Industry news

Innovation Day

Wednesday 8th June 2011

As companies struggle through the current austere times, many are investing in processes that will be cost effective and beneficial in the longterm.

Modern outsourcing relationships now offer and deliver much more than just cost savings.Businesses are often transformed through innovation to achieve far greater efficiency and productivity.

Innovation is perhaps the most misinterpreted term in outsourcing. It seems everyone wants a slice of the pie, but many are unsure of what the pie actually consists of..

The National Outsourcing Association’s Innovation Day was chaired by Lee Ayling, NOA Board Director for Innovation and featured the latest information and advice on how to implement innovation in your outsourcing deals.

Lee announced the results of the NOA’s latest research, carried out in association with KPMG, "Driving Innovation Through Collaboration" and looked at varying interpretations of innovation.

What is Innovation?

· Innovation has no standard definition and means different things to different people

· To avoid misunderstandings, definitions and expectations of innovation should be agreed upon with each service provider

· Innovation is not applicable to all service provider relationships

· Innovation is new ideas or ways of working to drive commercial gain and / or competitive advantage

Lee said: “Coming out of a financial crisis, many businesses are looking at innovation to increase their profit margins, streamline processes and improve services quality.

Following on from this, we felt the NOA needed to put together a very recent piece of legislation to investigate and highlight trends in outsourcing.

“Driving Innovation Through Collaboration” Research Highlights"

· 70% of respondents consider innovation to be very important and 50% are discussing innovation once a quarter

· Improving quality and lowering costs – but also decreasing time to market and replacing old legacy systems are key drivers

· Less than a quarter of all user organisations do have a formal innovation methodology to support the outsourcing process

· There is a disconnect between the way users and suppliers want to fund / are funding innovation

· Around 80% of the user organisations don’t measure innovation quantitatively

· Users and suppliers agree that both organisations should take the lead role for innovation, but that rarely happens in practice

· When innovation is important to you, consider appointing named leaders to ensure this topic gets enough attention

· User organisations can do much more to support their innovation initiatives

· Both users and services providers think most innovation is possible in ITO, KPO, customer care and niche areas, while least innovation is possible in BPO.

David Baker, formerly United Biscuits, discussed innovation in practice and focussed on how innovation was achieved as best practice at United Biscuits through the contract, governance, structure, behaviours, gainshare mechanisms and finance. David said: “Additions to original contractual arrangements are usually examples of true innovation. Suppliers should have full knowledge of how an end user’s business operates in order to effectively incorporate innovation in the best possible way.”

Innovation Lessons Learned

· Do it yourself before someone does it to you

· Get the contract right and the rest follows

· Create an environment for change

· Get the funds to demonstrate quick wins

· Don’t just look at “headcount or price savings” – reduction in working capital, right first time.

“Innovation distinguishes between a leader and a follower” – Steve Jobs

“Without change there is no innovation, creativity or incentive for improvement. Those who initiate change will have a better opportunity to manage the change that is inevitable”

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow” – William Pollard

“Innovation is not the product of logical thought, although the result is tied to logical structure” – Albert Einstein

Debra Maxwell, arvato, emphasised the importance of relationships and transparency when developing innovation.

Debra said: “A true partnership should be used to push innovation and truly ‘innovate’. Transparency is very important with our clients, we need to be able to see what is happening and what is not happening in order to bring change.

"Service level agreements need to outline exactly what requirements are needed.Space is also very important when trust is involved. Time is needed for trust to be earned through results and expectations which are met.”

Nick Pantlin, Herbert Smith, discussed contractual innovation in outsourcing and gave examples of two innovation contracts.

· Innovative Contractual Structures

Multisourcing Services

Integrators/Service Managers

Global

Frameworks/New contractual structures

· Innovative Contractual Provisions

Innovation

Funds

Gainsharing

Innovation

SLAs

Nick said: “In this age of austerity, outsourcers are required to provide more for less. Is innovation something that can actually be contracted for and do end users really know what they want when they ask suppliers to ‘innovate’?

“It is also hard to present on innovation without mentioning the cloud which is one of the tool sets set to change the outsourcing landscape.”

Will McAllister, Aegis, provided a view of innovation from a supplier perspective and outlined examples of best practice.

· Innovation which drives a better business outcome is the goal – keep it real

· Innovate using the knowledge collateral that your colleague community represents.. and your clients if possible

Will said: “Innovation takes a number of forms but to be considered as innovators we must address them all”.

IIan Oshri and Julia Kotlarsky presented the latest Warwick Business School research on innovation in outsourcing.

Two Surveys:

In early 2009: A survey of 263 CIOs and CFOs of the largest firms in the UK andother European countries about realizing value in outsourcing.

In late 2010: A survey of 253 CIOs and CFOs of the largest firms in the UK and other European countries about innovation in outsourcing.

Qualitative input from both surveys was obtained along with indepth interviews on key findings with CIOs and CFOs from leading European multinationals. Input from research was conducted with a dozen multinationals on their outsourcing decision making processes, practices and impact on their business. IIan commented: “Many organisations do not effectively measure the effects of innovation or even allow room for innovative practices. It is really hard to envisage what innovation will be and it is very hard to imagine at the beginning of a partnership what that will be.”

Research Findings

· Client firms want vendors to deliver innovation that has significant impact on the firm performance

· Client firms don’t want to pay extra/premium for innovation

· Contracts are not designed to accommodate innovation

Jim Hemmington, Head of Strategic Contracts, BBC, outlined how the BBC continues to drive innovation in its outsourcing contracts.

Outsourcing at the BBC fell down to three reasons: cost reduction, service improvement and business improvement.

BBC Outsourcing Requirements

• Maintain quality

• Control cost

• Achieve value

• Increase value

• Meet customer changing needs

• Do more for the same

Supplier Outsourcing Requirements

• Retain margin

• Increase margin

• Take out cost

• Increase scope

• Achieve lowest acceptable quality

• Do the same for less

Jim said: “You need a sense of urgency to drive real innovation along with an incentive. Risk always comes with real innovation and unless you have open and frank discussions with your suppliers, you will never really reap the benefits.”

The interactive breakout sessions at the end of the day focused on three key topic areas of innovation in an outsourcing context

1. How should organisations document and contract for innovation?

2. How should organisations govern, manage and measure innovation?

3. What are the people and roles needed to drive successful innovation?

The breakout session groups discussed a number of item in each area and then selected a primary item for discussion on each topic to feedback into the main session

Documenting and Contracting

· clear visibility in contract

· incentives on a corporate and individual level

• Use of incentives in the contract to drive innovation – including the use of

both corporate and individual incentives (selected idea)

• Definition of what innovation is and isn’t required up front (shortlisted)

• Use of competition to drive innovation (shortlisted)

• Drive short term innovation by competitive threat

• Document mutual expectations

• Access to senior execs with a board to review ideas

• Clear IP agreements

• Simple friendly contract language

• Innovation framework with decision trees

• Capped T&M / hybrid commercial model

• Penalties for not innovating

• Painshare approach

• Seconding supplier people into client to understand business

• Documented customer led process

Measuring, Managing and Governing

• Create an “Innovation Forum” to air ideas across end user and supplier teams and organisations (selected idea)

• Innovation as the first topic on the governance agenda (shortlisted)

• Clarity of R&R and incentives

• Collaboration between procurement and inlive service teams

• Agreed metrics and measurements

• Focus on guarding against not invented here / use of different hats approach

• Clear baselines to measure benefits against

• Best practice / case study achievements

• Communications in and between both parties

• Supplier personnel continuity

• Clearly documented, communicated and understood objectives

• Named leaders for innovation

• Links to wider teams

• Considered deployment roadmap / effective prioritisation of innovation

People, Skills and Roles

•Strong leadership with clear objectives

• Focus on innovation through reskilling and strategy

• Reskill the retained organisation to focus on innovation and strategy and less on marking supplier organisations (selected idea)

• Named innovation leaders with credibility in their organisations (shortlisted)

• Empowerment and sponsorship from above (shortlisted)

• Get direct ideas from the “customer” (e.g. users in the business)

• Clear communications that everyone should be able to contribute ideas etc

• Tapping into the wider supplier workforce

• Swap / imbed roles between the organisations to give teams each other’s view points

• Use of Lean etc process reviews and redesign

• Ensure suppliers bring in the ideas of their subcontractors

• Planning for what roles and skills required to deliver innovation are needed

The seminar came to an end with a panel discussion and networking with drinks.

Please see the Innovation Day slides for further information and visit www.noa.co.uk for details on upcoming NOA events.

The first generation of recruitment outsourcing concentrated on doing exactly what it says on the tin – taking over the responsibility of sourcing new staff from the external market. And in most instances the best players in the sector achieved the targets set for them by their clients and everyone patted themselves for coming up with such a clever idea and for a job well done.

But the world moves on.

What seemed like a near perfect model in the 1980s and 1990s now looks as dated as a Spandau Ballet LP or a Madchester t-shirt. Today the focus is no longer just on making recruitment processes cheaper or more efficient, but on the whole spectrum of talent management. And that means, not just sourcing the very best new talent for organisations, but also developing and sustaining productive relationships with individuals, who have already worked for them, but have moved on to pastures new.

Research across the Ochre House Network, an extended think-tank, which is made up of over 650 major employers including GE, Kimberley-Clark, Lilly, Microsoft and United Biscuits found as many as four out of every five leavers would consider working for their employers again. But very few businesses have established effective systems for tracking and bringing back the best people.

At its latest meeting the think-tank concluded that an employee’s resignation and departure should be regarded as a natural and possibly temporary process rather than as a cut-off point. Organisations should be thinking in what were described as ‘Hotel California’ terms – “you can check out any time you like, but you can never leave.” Delegates cited Johnson & Johnson’s ‘boomerang’ scheme and Astra Zeneca’s open door policy as prime examples of this thinking put into practice.

It seems that too many employers seem to see resignation as the end rather than the beginning. Yet it’s much more realistic and productive to accept that it’s natural for the best people to explore new career opportunities, but can often be enticed back through ‘keep in touch’ programmes, perhaps even more skilled and able than when they left. The key to success seems to lie in a clear allocation of responsibility for such programmes and a commitment to regular, relevant, but nor intrusive contact. But so far, few companies have succeeded in building this elastic talent pipeline. And, in my view, it’s down to outsourcing partners to ensure that such pipelines stop being an aspiration and turn into a concrete reality.

Helena Parry is a director at recruitment outsourcing and talent management specialist, Ochre House.

Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, through its Financial Services global business unit, and MUREX, leader in the global market for software development in front, middle, back-office and capital markets risk management, have signed a global partnership. This responds to a sharply increasing demand from financial institutions for the industrialisation and package development of their IT systems.

This global agreement positions Capgemini as a reference integrator in financial package services. It provides a significant enhancement of the technical and functional skills for Capgemini consultants, in the Murex package suite. An intensive academic and practical training program lasting several weeks, and focusing particularly on back-office, reporting and data migration, has already been launched.

“Capgemini employs over 3,000 professionals specifically dedicated to financial markets. This new partnership with Murex, a player internationally recognised for the quality of its platform and its expertise, demonstrates our willingness to accelerate our growth in this segment. It will enable us to better respond to the increasing demand from our clients for package integration projects, which are an integral part of their pursuit of greater efficiency, cost reduction, and a greater ability to develop their business,” says Aiman Ezzat, Head of Capgemini’s Financial Services global business unit.

A contact centre run by actors has signed a deal with international relief and development agency, World Vision.

Charity members and potential donors will be able to discuss development work World Vision does with RSVP call centre agents.

The agency is one of the world’s largest humanitarian aid agencies, covering child sponsorship in almost 100 countries as well as emergency relief programmes. As a member agency of the Disaster Emergency Committee the charity is one of the first points of contact for donations at these times. Call volume can increase dramatically, during a crisis.

RSVP employs 208 agents at its contact centre in Canary Wharf, London. All members of its management team having arrived via a performing background. It employs ‘resting’ actors, as they have strong communication skills.

Dean Hurst, RSVP, operations director said: “It’s a privilege to be supporting World Vision. There’s a real feel good factor in that our agents feel that they are playing a part in making a difference in helping callers. This is a very important client for us. We would welcome the opportunity to expand our services to more not-for-profit organisations, both in the UK and on an international scale.”

Westminster City Council, the London Borough of Hammersmith and Fulham, and the Royal Borough of Kensington and Chelsea ("the Tri-Borough Authorities") have aligned themselves as strategic partners and are about to embark on a number of different activities to streamline services and deliver savings.

These activities include a programme of work to look at a fully outsourced managed solution (including the hosting and processing of transactions) for a number of corporate managed services. The proposal is in conjunction with Project Athena, a pan London initiative to enure benefits are available across London. The target operating model for this project is for all London Authorities to use common processes and share access to multi-tenant, cloud-based, fully managed business services, used the same way to deliver shared support function(s).

Consequently, it is intended that all London Borough Authorities and other public sector bodies in London will have access to the framework agreement.

Potential service providers will need to be able to support this approach as well as develop innovations that will result in further efficiencies and savings. The project aims to source a solution that will facilitate support for the following core services which form four Lots: Transactional Finance/Accounting & Procurement Human Resources/Payroll Property/Asset Management Integration/Business Intelligence/Reporting.

British outsourcing firm Xchanging has said it had bought three insurance businesses in Australia and India from its already part-owned global processing company Cambridge Solutions for $71.7 million.

Xchanging said the deals to acquire Cambridge's Australian workers' compensation business, Cambridge Integrated Services Victoria, and its Indian business process outsourcing firm would give it full ownership of Cambridge's major assets.

The businesses are currently 100 percent owned by Cambridge, which is in turn 76 percent owned by Xchanging.

Som Mittal, head of IT industry body Nasscom, expects India’s IT outsourcing companies to deliver double-digit growth by the end of the year. Mittal is forecasting that revenues from the sector will rise at least 15 per cent to about $70bn this year as banking and corporate customers in the US and Europe resume spending following a slowdown in growth during the global economic downturn.

However, despite the projected growth, Mr Mittal admits that India’s traditional IT outsourcing model is experiencing a fundamental shift as it adapts to the post-economic crisis environment. “We’ve now moved to an outcome-based model” – being paid on performance, rather than one based solely on the number of people deployed on any one job, he says. “That is giving outsourcers an incentive to be more efficient.”

According to Bindi Bhullar, director of Global IT services firm HCL Technologies: “One interesting trend is that buyers are becoming more sophisticated in their purchasing of IT services, looking for more outcome based pricing models.

“As a result, the frequency with which executives approve major consulting deals casually during a round of golf is diminishing. Instead, several developing trends are shaping client expectations for the client-consultant relationship. These trends include more centralised purchasing, better information sharing among clients and higher skilled IT workers.”

Meanwhile, analysts say that above-average wage rises in India’s IT outsourcing industry could become a concern. Arup Roy, a principal analyst at consultancy Gartner, says wages have risen about 15 per cent a year.

Mr Roy says that for many international companies, the key reason to outsource some technology functions to India is price. But he says that, while India still remains a low-cost destination, that advantage is “depleting with every passing year”.

Indian IT outsourcers are still expected to see a 10 to 15 per cent rise in quarter-on-quarter growth, he says. “The problem is that investors have got used to growth of 20-25 per cent. Investors will have to reset their expectations.”

Dell has announced Dublin as the site for the company’s first Cloud Research and Development (R&D) Centre, and the company’s campus in Limerick as home to the first Dell Solution Centre built globally.

These announcements were made in Dublin by Taoiseach Enda Kenny, Irish Minister for Finance Michael Noonan and Jeff Clarke, vice chairman, Global Operations & End User Computing Solutions, Dell. These technology investments in Dell’s global solutions and services capabilities are supported by the Irish Government through the Irish Development Agency (IDA).

The Dell Solution Centre in Limerick was part of Dell’s previously-announced plans to invest $1 billion globally in new technology solutions and services while the Dublin Cloud R&D Centre is a new announcement. These facilities are part of the company’s investment strategy designed to help Dell customers worldwide innovate and drive business results through new solutions, services, and cloud-based delivery options. Recruitment is currently underway at both sites for world class software engineers, IT architects, engineers and developers.

It is expected that a total of 150 people will be recruited across both sites in the next two years.

Apple® has introduced iCloud®, a breakthrough set of free new cloud services that work seamlessly with applications on your iPhone®, iPad®, iPod touch®, Mac® or PC to automatically and wirelessly store your content in iCloud and automatically and wirelessly push it to all your devices.

“Today it is a real hassle and very frustrating to keep all your information and content up-to-date across all your devices,” said Steve Jobs, Apple’s CEO. “iCloud keeps your important information and content up to date across all your devices. All of this happens automatically and wirelessly, and because it’s integrated into our apps you don’t even need to think about it—it all just works.”

The free iCloud services include:

The former MobileMe® services—Contacts, Calendar and Mail—all completely re-architected and rewritten to work seamlessly with iCloud. Users can share calendars with friends and family, and the ad-free push Mail account is hosted at me.com. Your inbox and mailboxes are kept up-to-date across all your iOS devices and computers.

The App Store™ and iBookstore℠ now download purchased iOS apps and books to all your devices, not just the device they were purchased on. In addition, the App Store and iBookstore now let you see your purchase history, and simply tapping the iCloud icon will download any apps and books to any iOS device (up to 10 devices) at no additional cost.

iCloud Backup automatically and securely backs up your iOS devices to iCloud daily over Wi-Fi when you charge your iPhone, iPad or iPod touch. Backed up content includes purchased music, apps and books, Camera Roll (photos and videos), device settings and app data. If you replace your iOS device, just enter your Apple ID and password during setup and iCloud restores your new device.

iCloud Storage seamlessly stores all documents created using iCloud Storage APIs, and automatically pushes them to all your devices.

iCloud’s innovative Photo Stream service automatically uploads the photos you take or import on any of your devices and wirelessly pushes them to all your devices and computers. So you can use your iPhone to take a dozen photos of your friends during the afternoon baseball game, and they will be ready to share with the entire group on your iPad (or even Apple TV®) when you return home. Photo Stream is built into the photo apps on all iOS devices, iPhoto® on Macs, and saved to the Pictures folder on a PC.

HP has extended its Hybrid Delivery solutions portfolio so enterprises can improve their agility and quickly respond to changing customer and citizen needs.

Hybrid delivery environments, which combine traditional IT infrastructures with private and public clouds, enable enterprise agility by using flexible delivery models to best meet changing market demands.

Organizations today realize that agility is critical to their future success. They need it to meet the changing demands of customers and citizens, as well as drive competitive advantage," said Jan Zadak, executive vice president, Enterprise Business Sales and Marketing, HP. "HP’s experience, breadth of portfolio and global service delivery organization are integral to helping businesses and governments take advantage of cloud as part of their journeys to becoming Instant-On Enterprises."