Industry news

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.

Hacking and the issues that surround it are rarely out of the news at the moment – it’s a very current and pressing problem. Cyber crime has never been more of a threat, with websites and organisations great and small all at risk.

Having a high standard of information security is something that all businesses should strive to achieve, and for some companies, there are specific standards that must be hit.

The Payment Card Industry Data Security Standard (PCI DSS) was created by the five main card brands, and is a set of technical and operational requirements that protect cardholder data. All companies that store, process or transmit payments from these card brands must comply with these strict standards. They essentially ensure that cardholder data is processed securely, and that a system is in place to respond and react to any perceived threat.

PCI DSS also requires companies to regularly monitor and test their security systems and processes. These businesses therefore must find a cost-effective, yet comprehensive method of carrying out investigative security scans of their own systems.

Although adhering to PCI DSS is not a legal requirement, it’s in the best interests of organisations to make sure all confidential data is secure anyway – breaches of personal customer information can have devastating short-term consequences, and long-lasting effects.

There are two main options with regards to security scanning – buy in a technology solution and conduct scanning in-house, or employ an external firm to carry out the work for you.

Scanning and monitoring in-house gives companies complete control of the process. There are obvious benefits to this that come with a hands-on approach, but it also means having to invest staff and internal resources that could be better served contributing to core activities – security scanning is a time consuming, expensive and repetitive task.

Outsourcing the scanning process to specialist organisations can be a more economical solution, while making sure the process is as exhaustive and as thorough as possible. It can also avoid the bias, unintentional or not, of the staff who maintain systems effectively marking their own work.

Some security scanning firms can provide a managed service, handling all aspects of the scanning procedure. Scans can take place as often as is requested, depending on a companies specific requirements; from in-depth monthly scans to daily security checks.

An effective managed service offering would also regularly reassess the scope of the project, and react to changes, pinpointing vulnerabilities and suggesting improvements.

But most importantly, it’s a cost-effective solution for businesses that have to meet these stringent standards. Having a dedicated, efficient security team carry out the process will almost certainly reduce outlay.

Managed security services can also leverage additional benefits – rather like fitting a new door to keep out in intruders can also reduce a draft. Carrying out comprehensive reviews of business security will most likely highlight other flaws that can be corrected, and weaknesses that can be strengthened before they become a serious threat.

The introduction of PCI DSS was a step in the right direction for improved information security – but it’s up to businesses to use those standards as a platform from which to tighten their perimeters and ensure the safety of customer details.

Outsourcing Software Licence Compliance

It is generally accepted that the global financial crisis is affecting the revenues of all commercial companies, including all the largest software authors. Consequently, industry analysts predict a significant increase in vendor driven audits during 2012. Customer feedback and the rise in vendor required compliance consultancy seen over the last six months certainly seems to confirm these predictions.

So what are the risks of non-compliance and how do customers find themselves in a position where they are being reported as under licenced?

For most organisations, the financial risk from non-compliance will be secondary to the adverse publicity and damage to their hard earned reputation. However, the financial risks should not be under-estimated as fines can average around £1000 (*1) for each unlicensed software installation, and considering the increasing activity of the software authors and their enforcement agencies, there is bound to be adverse publicity. Considering the increasing complexity of software licensing schemes and the associated links to hardware type or user type options, it is understandable for organisations to get it wrong; but caveat emptor applies as the software authors seek to protect their investment and retain revenues. For these reasons alone, perhaps all organisations should consider prioritising the management of true software compliance in 2012?

(*1 Figure based on software costs plus a compensation element)

What else, besides avoiding fines, can an organisation expect to gain by initiating a true compliance commitment? It’s important to understand that it isn’t just a simple matter of ordering enough licences to cover your entire enterprise. Current installs need to be determined, followed by optimisation and re-allocation, as there is always the possibility of over-licensing. Knowledge is paramount in determining exactly what needs to be purchased, upgraded, transferred, removed or simply recorded throughout the life of any compliance commitment. Software Asset Management (SAM) service providers help clients optimise their software licence position and implement more effective management processes, reducing costs and increasing ROI.

Experience alone will not guarantee achievement of an acceptable compliance position as success also requires access to dedicated SAM tools. Partnering with an experienced SAM service provider to outsource the software licence compliance element of the SAM process can be very cost effective, with some service providers being able to leverage global resources (experienced consultants, private cloud technology, universal software libraries and mature software licence compliance / management tools) Each service element should offer stand-alone benefits or dove-tail into the next to allow maximum flexibility. Finally, costs should be directly related to device and data volumes to ensure predictable budgetary controls. As an example, SAM specialists BCS, provide a fully managed compliance service which charges an average of £5 per device per annum. After initial consultations, the service continues to identify and track all installed software, including internally written applications if required, an option which can prove extremely useful where service cross-charging applies.

There are numerous other advantages to working with an experienced partner including:

Use of existing tools and data – Investing in SAM tools alone generally fails to meet expectations: the implementation is poor due to lack of qualified resource, resulting in supportive SAM processes not being implemented; leading to frustrations and a failure to deliver expected results. However, specialist managed service providers have the experience, knowledge and resource to leverage those existing tools and provide the perceived value and ROI that the user originally expected.

Reduction in internal resource requirements – Often in-experienced internal staff are seconded to SAM projects, and they end up consumed by the complexity and legal terminology within software contracts, whilst attempting to establish and document the various licensing rules. Upgrades, downgrades and cross grades come to mind! The reality of SAM and software licence compliance is that there are many disciplines that are required to participate in a successful implementation; procurement, infrastructure, legal, HR, helpdesk, internal audit and most of all, senior management. Outsourcing software compliance reporting ensures that internal resources are free to concentrate on their core duties.

Joining up and implementing effective SAM Processes – The most important factor in the success of any software compliance project is to ensure that the correct processes are identified, implemented and ‘joined up’. When an external specialist provider implements a compliance service they will know exactly what is required to complete their actions, often removing previously undetected disconnects not apparent to the untrained eye, by initiating a single coherent rolling process or re-connect.

Conclusion

The outsourcing of a high profile deliverable such as software compliance could be seen as high risk, however, given the fact that most organisations have a very low level of SAM / licence compliance maturity, the risks associated with not engaging an experienced managed service provider to actually deliver what most organisations cannot do internally, could be much greater; remember the prediction from industry analysts for 2012?

Cloud based services have become ever increasingly popular, cloud services are now being employed by a global user-base from companies to individuals. The cloud market has grown rapidly and was worth $3.7 billion in 2011, web-based services are expected to be worth $10.l5 billion by 2014.

The cloud market has been attractive to companies who have expended revenue on large computing infrastructure to run a diverse set of applications to deliver and manage services. However web-based services are not without risks and their use has disadvantages as well. The NOA Cloud Special Interest Group discussed the merits of moving to cloud based infrastructure and in discussing the importance of weighing up the situation before the transition.

This roundtable discussed the situation on both sides of the fence, bringing together suppliers, support, agencies and end users to analyse the risks and challenges businesses will face when moving to the cloud.

Josh Cornejo is director of Sales Engineering EMEA for Verizon Business, said: “Verizon have acquired various organisations over the past few years to boarder their reach of the market. We provide an integrated global situation with all cloud models.

He acknowledged that security issues are intrinsically associated to the concept of the cloud. The definition of cloud is quite varied however it is extremely important to know where, what and how to choose a journey to the cloud.

John said that ““Not everyone will have the same processes, IT etc but the outline of the journey will remain the same for all organisations”.

The implementation of cloud computing should be carefully planned, taking into account individual business requirements and should follow the model laid out below:

Foundation

• Create the foundation for technical IT Governance

• Corporate and Technical Compliance

• Reduce the risk and impact of change

• Need to asses infrastructure as part of a compliance program (PCI/SOX)

Intelligence

• Make IT decisions based on facts, not assumptions

• Auto-populate the CMDB, avoiding costly manual audits

• Confirm your capability to scale effectively and reduce time to market

• You recently experienced a merger / acquisition and need to understand what you now have

Optimisation

• Architect next-generation business enabling solutions

• Enable rapid incident diagnosis and resolution

• Identify redundant equipment and software licenses

• Discover potential tactical fixes in IT

Support

• Clear the IT “forest” and create a path for decision makers

• Enable Operations by giving them a clearer view of their IT

• Improvements are necessary in the IT environment, but not sure where to start

Josh Cornejo, discussed how Amazon dominate 60% of cloud service with a product that provides lean, simple and clear contracts which are relevant for 1 person or 1000 people. Amazon’s market domination provides them with the advantages in training the people who are responsible for the next wave of software services.

Andy Rodgers of the NOA, said : “It is extremely important for a company to understand what is core to their business and what they feel can be placed in the cloud and also what can be outsourced. Security can never be guaranteed but it’s increasingly sophistication has encourage many organisations to adopt strategies which at one stage it would deem ‘too risky.”

The roundtable then discussed the development of the cloud and how cloud costs stemmed from applications and licensing, which represented 60% of costs, storage also represents a large percentage of overall costs.

The conference moved to future implications of cloud services, Andy Rogers pointed out that issues may arise from the transitional phase in the future when users want to migrate between cloud providers. Consumers are now savvy and lapses in security, connection and issues with the cloud are no longer tolerated. Security is still a big issue with cloud and trust over the services having been a limited factor in the service.

Rob Sumeroy from Slaughter and May detailed how old contracts are still being used for what is actually a new procurement model. Customers also feel that cloud process should be a lot simpler than it actually is in a lot of situations.

There needs to be a focus on cloud contracts, legal tender and the advisory process. Sometimes the cloud model does not meet the business risk and such cases demonstrate the need of analysis that should always be done before the contract

A Canadian advocacy group has said that open source software could save government hundreds of millions of pounds. Getting Open Source Logic Into Government (GOSLING) say proprietary software is wasteful and disadvantageous to governmental transparency.

They say that the Canadian government is spending $1.5 billion (£930 million) buying software when it should only cost a third of that. According to GOSLING, the disjointed and unnecessary development in governmental departments causes the waste.

Co-founder of GOSLING Russell McOrmond believes the issue is not one of adopting open source platforms, but using a shared services platform between different governmental departments. He also believes that procurement processes can favour large suppliers.

McOrmond stated: "Say the government of Canada decided, 'let's do an open-bidding process on support contracts for LibreOffice or OpenOffice. How do you do an open bidding process for licences for Microsoft Office? There's only one copyright holder. So you can't do three bids from three competing companies offering that code. But you can do three competing companies offering full source to support contracts to training, on free software equivalents."

Shop Direct has awarded a new BPO contract to Serco. The ten-year contract will start on 1 July 2012 and has a total estimated value to Serco of approximately £430m.

Under the contract, Serco will assume responsibility for managing customer contact across Shop Direct's brands. The partnership will work together to enhance service levels and efficiency through the investment in the latest technology, such as web chat and mobile digital services, which are designed to seamlessly integrate online and mobile into customer contact management.

Mark Newton-Jones, Group Chief Executive of Shop Direct, said: "The ways in which customers are shopping with us, contacting us and servicing their accounts have changed rapidly, driven by revolutionary advances in digital and interactive technology. We have chosen to work with Serco as they are an acknowledged leader in this field. Serco's expertise, coupled with their investment in technological innovation, will ensure that we have a customer contact programme that is flexible and adaptable for the increasingly online and mobile world that we live in."