer base.”

Cognizant has topped the customer satisfaction and recommendation rankings in the four-country region (Finland, Norway, Denmark, Sweden) in KPMG's Outsourcing 2012 study of service provider performance in the Nordic region.

While Cognizant topped the general satisfaction ranking with a score of 80 percent (industry average satisfaction rate of 68%) and client recommendation ranking with a like score of 80 percent (industry average client recommendation rate of 67%), notably, all Cognizant clients among those surveyed were satisfied with its services. Further, the company secured high scores on all major performance indicators, including customer satisfaction, recommendation, relationship management, innovation, service quality, price, flexibility, transition, and governance.

This independent study evaluated 28 global and local service providers based on an assessment of more than 900 unique client-provider relationships. As part of the study, CFOs, CIOs or their direct reports at over 340 of the top IT spending organisations in the region were interviewed.

"We are proud to have topped KPMG's overall customer satisfaction rankings across the Nordics region in a very short period of time since we began our operations here," said Jayajyoti Sengupta, Cognizant's Country Manager for the Nordics. "This recognition validates the significant investments we have made in bringing our industry-leading, client-focused processes to the Nordics. Our high-touch relationship model, deep domain expertise and consulting skills, unique reinvestment philosophy, and our ability to build strong multicultural teams around the globe have helped our customers navigate structural changes in the economy and their industries, enabling them to stay efficient, effective, and innovative. As a result, we have become one of the fastest growing companies in the region, while maintaining the highest client satisfaction and recommendation levels in our industry."

"Cognizant received excellent feedback from their clients and high scores for all key performance indicators," said Carl-Henrik Hallstrom, Head of Business Effectiveness and People and Change at KPMG. "Cognizant also had not one dissatisfied client, which makes the company the top performer among the top 28 global, regional, and local IT outsourcing service providers that we evaluated."

Research commissioned by the National Outsourcing Association (NOA) has revealed that 80 percent of the UK general public do not believe that outsourcing contributes to the economy.

This perception has stemmed from the connotations of outsourcing with cost cutting (67 percent), job losses (53 percent) and offshoring to India (45 percent). Commonly cited examples of outsourcing by the public included a major bank opening a call centre in India and a sports brand setting up a factory in China to manufacture trainers, despite the fact neither involve outsourcing, instead being examples of captive offshoring projects.

The research showed that nearly one in four people do not like outsources. While the profession is not disliked to the same extent as politicians at 67 percent or bankers at 47 percent, only 19 percent of the public believe that outsourcing can help the UK out of recession.

The research demonstrated that the public did not understand the role of outsourcing and that only 14 percent understood that the use of an accountancy firm was an example of outsourcing. Only 27% recognised a local computer company providing IT support to small businesses represented another example of outsourcing. The research shows that the UK public dislike outsourcing and do not perceive value in it, despite the majority failing to understand what outsourcing actually involves and its use throughout the high-street.

Martyn Hart, Chairman, National Outsourcing Association said: “The National Outsourcing Association’s Outsourcing Works campaign aims to tackle misconceptions and highlight the sterling contribution outsourcing makes to UK PLC. The NOA is confident that we can prove to the public the value that outsourcing brings to businesses, and the nation as a whole. Outsourcing is not just about offshoring and job losses, although the public currently thinks that it is. Most of the IT industry is outsourcing, in one way or another. This is not being recognised currently. The Public Perception of Outsourcing research shows that although the public is adamant that they don’t like outsourcing, for the most part, they do not properly understand what it is. The NOA knows that Outsourcing Works. The next wave of NOA research will prove empirically that Outsourcing Works, and then we’ll shout it from the rooftops.”

All of the key findings from this research are published this week in Outsourcing Yearbook 2012. It is available from sourcingfocus.com and noa.co.uk

In mid-April the TPI Global Quarterly Index for Q1 2012, which provides a snapshot of the sourcing industry, showed that the value of overseas outsourcing contracts fell compared to both this time last year and compared to the previous quarter. Looking at different disciplines, IT outsourcing contact values showed a decline of 30% on the same period of the previous year. Other research, for example from the Hackett Group, as well as narrative evidence backs up the TPI findings.

It seems that the offshoring boom of the past three years is over and we are facing a new outsourcing reality. Recession and related fears created that spike in demand. Now, I believe, ongoing economic uncertainty and a return to recession in the UK, coupled with some of the consequences of offshoring are leading to a new turn in the market.

A considerable proportion of the off-shoring of recent years was to cut costs. With many functions like IT services and development already stripped out, in many companies there is little left to offshore. Budgets remain tight, hence there is nothing new to outsource. At the same time, for some companies, the honeymoon period with their off-shore partner might be over and 1 or 2 year contracts may not be renewed.

As outsourcing costs have continued to rise in countries that experienced little or no recession, costs in the UK have fallen helping to make on-shoring much more competitive. The National Outsourcing Association echoes this view. In a recent article its chairman, Martyn Hart, explains the issue very succinctly: “nowadays, with rising inflation in popular offshore destinations like India and China, the cost of doing business abroad has skyrocketed. Not only that: the costs of supplier management are escalating too.”

Organisations’ understanding and use of outsourcing is maturing and price is no longer the biggest driver. Changing requirements are pushing organisations towards different sourcing models. For example in the field of software development, companies are increasingly outsourcing to take advantage of skills they do not have, and to learn new skills. This means they are looking for outsource partners that are also expert consultants. Unfortunately, many traditional software development companies are unable to offer this. In addition, there is a growing trend in software development towards much closer integration of teams, between the IT specialist and the business which seems to point away from long-distance outsourcing.

Further, the UK economy is not recovering as rapidly as many expected. This is resulting in both social and political pressure to keep jobs on-shore: off-shoring is an easy target for finger-pointing. Additionally, public perception of offshoring hasn’t changed much, despite improvements in service. Companies are not immune to these pressures and those that choose to do their development/ manufacturing/ customer service etc., onshore are able to turn this into a notable selling-point.

So how can companies use these changes in the outsourcing market to their advantage? The obvious place to start is a re-visit to your sourcing strategy. Is it delivering the objectives you want it to? Have your objectives or drivers changed? It is also worth reviewing the off-shore/ near-shore/on-shore options available to ensure you are still making the best decision.

If, as I believe, on-shore is in the ascendancy then is certainly is worth exploiting its strengths. While some functions like business process outsourcing are less time and distance-reliant, others like agile or scrum-based software development are proven to work much better when done on location.

As previously noted, closer integration of teams on both sides of sourcing is gaining in popularity. With shifting costs and evolving priorities, if you reconsider whether the work that you outsource, as well as the employees in charge of it, would benefit from being done geographically closer to your company, your organisation may find that the cost-benefit balance has shifted slightly.

The UK is particularly good at highly-skilled activities like specific software development or electronics. What’s more, its professionals hold a lot of specific industry knowledge which is unobtainable anywhere else. You are also able to find mid-tier companies that provide a mix of consultancy and ‘doing’ at a very reasonable price.

Additionally the UK remains a paragon of upholding intellectual property law and is still a top 10 destination in the Brown-Wilson rankings of secure outsourcing destinations. For high-skill areas of outsourcing, this respect for IP is important, as many organisations that have had to fight intellectual property cases in courts abroad will tell you.

For a whole range of reasons the overseas outsourcing industry is changing and, I believe, becoming less attractive. For many companies this should signal a re-assessment of their sourcing strategy. The question is can businesses turn the changes to their advantage, and what does that mean for UK onshore outsourcers.