Industry news

IT supplier Capgemini’s new contract with HM Revenue & Customs has cut annual IT costs by as much as half to £700 million.

The new contract with Capgemini will see multiple management systems standardized as one system in order to reduce IT costs while improving the level of service. Phil Pavitt, chief information officer at HMRC, said: "In three years we've cut our annual IT costs from £1.4 billion to £700 million, and soon it'll be £600 million."

These changes reflect a 25 percent budget cut in line with government savings. Pavitt points to IT service levels of 99.93 percent to demonstrate the savings from the Capgemini contract are sustainable. The renegotiated contract is set to run until 2017 and is predicted to further reduce costs over the coming 5 years.

593 IT jobs are to be cut and offshored to India by Lloyds Banking Group. The offshoring is also set to impact staff within IT across HBOS due to their merger with Lloyds TSB back in 2008.

Around 308 permanent IT jobs, and 205 UK contractual positions are being outsourced, with the company’s maintenance, service delivery and application developments teams to see the greatest losses.

Since the HSBOS merger Lloyds has cut nearly 5,000 IT jobs through integration of its multiple brand services, which has led to savings per year of more than £2 billion.

The LTU commented to its members, that, "It is disgraceful - and without any ethical justification - that the bank is offshoring yet more IT jobs abroad,"

BT has entered into a five-year contract to improve the office systems of European technical services provider Imtech.

The deal will see the integration of BT’s Field Force Automation (FFA) application, which serves to provide scheduling, resource management and improve customer service, with Imtech’s Dutch Building Services business unit.

Edwin Hageman, BT CEO, said that: "Imtech chose BT for the next five years over a number of specialist players."

160 different nursing areas within Hertfordshire Partnership NHS Foundation Trust have received e-rostering software to update the previously used paper based system.

The rollout extends an initial rollout to just 54 nursing areas within the trust, which over a three year period saved £750, 000.

E-rostering project manager for the Trust, Phildah Chifamba said that the Trust wanted to introduce an IT based system in order to optimise workflow, in contrast to the inefficient and time consuming paper based system of the past. Phildah said:"The e-rostering system allows users to see the pending requests and help managers to see which nurse has requested annual leave before another. When we were using paper rotas there was no audit trail."

SKF, who supplies bearings, seals and mechatronics have extended their 10 year IT outsourcing contract with HP for a further 5 years.

The contract will cover the improvement of IT services over 42 countries and 20,000 users through the transformation of SKF infrastructure, including the servicing of more than 10,000 service desk calls per month.

Mike Nefkens, senior vice president, Enterprise Services for the Europe, Middle East and Africa region, said: “HP will help SKF take advantage of future technology and services advances, giving the company the flexibility to reach business objectives and achieve corporate growth plans.”

Genpact, a business leader in technology management and business processes has announced a contract to provide key end to end processes for specialty lines insurance company Ironshore.

The seven year agreement is for the management and standardisation of Ironshore operations by Genpact, in order to ensure effectiveness and increased productivity, while allowing Ironshore to focus on expansion into new markets and managing insurance risks.

Mitch Blaser, CFO/COO of Ironshore, said: “Genpact’s deep domain expertise in insurance operations and approach to process transformation enables Ironshore to deliver best-in-class support services”

What is "Agile"?

Agile development is a software development methodology the basic principle of which is to develop a system through repeated cycles (iterative) and in smaller portions at a time (incremental), allowing developers to take advantage of what was learned during development of earlier parts or versions of the system when moving on to develop the next. Agile is favoured in scenarios where requirements and solutions are not fully known at the outset. Agile allows requirements and solutions to evolve through collaboration between the customer and different cross functional teams.

Why use Agile?

Agile methods break development into increments. Iterations are short time frames, known as sprints. Each iteration involves working through a full software development cycle including planning, requirements, design, coding, testing and demonstration. This minimizes overall risk and allows the project to adapt to changes quickly. Typically developers hold daily meetings to discuss the process of each sprint ("scrums"). A key member of the Agile team is the customer representative(s) - acting on behalf of its stakeholders. This approach can be contrasted with the traditional software development lifecycle (the waterfall method).

Contracting for success

Our view is that, properly practised, Agile can have beneficial effects, achieving cost and time savings through its more efficient processes. So how to contract for Agile? Given its nature, it requires a different approach to contracting, one that is built around a dynamic, interactive, iterative relationship as opposed to a one time transaction.

Customer Engagement

One essential for successful Agile contracting is a tailored but not overly prescriptive governance framework. The major difference with Agile is the intense level of customer engagement; Agile really is dependant on the customer engaging in a highly interactive way with the developer. But the engagement needs to be intelligent engagement. Agile is input based, and input based activity is hard – and often ill-advised – to prescribe contractually, often (as in the case of Agile) requiring a high degree of skill and judgement. In our experience, the better approach is to build into the contract a set of engagement principles.

Contracting for intelligent engagement - engagement principles and health indicators

Engagement principles might include lines and levels of communication and idea generation. Also, as Agile is experimental, actually planning for failure – failure doesn't always mean that the project or phase has been unsuccessful, in fact it's important that lessons learnt from such failures can be used to assist with ongoing development.

Health Indicators may include factors such as project on time, project on budget, working code, customer satisfaction.

Building the engagement principles and health indicators into the contract and applying them with rigour is key to ensuring the successful and efficient outcome.

Exit as incentive

In order to incentivise suppliers and mitigate some of the inevitable risk that comes from using the Agile methodology it is important that the customer has complete freedom as to duration and continuity of the Agile development. To ensure this is workable the contract must provide for delivery of working code and value at the end of each and every sprint of the Agile lifecycle.

However this threat of exit will not be workable unless there are contractual provisions which ensure that any handover could be properly regulated and effected. It's really critical that the supplier understands their responsibilities to handover. The contract must capture disciplines around documenting IPR, source code, access documentation and personnel etc continuously throughout development.

Pricing

In general, time and materials pricing is to be preferred. Fixed pricing can encourage the supplier to attempt to tie down scope with the customer ending up footing the bill for subsequent changes. This is totally contrary to what Agile is trying to achieve. By contrast, a time and materials model mitigates the supplier's risk, whilst the customer retains control through intelligent engagement and its ability to pull down the shutters.

Portfolio level health checks

A useful indicator of relationship success can be portfolio level health checks, assessing the health of Agile across the customer's entire project portfolio. What's often important is that these health checks have real teeth in the event expected levels of performance are not achieved.

Conclusion

Agile offers great advantages in terms of speed, cost, and outcome but it relies on:

• the willingness of the parties to collaborate and regularly communicate;

• clear engagement principles and health checks that are diligently applied; and

• contractual rigour around exit strategy, handover and materials.

Successful Case Studies in Business Process Outsourcing

14th March 2012

In the early days, Business Process Outsourcing (BPO) usually consisted of particular outsourcing processes such as payroll. It has now grown to encompass a number of functions that are considered ‘non-core’ to the primary business strategy.

The NOA seminar for Successful Case Studies in Business Process Outsourcing took place on 14th March at Eversheds, Manchester. The aim of the seminar was to highlight recent NOA successes and share best practice

From Transaction to Transformation: KPMG and EquaTerra

KPMG EquaTerra is the largest independent third-party Sourcing advisor in the UK with over 150 dedicated sourcing professionals in the UK and Europe.

Jonathan Howgate, Principal Consultant, KPMG Sourcing Ltd, outlined the organisation’s value assurance policy, highlighting the importance of holistically reviewing all outsourcing arrangements.

Recommendations from the review help move contracts to an optimal state.

• The review policy looked at the methods, benefits and negatives of analysing performance, process, potential and other aspects of outsourcing contracts

• As an outsourcing contract reaches maturity, the continuous review process can help deliver further value to service providers and clients

Successful outsourcing case study: Rail Settlement Plan

Stephen Green, Head of Operations, Rail Settlement Plan Ltd, introduced the successful outsourcing case study of the Rail Settlement Plan. British Rail goal was to enable passengers to use the national railway network seamlessly, and found that outsourcing may be the most efficient way of doing so.

• Business operations division British Rail Business Systems was sold to a major outsourcer

• The services provided needed managing on behalf of Train Operating Companies so the Rail Settlement Plan was created

• It has proven to be the right model – RSP concentrates on understanding business needs and translating them into programmes and managing resulting services

• Green also made observations on the links between risk transfer and influence on technology and influence.

Successful BPOs

Tom Bridgford, Partner and Head of Commercial and Outsourcing, Evershed, gave a general insight into BPO as well as defining successful BPO and the problems and pitfalls that may arise in any process.

• Business Process Outsourcing includes services such as procurement, finance and accounting, HR and facilities management. The benefits can include lower costs, budget control and a better quality of service

• However, defining ‘good’ BPO can be problematic. Lack of clarity in the ITT or difficulties in measuring current success can lead to outsourcers finding it difficult to define whether BPO has been successful. This highlights the need for a robust negotiation process between supplier and client and clearly defined work-streams for each schedule

• Problems will often occur in BPO, but relevant steps should be taken to minimise damage. These include reporting to the client in advance, discussing how to prevent future occurrences and identify future damages

BPO in India

Bhupendra Mistry, Alliance Manager and Statistical Programming & Analysis at Hoffman la Roche took us through the successful case of Roche Holdings who outsourced their business processes to India.

At the 2006 Global Capacity Building Initiative, Roche identified their long term strategic goals, and it was decided that in order to achieve them, BPO was a suitable solution.

Firstly a rigorous selection process ensued that the most appropriate outsourcer was selected.

• Several country and model choices. India proved most suitable

• All relevant vendors in India were considered. Researched vendors to evaluate overall capabilities, presence in India, experience in pharmaceutical development

• Presentations, proposals and vendor visits helped to determine final vendor

Once the vendor was selected, Roche’s Indian BPO began to operate, and over a period of time, built a professional relationship and increased operations, all whilst ensuring excellent quality.

Breakout Sessions

The breakout sessions were focused on BPO hot topics such as the mapping of business functions and the security of outsourced data. Questions posed included:

• Is mapping always fundamental and needs board approval?

• What can go wrong during mapping?

• Should you always have a backup?

• How can you guarantee continuity if you terminate the contract?

• What are the impacts on other parts of an organisation?

• Do your existing providers offer the complete service offering?

• Who deals with your process mapping internal, consultant (external) or CSP/intern?

Two particular questions that were raised were:

• What three things have gone wrong in your deal?

• How would you have done it differently?

When addressing these questions, three main areas were covered:

1. Scope & relationships

a. Scoping - Failures by customers to properly scope their requirements and include these in the formal contract inevitably leads to problems. The parties do not have matched expectations at the outset and customer expectations do not necessarily materialise into the service they ultimately receive.

b. Due diligence - Difficulties with due diligence exercises from a supplier perspective, often caused by scoping issues (as in (a) above) and difficulties in obtaining the required information (from either the client or an incumbent provider), resulting in a lack of understanding by the supplier of the required services and difficulties with pricing an uncertain scope.

c. Delivery – Failure by supplier operational teams (the ‘B Team’) to deliver on promises made by supplier sales teams (the ‘A Team’).

d. Third parties – Problems with third party providers (for example, sub-contractors of the customer on which some of a supplier’s activities are dependent, or a supplier’s own sub-contractors) can create tension between customers and a lead supplier. Ensuring that there is a process for identifying responsibilities, defining roles and ensuing appropriate controls are in place help to lessen any impact.

e. Trust – A key element of any successful outsourcing. A poorly scoped outsourcing (particularly on a first generation outsourcing) may lead to disagreements very early on in the most fragile stages of the relationship.

2. Pricing flexibility and changing business needs of customers

a. Evolving customer businesses requires a flexible and accommodating contractual relationship, including flexible pricing mechanisms (for example, indexed charges). Provider innovation (in 3 below) is also required to tackle these changes.

b. Gain-share mechanisms – These mechanisms can be difficult to draft, but problematic if not properly agreed at the outset. An unsuspecting customer may receive an unexpected invoice from a supplier demonstrating savings achieved, with little or no clarity around the required process. It was generally agreed that other mechanisms are, however, well received by both customers and suppliers to recognise efficiencies / performance, including service credits and bonuses (i.e. risk / reward).

3. Continuous improvement & innovation

a. Customers will expect continuous improvement of service delivery and quality throughout. Incentivisation (e.g. gain share, risk/reward etc) is often key to successfully implementing any such contractual obligations, and (as mentioned in 2 above) innovative suppliers will develop successful relationships with customers where they can identify innovative solutions as the customer’s business develops/changes.

In summary, when mapping - objectives need to be clear and consistent throughout the whole process. It is crucial that your supplier is validated and services are well defined in terms of supplier fit and flexibility.

The seminar concluded with networking drinks. To view the full set of slides please visit the members’ area of www.noa.co.uk

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'.

Why did you start Happiest Minds?

We believe that new technologies and transformational technologies really represent an opportunity for a new entrant to come in. It provides your entry strategy, it provides a basis for transformation and it gives you an opportunity to come in and say “look, none of the incumbents have really got any solid experience which puts them at an advantage; we’re all experimenting with some case studies here and there”. On top of that, we have no legacy to protect. Therefore we are straight away going to provide you with the richest, most logical solution which favours and helps you build the newest technologies. So I think it is a basic entry strategy that we saw, we see that the message has resonated well enough – 12 customers across the world in the space of just 6 months after starting is quite something given the lead times in this business. Interestingly enough, none of those customers are customers from our previous business, they were all new recruits. They met us as well as meeting with larger players, and then decided “hey look these guys know what they’re talking about, they’re a seasoned and experienced team, and they’re working at the leading end of where they’ve got expertise.” The second reason is linked back to the name, where we are saying we do want to create a company, where I would say it is truly a unique culture which enables, and focusses on happiness.

So, you said that your mission is encapsulated in the word smile. How does that work?

Research shows that the happiest moments in anybody’s life are the ones that they were giving, not the ones that they were taking. It resonates when you say straight away “how do we inculcate that?” We do this in little ways, for example, we will celebrate every milestone with an act of giving. So when we launched the company we gave away a finite number of meals for the government’s food for schools programme, so we were helping those kids access their one big meal a day. We will do some act of giving at each and every stage, every milestone. If I were to talk about some of the other aspects, I think the word ‘mindful’ is a very unusual word. You won’t find it anywhere else. It is a very rich word, it carries a lot of meaning in it, apart from being thoughtful, attentive, caring, seeing what’s likely to come ahead, literally you are thinking of the other person. I think that in itself is very closely linked to our approach. I should mention that it is not just the values alone which encapsulate our theme of happiness, its actually reflected in everything right from the name obviously, the mission statement is ‘happiest people, happiest customers’, the values as I’ve just described lend themselves to the acronym ‘SMILES’. We have developed a happiness framework for people as well as for customers, in our 5 year vision statement it says that we want to be the happiness evangelists for our people, and our customers. We want to be part of a global happiness movement, so we work in the IT environment but we also work in a global environment with people saying “what can we do to maximise happiness?”

You touched on your Corporate Social Responsibility programme, something that we’ve noticed has taken a back seat for some organisations in recent years, but you’re clearly making a big feature of it. Can you tell us about your activities in that area?

As part of our 5 year vision statement we actually articulated it and defined a set of measurements with criteria behind it so that it doesn’t remain pie in the sky. If you see our 5 year vision statement it says to be a leader in CSR initiatives with our core business operations, is an interesting approach to social responsibility. We are saying we are bringing a certain core confidence, if we can integrate some of that capability with our core business operations then we can deliver more value. So how do we take our own expertise to help make a difference in the lives of other people? For each of the divisions we have defined measurement criteria. The first we have decided is that we want to establish volunteering and community involvement as a core part of our Global People practice, and we encourage our people to get involved in that. I’ve already mentioned our celebration of milestones with an act of giving; we want to be able to establish processes to leverage our own capabilities for socially relevant causes. We want also to be able to say ‘how do we engage with our own clients and partners?’ to make a difference to society and to the environment. Finally, as we become profitable we will launch the Happiness Minds Foundation with its own focus mission. But that doesn’t mean we are going to wait until that time, we are going to do all of the activities I mentioned to you earlier.

(Puneet Jetli, Co-CEO of Happiest Minds Technologies) The holiday season was 3 months into our existence and there is normally the practice of a Secret friend or a Secret Santa, and the motivation was not only to find a secret friend but to establish contact, communicate and collaborate, and it would accrue a certain act of giving. The more people who go out and find a secret friend, the more people are sponsoring meals for underprivileged children. The idea is that every little act can become a force for giving.

The first few months of 2012 have seen an increase in the demand for outsourcing, with Morrison & Foerster’s outsourcing practice reporting a 20% increase in outsourcing activity.

Alistair Maughan, partner at Morrison & Foerster (MoFo) attributes this rise in activity to a drive for growth by Financial Services Companies. Companies are tending to use multiple suppliers as opposed to singular suppliers to allow room to negotiate more competitive deals. Maughan also noted an increased interest in outsourcing from property and pharmaceutical companies.

Maughan estimates that this increased interest will hold outsourcing in the buyer’s market for six to twelve months; however, Government plans to hive public sector IT into mutual companies could absorb capacity in the market and result in higher prices.