Industry news

IT outsourcing is a well-trodden path, and may even be seen as a common approach by many modern firms. Many companies, however, still often lack real insight and/or control when it comes to sourcing their IT.

Sourcing your IT correctly – whether that means insourcing, outsourcing or a combination of both – is an ongoing process that requires a clear understanding of your business goals, accurate measurements of performance and costs, and a structured decision-making cycle.

As such, there are three critical steps involved in assessing your existing sourcing arrangements and building a new sourcing strategy.

Step one: identify business requirement

The first step in establishing a formal sourcing strategy is to identify both the business requirements and the situation as it currently stands. This assumes a certain degree of understanding and connection between the IT function and other lines of business, as this will be essential when considering the current business strategy and taking into account any likely future changes in direction.

The next question is: what are the critical business services that support this strategy, and what IT systems underpin those? In each case, the current sourcing route should be established, whether completely insourced, outsourced as part of a larger contract, or a hybrid of the two. Only by clearly understanding both the current state of play and the firm's business requirements can a company start to determine the best sourcing routes.

Step two: measure service performance

Once the relevant business services have been identified and aligned with the current and future business objectives, the next step is to accurately measure the service performance. The important parameters to consider are: cost, risk, quality and flexibility.

Few tips to think about when it comes to evaluating the service performance:

Cost assessment should include measures not only of the direct running costs for a particular service delivery option – whether in-house or outsourced – but also of the associated set-up and management costs.

Performance assessments may also include factors such as the perceived quality or speed of the business service, and the level of satisfaction of the business sponsors and users.

Key considerations around flexibility should include the ability to scale services – and the associated costs – up or down as business requirements grow or shrink. Equally, there should be an analysis of the ability to change a particular service, in the event that there is a change in the business strategy or focus.

Step three: evaluate and determine your sourcing strategy

Once you have identified the business services, established the performance baselines and targets, and addressed any perceived deficiencies, you can then make valid decisions about the best sourcing options. Feeding into this stage will be a continual cycle of questioning whether the relevant resources and skill-sets are available in-house. Even if they are not (or no longer) available, outsourcing may not always be the right decision. For example, for some strategic services where the perceived risk is high, companies may prefer to retain or develop the relevant skills.

Finally, few considerations before you outsource…

When weighing up the value of outsourcing, it is vital to consider the potential loss of control, the potential for cost savings, and your company’s ability to handle an outsourced relationship. Some outsourcing arrangements fail to deliver the expected value not because the outsourcer is in any way incompetent or unwilling, but rather because the client has underestimated the importance of setting clear expectations and managing the delivery.

If outsourcing is the chosen route, the key rule is that the responsibility for the service remains in-house. This means that you will need to consider what skills need to be retained or developed internally, especially those concerning the management and orchestration of external delivery partners. Even more importantly, you will need to ensure that you have adequately prepared the groundwork for starting a new outsourced relationship. It may be a hackneyed phrase, but “don’t outsource a problem” is still a valid advice!

Warwick Business School study, sponsored by Cognizant, reveals European businesses spending more on outsourcers, but need help in measuring the value of innovation they deliver

A study of 250 CIOs and CFOs from Europe’s biggest businesses reveals that C-suite needs help in measuring the innovation delivered by their outsourcing partner. This is despite a strong recognition of the importance of outsourced innovation to their financial performance, and spending on outsourcing higher than at any point in the last three years.

The Warwick Business School research explores the link between outsourcing and innovation among 250 CIOs and CFOs across six regions (the UK, Germany, Switzerland, Benelux, France and the Nordics). It highlights that while the vast majority, 70%, believes that innovation achieved through their outsourced business arrangements contributes to the financial performance of their organisation, only one third (35%) are actually measuring the financial value of the benefits of innovation to their bottom line.

The survey finds that this failure to measure the benefits is against a backdrop of increased reliance on outsourcing-led innovation, with most C-level execs (64%) spending more on outsourcing than three years ago.

Sanjiv Gossain, UK MD, Cognizant, said: "As companies navigate the reset economy, they are investing, wisely, in processes that will be cost-effective and deliver long term benefits. As both outsourcers and clients can attest, modern outsourcing relationships now offer and deliver far, far more than simply cost savings. They can transform the business, achieving greater efficiency, productivity and helping companies maintain that all important competitive edge.

"Today’s research highlights that many businesses are now turning to outsourcers to offer innovation capabilities. As CIOs across the globe are constantly challenged by the board to deliver value by doing things differently, 67% of European CIOs admit to looking to their outsourcing partner to develop ideas into new and improved processes.

"However, today’s findings also indicate many businesses are missing a major opportunity to demonstrate the success that they have accomplished from working with their outsourcing partner by not measuring the benefits achieved or communicating these effectively with the wider teams. We can only conclude that this means money is being wasted by investing in innovation initiatives that are not delivering tangible results. The next steps must be to harness this innovation, by measuring it, communicating the effect it has on a company’s bottom line and growing it."

BPO provider Logica partners with Trintech to deliver software and services to multi-national companies wishing to outsource higher value accounting processes.

Logica has formalised its partnership with financial software provider Trintech, making Trintech Logica’s preferred software solution provider for General Ledger Accounting and Cash Reconciliation BPO.

Logica also uses Trintech’s solution internally to manage their consulting billing and cash collection processes.

“Our Customers expect the business benefits of outsourcing key financial processes to deliver not merely cost savings, but also improvements in process efficiency, quality and compliance. To achieve this improved process, visibility and a reliable ‘single version of the truth’ are essential.” Said Glenn Inniss, Logica Head of Finance and Procurement BPO. “The Trintech software suite is a powerful tool for monitoring, controlling and automating the Last Mile of Finance including account reconciliation, financial close management and financial reporting. It significantly strengthens our ability to support customers in both operational and strategic areas of their business.”

“Logica is the latest BPO provider to join the Trintech partner program. Outsourcing partnerships are a key component to Trintech’s accelerated growth strategy. The BPO sector is one of the fastest growing market segments for F&A. Recently, analysts forecast the BPO market to be $29.3B by 2013 (source Datamonitor; Black Book of Outsourcing).” Said Paul Byrne, CEO, Trintech. “In the market for outsourcing, financial executives need to have full visibility over the accounting process to ensure it is managed in a diligent, controlled, and compliant manner. With the escalating demands for faster close and increasing compliance requirements, Trintech solutions have never been more important to our clients and partners.”

Capgemini UK Chairman Christine Hodgson is Named Woman of the Year

Christine Hodgson, Chairman of Capgemini UK plc, was named 'Woman of the Year' yesterday in the Everywoman in Technology Awards 2011 which seek to recognise the most inspirational and successful women working in technology. She was presented with the top prize in the awards at a ceremony at the Landmark Hotel, London by famous science and technology expert and TV star Carol Vorderman. Capgemini UK plc is part of the Capgemini Group, one of the world’s foremost providers of consulting, technology and outsourcing services.

The awards, held for the first time this year, are the joint brainchild of three organisations - Everywoman, Connecting Women in Technology, and womenintechnology.co.uk. The awards were launched to demonstrate the career opportunities for women in the IT industry, which employs some 1.2 million people in the UK, only 23% of whom are women, and to provide role models inspiring more women to choose technology as a career.

The Team Leader of the Year category in the awards was won by Billie Major who leads a team in the company's Aspire business unit which delivers IT services for HM Revenue & Customs.

Paul Hermelin, Chief Executive Officer of the Capgemini Group, said: 'I warmly congratulate Christine and Billie on their success in these awards. We are proud of our record in promoting equality of opportunity at every level and we hope that these two outstanding women will inspire others to join our industry and appreciate its many exciting career opportunities.'

The NOA has commented on George Osborne’s budget as he unveiled tax cuts to lure major companies to London and promote growth through boosting enterprise.

The Chancellor announced a blitz on red tape and a reduction in the cost of doing business in the UK.

The budget includes cutting corporation tax by an extra penny. Combined with previously planned cuts that means a 2p cut on April 6 from 28p to 26p in the £, falling to just 23p in 2014/15, 11p less than France and 7p lower than Germany. A low rate of corporation tax of just 5.75 per cent will also be used to lure major multinationals who are especially welcome in the UK.

Andy Rogers and Bharat Vagadia, the National Outsourcing Association (NOA), commented: “The National Outsourcing Association welcomes the Chancellor’s budget, and in particular the commitment made to boosting enterprise in this country. New measures, including an increase in Income Tax relief on the Enterprise Investment Scheme, and the introduction of a new Enterprise Capital Growth Fund which will provide more than £37.5 million of equity finance to SMEs, are clearly aimed at easing the burden on SMEs.

“It’s clear that those looking for Mr Osborne to scrap the measures introduced after last year’s Spending review were always likely to be disappointed by today’s announcement. However, it’s clear that the government is looking to make good on its recent pledge to attack what the Prime Minister calls the ‘enemies of enterprise’ and by offering support to British entrepreneurs, it’s clearly good news for those looking for a more diverse range of outsourcing suppliers, and not just those able to offer the fattest contracts.

”Indeed, today’s budget announcement should ensure that the pool of smaller suppliers able to take a slice of the public sector pie will become even deeper, which perhaps signals a commitment from the government towards a rise in multi-sourcing.

“With this in mind, perhaps it’s a surprise that we’ve seen no pledge from the government in terms of training those in the public sector to deal with this rise? Very few workers in the public sector will have any experience of how to manage a number of different suppliers effectively, so perhaps it would have been a good move for the government to set aside some budget towards training public sector workers in this respect? Given the expected rise in more outsourcing, more private sector engagement within the public sector, and the likely scaling back of the public sector workforce, it would have made sense to invest more in training to make this workforce increasingly mobile.

“This investment in training might even have been expanded to further support smaller enterprises, which have no real experience in dealing with contracts. Another way the Chancellor could have demonstrated this commitment to enterprise is to introduce incentives to smaller organisations looking to bid for public sector contracts, perhaps by making the bidding process itself tax deductible.”

Not-for-profit business group argues tax and red tape plans should have gone further

One of the UK’s leading business organisations is welcoming several short-term measures to boost enterprise announced in today’s Budget – but arguing that more must be done in the long-term if small businesses are to truly drive economic growth and job creation.

The Forum of Private Business believes substantial measures on fuel duty – including an immediate cut from 6pm tonight and cancelling annual rises that had resulted from the introduction of the fuel duty escalator – should provide some cash flow relief for struggling small firms.

Equally, the Forum is welcoming a range of small business tax breaks including lower rates for businesses based in 21 new ‘enterprise zones’, increasing tax relief available under the Enterprise Investment Scheme and the decision to keep Community Investment Tax Relief contrary to recommendations made by the Office of Tax Simplification (OTS).

However, while the Forum also welcomes the Government’s continued commitment to reducing corporation tax overall, it is disappointed that small firms’ corporation tax bills are not being reduced by a similar rate to the higher level paid by big businesses, which the Chancellor is now slashing by 2% in April - double the reduction that had been planned – and from 28% to 23% by April 2014.

The Forum believes a number of opportunities have been missed for real root-and-branch tax simplification and radical reforms removing small firms from tax wherever possible – incentivising small businesses charged with leading economic recovery, rather than pandering to large companies. In its submission to the 2011 Budget the Forum called for the lower corporation tax rate to be cut to 17%.

In particular, the organisation is concerned that simply lowering from £18 to £15 the threshold price of goods shipped via the Channel Islands on which no VAT is payable will not stop large companies exploiting Low Value Consignment Relief (LVCR).

The Forum agrees with the pressure group Retailers Against VAT Abuse (RAVAS) that the real test is whether businesses that do not have offshore facilities can now compete on an equal basis with their counterparts on the Channel Islands. The answer for smaller retailers – including those selling CDs and DVDs which will still have to charge VAT – is clearly no.

It is important that the Government’s plans to work with the European Commission to limit the scope of the relief so that it can no longer be exploited for a purpose other than what it was not intended for stops the LVCR trade once and for all.

The Forum also believes that merging Income Tax and National Insurance (NI) into a single payroll tax is a step towards simplifying the UK’s complex tax system, and welcomes the announcement of a consultation into this, but is concerned that NI – a tax on employment at a time small businesses are charged with creating jobs - is still rising for most firms.

With the ability of small businesses to employ people under scrutiny, and a raft of employment legislation covering issues such as the default retirement age, pensions, parental leave and agency workers on the horizon for 2011, the Government’s plans for red tape have been keenly anticipated by business owners struggling to cope with the annual £12 billion cost of compliance bill.

Providing it produces measures that actually reduce small firms’ administrative burden, a review of all existing business laws is both welcome and long overdue - as is a specific review of health and safety law with a commitment to scrapping all unnecessary health and safety red tape.

In its capacity as Secretariat of the All Party group on Micro-business, the Forum is also backing the Government’s announcement that all firms with 10 employees and under – both start ups and established businesses - are to be given a three-year holiday on incoming red tape.

However, the organisation is concerned that the moratorium will not apply to red tape stemming from EU law – which creates the majority of regulatory hurdles for small firms - and is also calling for similar regulatory relief for larger SMEs that have also been charged with creating the jobs set to be lost in the public sector.

The Forum is also welcoming the announcement of an additional 50,000 apprenticeships over the next four years, but believes more support is required to help entrepreneurs create these apprenticeships within their businesses, and proposed changes to make planning laws more business friendly.

“It was important a Budget heralded as being pro-enterprise focused on easing the dual burdens of tax and red tape – two of the biggest barriers to business growth and job creation facing small businesses. In that sense, we weren’t disappointed and this was certainly more than just a nod in the direction of UK SMEs,” said the Forum’s Chief Executive, Phil Orford.

“However, while there have been some definite steps in the right direction the Government could have gone further in reducing taxes and making the tax and regulatory systems more proportional to all small businesses so that they incentivise to entrepreneurship rather than act as a barrier to it.”

Mr Orford added: “In summary, there are some good short-term measures here but more radical changes are required over the longer term.The lessons of history show that you achieve rapid, widespread small business growth – and therefore economic growth - by removing entrepreneurs from the stranglehold of tax and red tape as much as is practically possible.

“While they will broadly welcome many of the Chancellors’ announcements, British business owners will be looking for much more in the way of real actions in the weeks, months and years that lie ahead.”

Indian outsourcing vendors like Infosys, Cognizant and Tech Mahindra are set to gain new projects worth hundreds of millions from AT&T's acquisition of T-Mobile.

AT&T has announced that they have entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction currently valued at approximately $39 billion. The agreement has been approved by the Boards of Directors of both companies.

With this transaction, AT&T commits to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95 percent of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns. This helps achieve the Federal Communications Commission (FCC) and President Obama’s goals to connect “every part of America to the digital age.”

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” said Randall Stephenson, AT&T Chairman and CEO.

Renault has selected arvato to develop and manage a front-office contact centre for Renault owners across the UK and Ireland. From April, the multi-channel solution will be the first point of call for after sales enquiries including customer enquiries, requests for information and complaints reception handling. The dedicated arvato team will be based in Twickenham.

The appointment expands arvato’s existing back-office relationship with Renault, which has already saved the business over £1.7million a year since 2007, through streamlining its B2B fleet vehicle services such as appointment and demonstrator bookings.

“arvato has already proved its strength as a true business partner to Renault in our B2B operations, and has demonstrated its ability to continually improve processes,” said Andrew Kirk, purchasing manager, Renault. “Its professional team, combined with an innovative and flexible approach to service delivery will enable us to deliver excellent customer engagement as well as considerable savings for the business.”

“Renault’s strong brand reputation has to be matched by its customer service and engagement, so it’s critical any enquiries are dealt with quickly and effectively, and any commercial opportunities are qualified and correctly progressed,” said Mark Brown, Managing Director, Contact Centres & Loyalty, arvato UK. “We’re delighted to expand our long-standing relationship with Renault, which will enable us to develop even greater savings and efficiencies for the business and help support its continued growth in the UK and Ireland.”

According to IT recruitment specialists, Greythorn, the 2012 London Olympics will require at least 5,000 extra IT and Telecoms staff to develop and control the systems that are necessary in order for the event to run smoothly and to plan. The new personnel will be engaged in everything from making sure that news networks can upload their feeds to keeping cyber-terrorism at bay.

Greythorn have calculated that the average salary for the IT jobs will be £48,500 p.a. making a total of just under £250m in annual salaries.

IT support is rapidly becoming one of the UK’s largest employers with nearly 1.5 million workers currently engaged in the industry.

It is anticipated that the London Olympics will create well over 100,000 jobs which are expected to become permanent.

Cathay Pacific Airways and IBM have announced the signing of two multi-year agreements whereby IBM will provide Application Support and Maintenance Services and Application Development Services as part of Cathay Pacific's plans to change its IT operating model and tap into external service providers to deliver key services and solutions.

Cathay Pacific will leverage IBM's Application Support and Maintenance Services to manage over 80% of its application portfolio. IBM is also included in Cathay Pacific's panel of providers for providing Application Development Services. Both services will be backed by IBM Global Business Services consultants specialised in the travel and transportation industry, and IBM development resources through the company's Shenzhen Global Delivery Center and the Center of Excellence for the Aviation Industry.

"Partnering with IBM is consistent with our strategy to leverage the external market to assist in delivering solutions that support delivery of world-class service to our customers,” said Tomasz Smaczny, Director and Chief Information Officer of Cathay Pacific. "We look forward to a long-term relationship with IBM and being able to capitalize on IBM's capabilities across technology and business processes.”

"We are pleased to partner with Cathay Pacific to integrate our business insight and technology expertise to enable Cathay Pacific to deliver on its long-term growth strategy."said D.C. Chien, General Manager, IBM Greater China Group. "We believe we can help Cathay Pacific in its efforts to drive customer acquisition and loyalty while growing shareholder value and delivering sustained service levels and controlling costs."