Industry news

European and US businesses are expected to outsource around 750,000 jobs to overseas destinations over the next four years. However offshoring could see a sharp reduction during this decade according to research from The Hackett Group.

The research suggests that while jobs in IT, finance, human resources and procurement will be outsourced in large numbers to locations such as India, this level is expected to level off or decline by after 2014.

Michel Janssen, chief research officer at The Hackett Group, said that he expected that the economic advantages offered by offshoring would begin to dry up, “a decade from now the landscape will have fundamentally changed, and the flow of business services jobs to India and other low-cost countries will have ceased."

US financial services company Cowen International is to construct a technology centre in Belfast, which will create up to 50 high paying jobs.

Financial services and ICT sectors have been identified by development agencies as being important drivers for economic growth.

Arlene Foster, Northern Ireland's enterprise minister, said: “Subject to satisfactory growth and development, the project could create up to 50 jobs, which will pay salaries more than double the private sector average and will contribute more than £2m a year to the economy”.

Government agencies are faced with tight IT budgets over the next 12 months as the US federal budget faces reductions.

February saw the creation of a federal IT budget for 2013 that reduced spending by 0.7 percent, with priorities focused on cyber security and increased progress on interaction between agencies and businesses.

Bill Loomis, managing director of IT focused investment banking firm Stifel Nicolaus, said that despite short term reductions, he expected increased IT spending by the government in the coming years, as IT analytics and mobile device capabilities were expanded upon.

The Department of Transport have announced 13 firms that are in the bidding process as the next operators of Great Western, Thameslink and Essex Thameside rail franchises.

FirstGroup has been announced as a bidder for all three rail franchises, Stagecoach and National Express for two and Go-Ahead as a bidder for one. New operators are required to provide improved services and greater accessibility in tickets purchasing.

Theresa Villiers, Rail Minister, said: "The Government is engaged in the biggest programme of refranchising since the privatisation of the railways."

A new deal has been finalised between the Cabinet Office and Oracle which is expected to save the government a minimum £75 million by 2015.

The government currently spends over £200 million on software licensing deals with Oracle. The new agreement will see departments purchasing through the Government Procurement Service, who will then purchase software directly from Oracle.

Francis Maude, Cabinet Office minister, said: "The days of the government paying different prices for the same goods or services are over. We will no longer sign inflexible contracts that tie the taxpayer into unfavourable terms.

A new purchasing framework has been launched by the Government Procurement Service and the Department for Education which will allow schools and colleges to purchase their own ICT.

The framework is expected to be worth up to £575 million and is designed to meet ICT educational needs and provide flexibility and value for money.

Marie-Helene Durif, Head of ICT Sourcing & Category Management at GPS, said: "The Information Management and Learning Services framework is an important offering to our education customers which will deliver significant savings”.

Today’s challenging economic environment has led organisations to look at ways they can streamline processes, improve efficiencies and reduce overheads. With Business Process Outsourcing contract counts at an all-time high and multi-process and industry-specific functions leading the way, outsourcing is fast proving itself as a compelling option for firms looking to unlock new levels of operational efficiency. For payroll specifically the raft of changes to the UK PAYE regime has led many small and mid market businesses to outsource their payroll function, in a bid to free them up to focus on their core competencies, which differentiates their business and will ultimately drive profitability.

Outsourcing minimises the administration burden within a personnel team by removing time-intensive processes and enabling employees to focus their resources on those business activities that will directly impact the firm’s bottom line. Having a dedicated outsource provider can also increase the skills set of an organisation by giving them access to experts that not only have an intimate understanding of the process, but who can also help the business navigate any legislative changes to the payroll system. With tens of legislative changes to UK payroll system every year, and with automatic enrolment into pension schemes on the horizon, it’s more important than ever that SME’s have the peace of mind that their payroll function is in a safe pair of hands and that they are fully compliant with HMRC legislation.

Yet businesses that use payroll outsourcing to simply produce payslips each month are missing out on significant benefits. Decision makers need to identify business needs and what level of support they require to get the best possible return on investment, whether it be through a fully managed outsourced service, part managed or bureau service. It’s this relationship between a service provider and the customer that is paramount to the success of the service, ultimately dictating whether outsourcing payroll is the right option for supporting a firm’s business.

At Sage, we work closely with prospective customers to really understand their payroll needs, whether they be software or an outsourced service. One of our customers, Roundhouse, needed an outsource service to manage their permanent staff, casual workers and volunteers. By taking the time to really understand their business needs and pressure points and through adopting a close partnership approach, we were able to develop a bespoke service that minimised the administrative burden on the Roundhouse personnel team by removing time-intensive processes associated with running payroll. But that solution may not necessarily translate to all of our customers, so it’s critical that we understand their pain points and how a payroll solution can alleviate them.

While the current economic situation will continue to force businesses to focus on driving efficiencies, the importance of developing a relationship built on understanding and trust with your outsource partner cannot be underestimated. It is only by finding a true partner that organisations will be able to realise the 30% cost savings on payroll that are possible compared to running payroll in-house. However, it is this significant level of savings that means payroll outsourcing is a trend that is set to increase.

“He was really saying something,” goes the Motown classic, sung the Velvelettes back in 1964 and covered by Bananarama in 1982.

That chorus refrain is something that runs through my mind nearly every time I try and jack a news story, or craft an opinion piece or a blog.

Coz if you want to cut through the noise and get noticed, that’s exactly what you’ve got to do…be really saying SOMETHING. It doesn’t matter what particularly, just as long as no-one else has said that. If no one else is saying it – that’s thought leadership.

Business-to-business PR relies upon thought leadership. You cannot specifically push the brand, you have to push ‘the man.’ And that means making yourself a thought leader to be revered.

Of course, a lot depends on the characteristics and personalities of the leaders of your business, and the nature of the business you are in. Not everyone can go round effing and jeffing like Ryanair supremo Michael O’Leary! But if you’ve got someone as opinionated as yer man off Ryanair – and you have a highly attractive sales proposition where you can risk being offensive – then why not let rip? Saying something no-one else is, even when it’s confrontational and vulgar, is ‘really saying something.’

This is a strategy that has served Ryanair well – they get bucketloads of free PR, because O’Leary is soundbite central. Pithy, controversial, adversarial. He knows what he’s doing. It’s a very measured approach, employing shock value and comedy to devastating effect.

But for the rest of you, who need to mind your Ps and Qs a bit more, then you need to take another approach. You need to join in the conversation intelligently, expertly, like the urbane business sophisticate that you are. But how do you know what the conversation is? Or where it’s taking place?

You need someone like me, who spends huge swathes of his week analysing the news – looking for gaps in the conversation, keeping ‘em peeled for the stuff that’s not being said, assessing the scope for juxtaposition, reading between the lines for opportunities for you to push your agenda - helping you find your media voice.

For business leaders, just a few lines of well-placed, interesting insights can be the route to getting quoted as a market commentator in a big story, and getting your company name out there, or getting commissioned to do a longer piece…( and I could help with that too).

It’s crucial that you say something no-one else is saying, or else say it better - more succinctly and demonstrating deeper knowledge - than your competitors. But the safest bet is to know the story, weigh in with some fresh insight, and watch the coverage pile up.

Then you’ll be “Really Saying Something.” Bop bop soo be do wa.

Last week’s Budget was more of a damp squid than a firecracker. Intrinsically the Chancellor’s message was more of the same. Perhaps unsurprising when there has been little change in the economic outlook and so no reason to revise the Government’s deficit reduction strategy.

So for public sector organisations and employees there were no surprises. Just more belt tightening, more pay restraint, further cuts to services that are considered to be low priority and increased pressure to improve productivity; in order to make what available monies there are, go further.

For local authorities the situation is particularly acute. The long-term spending projections in the Treasury’s Red Book show that the financial pressures on local services will stretch well into the next parliament, with projections suggesting that total managed expenditure – the best definition of public spending – is set to fall from 45.7 per cent of GDP in 2011-12 to 39 per cent in 2016-17.

But it’s an ill wind that blows no good and while it is undeniable that many Britons will face individual hardships in the coming months and years, the current economic climate also offers a period of great opportunity for the outsourcing sector, as organisations are forced to reassess the status quo in order to maintain services.

Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations summed up the possibilities when he said: “Adversity always drives opportunity. The sector’s big opportunity is to push through better delivery, which is cheaper to the public purse.”

Traditionally the public sector has shied away from outsourcing service delivery – languishing in the wake of its private counterparts. Fears regarding the loss of personal interaction, expertise and the integrity of the service have all been voiced and the arguments are well rehearsed.

These entrenched attitudes are why I see the current recessionary times as an opportunity as well as a challenge for the sector. I hope it will force organisations to reassess they way in which services are delivered and to look with afresh at the benefits that carefully managed outsourced solutions can offer.

In fact some forward thinking public sector bodies are already stepping up their efforts to find creative ways to reduce costs, while maintaining or even improving the quality of core services. One recent example is that of the Prison Service, which has entered into a partnership with the MITIE Group to bid for a series of prison management contracts. While two police forces – Surrey and West Midlands – are looking at how they could outsource a range of services including, some frontline operations.

Within the digital arena the fact that cost savings are available to Government through the adoption of digital technologies is now widely recognised. And making sure services can be accessed online has been a priority for the Government for some time. The Chancellor added further commitment to this approach in his statement, setting out a plan to make all transactional Government services digital by default by 2015. Ease of use is obviously a priority, the Budget document states: “The Government will transform the quality of digital public services by committing that from 2014 new online services will only go live if the responsible minister can demonstrate that they themselves can use the service successfully!”

In my view, this is a hugely positive step. Effective online services can enable public sector organisations to maintain if not grow service levels at a lower cost, giving service users more choice about how to access and receive information. It also allows organisations to target the high cost services at those who really need them.

Tameside Council calculated that there is a powerful ratio at play. It found that the cost of face-to-face interaction is 7-15 times that of a telephone contact centre interaction and 60 times that of an online one. This is a ratio that is borne out across my own social enterprise’s client-base. It also parallels the way that the public typically chooses to engage with support services. For every person who would walk into a public building, there will be another 10-20 who will pick up the phone. A further 100 would rather go online. While some of these might need personal assistance, if the option of the preferred channel doesn’t exist, many will go without the help that they need.

In the Government’s Open Public Services white paper, which was published last year, its commitment to opening up public sector monopolies to competition was clearly stated. This month’s Budget looks set to speed up the demand for competition and diversification.

Ashok Soota began his career in 1965 with the Shriram Group of Industries in India. In 1978, he became CEO of Shriram Refrigeration, a company which was unprofitable for four consecutive years. He went on to become the President of Wipro Infotech from 1984 to 1999. Under his leadership, Wipro’s IT business grew from US$2 million in 1984 to US$500 million run-rate in 1999.

In 1999 Ashok co-founded MindTree which in a span of 11 years became a global entity with revenue run rate of US$350 million, with over 9000 people and offices in multiple cities in the U.S., Europe and Asia. Happiest Minds (a next gen IT solutions & Services Company) was launched in August, 2011 by Ashok Soota and a team of industry experts, with the mission to create Happiest People and Happiest Customers.

Ashok is an industry leader. He was President of Confederation of Indian Industry (CII), India’s largest Industry association and also President of Manufacturers’ Association of Information Technology. He has served on the Prime Minister’s Task Force for IT and on the Advisory Council for the World Intellectual Property Organization, Geneva. He was recognised as ‘IT Man of the Year’ twice and as ‘Electronics Man of the Year’.

Can you give me some examples of how a business can conduct true transformational change through something like business analytics or cloud?(Puneet Jetli, Co-CEO of Happiest Minds Technologies) I think that what has happened is that for a long period of time organisations and enterprises have invested in actually trying to decipher insights from data and they found 2 problems that they have actually ended up as reporting tools, and when you are looking at reports they only tell you about the past. But in economies of today where growth is not a given, you have to be able to predict the future, and if you can predict it as accurately as possible it will give you a competitive advantage. The true way of doing it is to get into the world of analytics. The second thing that organisations have realised is that there is x amount of structured data, there is literally 10 times of that which is unstructured within the organisation as well as outside of it. If you now want to get into meaningful insights and take decisions, you can’t ignore this qualitative data. So that is where we believe the need of the enterprise is likely to be, and that it marries very well with our focus area of social media, getting social analytics marrying it with structured data, making it predictive so that you can then take the right bets and then reach out with the right offers, right products, right services to the consumers when they are likely to need it. In doing so, do it with the medium which is likely to be the most effective – if you can reach out with a discount coupon, based on past purchasing behaviour of a consumer or a set of consumers, to the shopper as he or she is entering the store you are most likely to make the impact, and that can only come if you look at some of these pieces of technology and integrate it in a holistic way. It requires understanding of social insights and understanding of analytics and purchasing behaviour, it requires creating a proposition and delivering on the mobile at real time to the consumer, and that’s what we believe most enterprises would be tempted to adopt in the years ahead.

So, in essence, business analytics can replace the need of invention and that the computer becomes the inventor and predicts a new product people are going to want.

Either a product or an opportunity, absolutely. That is where innovation is going to happen, you’d be surprised how many enterprises are figuring out that they are reinventing their businesses, to enable that you need insight and analytics.

(Ashok Soota) You used an interesting word then, ‘replaces’. Because in my mind it facilitates and expands that invention because you need it all the time, but it is one more new powerful tool that is giving you new thoughts and new ideas because of the analysis of that data and connoting that into intelligence.

Where is outsourcing going in 2012?

That’s a big question! There are one or two things to consider when answering a question like that. The first one is the environment. The convention would be to look at the economy, it’s in trouble, it’s a bad time also for the IT industry, but in reality it’s in times like this that people really need Information Technology, particularly with the new transformational technologies you are not talking of just cost reduction, you are really talking of enlarging markets, of opening new channels that didn’t exist in the past through technology. You will also notice that the IT intensity of the world is increasing by the day, industry by industry is becoming an internet company, what I’d call the creation of web 2.0 companies which are purely internet based. So IT still remains at the core of change. The need for outsourcing is increasing because people cannot capture all the expertise within their own system, there is so much to be integrated. As the speed of change increases, the complexity of the technology increases, and how can anyone, even the largest companies, incorporate all of the skills that they are going to require to implement this change, therefore the need for outsourcing increases exponentially. I would make a distinction here between outsourcing and offshoring. We don’t just want to be seen as an offshoring company, we see ourselves as working as partners to our customers, and we want to bring the best of both worlds to our customers. Here in the UK we have actually hired a considerable number of local citizens.

Speaking of hiring people locally, there was an article recently about Rackspace experiencing problems with hiring people that had cloud experience – is this a problem you’ve experienced in the UK?

(Ganesh Narasimhaiya Vice President & Country Head of Happiest Minds Technologies)

Cloud is a new technology so there is not an abundance of people but there are people chartered at around 10-12 months in the market and the focus we have on the next generation and the area of opportunity we are able to attract the right talents.

(Ashok) I mentioned about how our message resonated with customers, it has obviously resonated with people also. So we have demonstrated at an early age our ability to attract talent. There is the excitement of working in a start-up, there is the fact that people know that this is a company that focusses on these areas, and there is also the message of the company.

What about the term outsourcing, we’ve been seeing that companies want to move away from being associated with the word itself. Is this something you agree with?

I can understand and appreciate that. For a start I think we’d all like to be seen as partners and we’d be open to having that reflected in the business model. There could be the other approach of how do you go about co-creation with your customers.

What do you think will be the next big thing in outsourcing?

Hopefully the term itself will become less prevalent and less used and there will be a different name. I think you’ll see new business models evolving, more partnering, more outcome-based, more procreation and sharing of intellectual property.

(Puneet Jetli) We believe that a lot of that will be influenced by cloud. Cloud will not just be a medium to offer to our customers to reduce cost, but also look at bringing innovation to the market and I think it would mean a lot even for service providers like us to embrace cloud to provide services to our customers in a very different way to what we have traditionally been used to.

What particular innovations do you think will be in cloud?

I think we have to move away from the mind-set of looking at pure services to looking for solutions, where you are essentially looking at a business opportunity but backwards, you are essentially trying to assess a business problem. When you are creating a solution by yourself or co-creating it along with your customer then how do you manage end-to-end delivery of that. That is why we are not only in IT services, but also infrastructure management and security, because you have to give a holistic solution as a package on a software-as-a-service model if required for customers to really appreciate and benefit from the range of technology.