Industry news

The government is to yet again extend the deadline for those suppliers who wish to join its G-Cloud framework and a posting on the G-Cloud website revealed that a “CloudStore” is on its way.

The idea of the CloudStore is that it will offer up to 1,700 cloud services from 600 suppliers and the Government is said to be currently accrediting these services. Whitehall and governmental bodies can then pick and choose what cloud services they require. The first first tranche of G-Cloud services are expected to be rolled out in February.

Emergency repairs group HomeServe is planning to cut 200 call centre jobs from its UK business after a damaging mis-selling scandal last year.

The company, which provides cover for household emergencies such as broken boilers, said the cuts would reflect its "smaller outbound telephony operation".

Last year, the group suspended all telephone sales and marketing activity after an independent report found call centre staff were mis-selling products.

Cabinet Office minister Francis Maude has announced plans for an academy to boost the skills of senior project leaders across government to deliver complex ICT and other projects.

Each year two groups of about 25 people will enter the Major Projects Leadership Academy for a 12 month formal programme covering three primary themes: major project leadership, technical understanding of major project delivery and commercial capability.

The Major Projects Leadership Academy will be fully launched in October 2012 and managed by the Cabinet Office Major Projects Authority (MPA). At the moment it is suggested that around half of the government ICT projects are behind schedule.

Almost 1,000 jobs are to be lost at Lloyds Banking Group.

More than 500 staff are expected to be made redundant with the closure of administration sites in Newcastle, Scunthorpe and Romford.

About 217 workers from its West Midlands site in Dudley are to be moved to another location.

The group is still considering where to make the remaining job cuts, which come as part of a restructuring of its business. However back office staff are among the worse affected.

A US firm has been awarded the multi-million-pound contract to print the tickets for the London Olympics, sparking criticism from UK businesses.

Up to 11 million tickets will be produced by Weldon, Williams & Lick, based in Fort Smith in Arkansas.

But the Federation of Small Businesses (FSB) said local companies had been "left out of the loop". The committee said the contract was awarded following a "competitive and open procurement process".

Advisers will have to charge their clients VAT if they offer them an outsourced discretionary fund management (DFM) service.

A new draft version of HM Revenue & Customs’ (HMRC) guidance on VAT exemptions for financial advice after the retail distribution review (RDR) has removed any reference to outsourcing to a DFM as it does not deem it an advised sale under the RDR.

New rules on outsourcing to DFMs are being reworked into a separate VAT guidance paper.

The fate of over a billion dollars worth of information technology outsourcing contracts is in limbo after Thursday's US Supreme Court verdict cancelling 122 licences of telecoms firms.

The order comes at a time when both Indian and multinational IT firms like Wipro, Tech Mahindra and IBM, besides business process firms such as Firstsource, Intelenet and Aegis, have signed multimillion-dollar deals with telecoms firms including Uninor, Etisalat DB, Videocon and Idea.

In my previous article, I likened the complex sourcing of external IT services to different supermarket choices. To recap, there are four broad approaches to outsourcing:

1. The home delivery of one-size-fits all approach to outsourcing, which means engaging with a global outsourcer, taking the good with the bad for the sake of convenience

2. The low-cost international supermarket which is essentially engaging with a pure offshore provider for volume, and low cost commoditised, services.

3. The local supermarket approach of selecting best-of-breed products satisfying the majority of your requirements, whilst also retaining the option of shopping elsewhere

4. The corner shop approach with niche single-product providers.

In this second article, I’d like to discuss how to choose a selective sourcing shortlist and some of the key factors to consider before making a selection. The rules are largely the same as any sourcing operation - e.g. value for money, proven track record, reasonable to do business with etc. - with one or two additional criteria. I’ve used ERP as the technology example, but the same principles apply for decisions around other technologies.

o Matching your current – future – and aspirational capabilities?

o You may be considering the corner shop niche service provider who specialises in a particular ERP technology. Will they provide an un-biased view of the future state of ERP marketplace when you want to expand into CRM or Business Intelligence?

o Likewise, you may be considering taking services from the ERP vendor directly. Can they also provide you with services for other vendor’s products as part of your consolidated sourcing strategy? With the introduction of this new provider is there an opportunity to further consolidate the management of your legacy applications into the same agreement and recognise some immediate economies of scale? For example, a single supplier providing a number of services under a common delivery framework can show significant savings over three separate niche “corner shop” providers. It’s worth exploring whether the provider has a proven track record of delivering these others services then maybe so.

o Flexibility of their engagement model to change with your business?

o Is the service engagement model restricted to ERP solutions or does it follow globally acknowledged service management standards? The service framework may work perfectly well for the one solution but will it adapt for others?

o Could they also provide an “aggregation” service to help you consolidate multiple providers under their one service model – thus taking away the cost of you having to do this yourself whilst providing transparency of the overall supply chain?

o Can they retain the intimate knowledge of your business?

o As your business grows, and your business with the selected suppliers also grows, can they retain that intimate knowledge of your business that influenced your decision to choose them in the first place?

o How do they stop themselves from appearing as though they are multiple separate service providers to you?

o Are you important to the provider’s business?

o Striking a balance between being the only client that a provider has (risk for you and for them), and being lost in the noise of a gargantuan service provider organisation is a challenge.

o You may sit nicely in the middle of this range for now but how do you manage the risk of this changing over time? Large providers will often hunt in shallow waters, looking for potential growth clients. oWhat happens if you do not deliver the account growth which they expected? What happens if you select the corner shop and they themselves are unable to grow in line with your business?

The cost, risk and business disruption of moving providers can be significant. Selecting the most appropriate provider for your business is a major challenge and one which should be carefully looked at from all dimensions before making a selection.

Do not just consider the task at hand. Instead, think broader and think about your overall sourcing strategy as a whole. This way, you will spend less time window-shopping and ensure you select the right provider to support your goals, growth strategy and get the best value available.

Outsourcing continues to change in response to market changes, and a still uncertain economy. I expect the following trends to be apparent in outsourcing as we go through the year:

• Cloud concerns will increase – although I expect more companies to start implementing cloud-based solutions into their IT infrastructure, the struggle of complying with data protection laws, and a lack of contractual safeguards, will continue to slow the take-up by larger organisations.

• Mergers will increase – service providers, particularly the technology service providers, are likely to continue to find their established markets hard to predict, as customers take longer and longer to make decisions about their outsourcing strategy. I expect these pressures to lead to more consolidation in the market, and I would not be surprised to see 2 or 3 major deals announced over the next 12 months. In particular, I expect to see further consolidation among the second and third tier Indian vendors.

• Less established countries to increase their profile – Countries like Brazil and China, and possibly South Africa, Sri Lanka and Vietnam, are going to be seriously considered by companies looking to outsource beyond the traditional destinations such as India. The profile of these countries, and availability of skilled talent, has been steadily increasing and Brazil in particular is now looking to become a major player within Latin America. The introduction of data protection laws across Latin America over the last 12-18 months will also give comfort to organisations who might otherwise have been concerned about a lack of security and protection for the processing of sensitive data. Similarly, service providers are starting to shift their data centres to these regions to take advantage of these growing markets.

• Smaller deals will dominate. The trend for some time has been for customers to require shorter deals with easy routes of escape if required. Risk mitigation is the theme for most customers, and that requires a service provider to accept a shorter term, and “get out” clauses that enable the customer to exit the deal if market conditions change, or there is a change in strategy. This is, however, leading to a less strategic and more procurement-oriented mindset around outsourcing – which carries with it a risk that there will be less innovation and little in the way of transformation from service providers who have no incentive to be creative.

• Data Protection will become an increasing concern. The laws in Europe around data protection are set to change over the next couple of years, and fines for data breaches will be significantly higher. Data processors (ie: service providers) will also have regulatory responsibilities for the first time, forcing the industry to potentially adopt higher standards of security. Deals being signed will therefore need to anticipate some of these changes, and give more focus to this area, or face being renegotiated once the laws come into force.

• Legal Process Outsourcing to increase dramatically. One area of outsourcing likely to increase significantly over the next 12 months is LPO. Law firms are actively trying to minimise costs in all areas – and saving money through outsourcing is now becoming standard practice. Expect to see more service providers try to enter into this market, and for firms to continue to explore the outsourcing of legal services to offshore destinations such as India and South Africa.

ISG has won a £100m deal to build and fit out a new data centre for Santander in the East Midlands.

The project encompasses the construction of two identical buildings, each with an individual gross floor area of over 161,000 sq ft that will be delivered concurrently.

David Lawther, ISG chief executive, said: “We are delighted to announce this contract win. We have been focusing our efforts on the data centre market, bringing together a highly skilled technical team. We expect further growth in this area as we focus on our multinational clients and on their increasingly demanding technical requirements."