Industry news

Accenture Reports Strong Second-Quarter Fiscal 2011 Results

Accenture reported strong financial results for the second quarter of fiscal 2011, ended Feb. 28, 2011, with net revenues of $6.05 billion, an increase of 17 percent in U.S. dollars and 18 percent in local currency over the same period last year and exceeding the company’s guided range of $5.6 billion to $5.8 billion.

Diluted earnings per share were $0.75, an increase of $0.15, or 25 percent, over the same period last year.

CGI, a leading provider of information technology and business process services, has been named as a preferred vendor by TD Bank Group (TD).

TD will include CGI for consideration when selecting vendors for opportunities across its business and technology functions.

“We have selected CGI in recognition of the commitment and depth of the relationship that exists between TD and CGI,” said Mike Pedersen, Group Head, Wealth Management, Direct Channels and Corporate Shared Services, TD.

“CGI has been providing quality services to TD for over two decades, and we look forward to expanding the scope of business with CGI to support TD’s global growth.”

Releasing the pressure on IT Directors – Providing virtual access to essential but expensive resources

For cash strapped IT Directors, reducing internal IT resources has been essential over the past couple of years. Yet despite outsourcing desktop support and moving applications into the cloud, the vast majority of organisations still feel compelled to retain expensive legacy skills in house. While these individuals are responsible for the smooth running of business critical applications, these systems are stable and hardly require full time expertise.

Yet outsourcing support for these applications is far from simple. Most providers do not have the required skills and will coerce the organisation into an expensive and destabilising upgrade process. This is frankly unacceptable. It is also unnecessary when the right skills are already available in the market.

Paul Timms, Operations Director, Maindec, asks why organisations are failing to leverage the skills and long term expertise of third party providers to attain virtual access to these legacy resources as and when required.

Squeezing Resources

Over the past couple of years, IT Directors have had to squeeze every last penny from the budget. With a freeze on capital expenditure and stakeholders now demanding accountability for every component of IT spend, outsourcing contracts have been renegotiated and organizations have looked ever more closely at the financial pros and cons of cloud computing.

With people, especially expensive IT people, representing one of the biggest corporate costs, there is growing pressure to cut heads. Yet while many internal resources have been cut to the bone, the majority of organisations still have one or two expensive experts on the staff; the indispensable individual responsible for the smooth running of the essential, but typically ageing, key corporate system.

These systems rarely require the attention of a full time employee. But with these legacy skills increasingly tough to find in the open market and most outsourcing/support organisations offering only the most basic and recent skills, organisations have no choice but to retain these costly resources in house.

Legacy Overhead

This requirement is increasingly frustrating IT Directors who, supported by senior management, are increasingly looking to focus on the core business and embrace the hosted/cloud computing model as far as possible to drive down costs and further rationalise internal skills sets.

So just what can be done with these legacy applications running on old HP, DEC, Compaq, or even IBM kit? They may appear to represent an unacceptable operational cost, but these systems cannot simply be switched off. The applications may be stable and rarely require attention but they are often business critical; they are running key aspects of the manufacturing, distribution or financial process.

Yet turn to the vendor or mainstream outsourcing or support provider for advice and the organisation is likely to find itself required to undertake an expensive and destabilising upgrade process simply to achieve a ‘supportable’ infrastructure.

This strategy may reduce the need for expensive dedicated resources but at what cost? The business impact is huge – from the cost of the upgrade, of both infrastructure and application redesign, to the associated risk. Making this level of investment at a time of budget cuts, simply to retain the status quo rather than add quantifiable business value cannot possibly make sense.

Flexible Access

In an ideal world, of course, any IT Director should jump at the chance to replace the in house head with access to these skills as and when required. So why are so few companies looking beyond the shallow skills base of traditional third party organisations and exploring the benefits of legacy specialists?

Third party organisations with a track record of providing support across diverse legacy platforms for several decades can offer not only technical expertise but also valuable vertical market insight and knowledge. They can share best practice and, critically, offer such skills in a highly flexible manner, such as regular clinics.

Rather than have a full time expert, organisations can opt for a named individual from the third party to come in for four hours a week, for example, to address and fix specific issues. This is a far more cost effective way of handling support than opting for a full time employee. Critically, with the right organisation, this model can be extended to encompass every aspect of the IT skill set, from desktop services to supporting those key legacy applications, providing the IT Director with lower cost IT team that also has the right mix of essential skills.

Conclusion

The move towards outsourcing and cloud computing is gaining pace as organisations increasingly recognise the value of focusing on the core business. But getting the balance right between retained IT expertise and accessing the right external skills remains a work in progress for many organisations.

Research indicates that, today, about 10% of companies with IT and Telecoms professionals report gaps in their skills. In three years time this will be worse and training requirements will increase by a third. And while this affects every aspect of the IT infrastructure, there is no doubt that as new IT graduates have no grounding in older technology, the access to the skills required to support legacy systems in house will become ever more scarce and expensive.

Organisations need to retain IT Management skills, keep those one or two individuals that understand the IT requirements of the business. But there is no reason that the vision of a radically reduced internal IT team cannot be achieved however ageing the underlying infrastructure. Tapping into the breadth of skills, long experience and vertical market expertise of a third party can support that mix of cloud and local infrastructure and, critically, provide virtual access to a range of skills on demand.

Martyn Hart, Chairman, NOA, argues that the Channel 4 Dispatches programme missed the point

Last week’s episode of Channel 4’s current affairs documentary series, Dispatches, raised a number of interesting points around whether outsourcing suppliers in the private sector are the true beneficiaries of the government’s spending cuts. But did it miss the point?

Screened on the eve of a major report on public-sector pay was announced, the programme highlighted the multimillion pound pay packages being earned by heads of private organisations which provide public services, and questioned why they should be the ones to benefit.

But what’s the objective here? By scaremongering, and forcing private sector companies such as government services company Serco, to defend the salaries of its top managers, the programme served only to undermine the private sector’s ability to adequately provide these services.

This is despite the fact that private outsourcing companies are offering a real and credible solution to some of those who fear that they will be affected by the cuts, by creating new jobs and cost efficiencies.

The programme, presented by financial journalist Ben Laurance, used the word ‘profits’ as though it were a dirty word - an interesting approach, given the troubled economic times we are living in! Is it not in the interests of every private sector organisation to maximise its profits?

If it can achieve this by relieving the financial burden on the tax payer and ensuring that these services are run effectively, then should it matter how much the company heads are earning? Surely, one of the government’s responsibilities is to cut costs, and stimulate growth in the private sector to help take this country out of the choppy financial waters?

Dispatches also asserted that the government’s ‘Big Society’ flagship policy could benefit big business and cause the public and voluntary sectors to feel the strain.

However, it conveniently made no mention of the government’s recent initiative aimed at ensuring that small and medium-sized organisations are able to bid for government contracts, with a view to increasing transparency and ensure that big businesses are not the only ones to benefit.

The programme also highlighted a number of areas in which outsourcing suppliers have had a negative impact, citing schools in Bradford as one example. It’s worth bearing in mind that any outsourcing deal has the potential to produce inconsistent results, if objectives have not been correctly set and communicated from the outset.

The programme was right, of course, to imply that simply giving out a contract to the biggest supplier is not the way forward, and care must be taken to ensure that suppliers can provide a compatible cultural fit, and the right level of expertise in order to achieve a successful outcome.

However, what Dispatches did not highlight was that outsourcing and shared services has saved millions of pounds for organisations in this country, with many proven examples of this success.

By refusing to present a balanced argument as to the pros and cons of outsourcing, Dispatches has missed the point, which is that if deals are tendered, and carried out in the correct ways - as the government seems intent on doing - there’s no reason why outsourcing service providers in the private sector should not be the beneficiaries of the government’s spending cuts - after all, they could be the most viable solution for us all.

How purchase-to-pay solutions can give you control of payment cycles – and help you gain over 30% annual return on capital through settlement discounts.

Ask a CFO if they would like a 30-plus percent annual return on capital, while making their financial processes more efficient, and you’d probably get your hand bitten off. Especially in the current climate, which tempts businesses to hold onto their cash for as long as possible.

At the end of 2009 UK businesses had significantly improved the time it takes them to settle their bills, according to Experian’s Late Payments Index, the global information services company. Firms were paying their late bills an average of just under 21 days after agreed terms - an improvement of over 2.5 days compared with the previous year.

But while everyone’s doing it, it isn’t good for supplier or partner relationships. Nor does it make the best financial sense. So why do organisations persist in holding onto cash?

CFO versus CPO

Looking at the issue from the traditional CFO viewpoint, the only leverage they have on suppliers is payment terms and the retention of working capital. On the other hand, the traditional view of the head of purchasing is NOT to squeeze suppliers by extending payment terms, because of the risk this might incur to the company’s supply chain.

So the arm-wrestling contest between purchasing and payment continues. What’s more, the contest is usually over very small percentages. A typical business reserve account gives around 3% interest, or just 0.25% per month. It’s better than nothing, but does it compensate for the squeeze on suppliers and the risk it causes?

Doing the maths

The alternative is dynamic discounting. While paying suppliers early to improve your own cashflow seems counter-intuitive – and is likely to cause some internal controversy – the figures certainly add up.

Let’s assume that by offering to pay invoices in 10 days instead of 30, a company negotiates an average additional discount across its suppliers of 2%. That’s nearly six times what it would earn in interest by delaying payments. Furthermore, the return on capital would be 2% in 20 days, or over 36% annually – a figure which would soothe the most ruffled feathers.

Even if the negotiated early-settlement discount was half of the above – just 1% -- that’s an 18% annual return on capital. Whilst there is some discrepancy between achievable returns in practice and theory, there is NO argument that the payoff achievable through returns on capital employed by better management of supply chain finance is vastly superior to those achieved by e-invoicing, scanning and the resultant head count reduction.

Capturing the discounts

Although the figures are compelling, there’s still the issue of ensuring that payment systems are capable of tracking and hitting early settlement deadlines. So how can you be sure of achieving this?

The secret is gaining control of the purchase-to-pay process, which then gives financial managers a choice of how and when to pay, in order to best suit their working capital strategies.

Having an automated invoice processing solution, whether in-house or outsourced, is a key first step, to ensure that invoice is received electronically or data is taken off paper documents through scan and OCR thus enabling electronic processing. However, it’s vital to look beyond simply scanning and capturing of invoice data, and uploading it onto the accounting system.

The most vital stage is what happens after the invoice is digitised – the matching of the invoice to its corresponding PO or contract and other supporting documents, so that all evidence for prompt approval and payment is available to AP and other staff involved in the approval process.

The second issue is ensuring that the staff who approve invoices can do so quickly and easily. Manual tasks like finding supporting documentation, checking and consolidating can cause delays that could mean early settlement deadlines are missed. Not forgetting the costs associated with downstream journal corrections, and other corrective measures that arise in a manual – or less than fully automated – process.

Automatic for the payments

So automation is critical, as is the ability for AP staff to access their invoice workflow wherever they are. A cloud-based solution is ideal for these circumstances, so the workflow can be processed on handheld devices, laptops, or when working from home.

Integration with core business systems is also critical, so that any exceptions (such as invoices without orders or incorrect coding) can be highlighted, and escalated where needed. This way, automation can be applied allowing management by exception. This also means that targets like settlement deadlines can be built into workflow, so they can be hit every time and ensure savings are captured.

Benefiting from your banking

Many organisations already have the building blocks in place for integrated purchase-to-pay solutions, which in turn would give them the capability of deploying dynamic discounting to suppliers and partners, boosting capital and reducing the cost of doing business.

Another option is to look at Reverse Factoring, working with your bank. Where traditional factoring uses an invoice as the underlying asset for financing, Reverse Factoring brings the qualified invoice into play. In essence, traditional factoring deals with the supplier’s receivables from many ‘unknown’ buyers, whereas Reverse Factoring deals with the payables of one well-known buyer.

The weakness with traditional factoring is, the factor company does not know whether the supplier really delivered the promised goods or services, or whether the delivered goods or sent invoice will be contested by the buyer. As a result, only about 70% of the invoice value would normally be financed.

However with Reverse Factoring, the buyer approves the invoice prior to the financing organisation settling with the supplier, thus enabling financing of 100% of the invoice value.

So back to the beginning – the keys to Accounts Payable automation or P2P are control and choice. If you have the control over your process, which gives you insight into the real financial data as a Finance manager, you have the choice of how and when to pay your supplier. This in turn allows you to maximise the return on your capital.

The fundamental point is to ensure that systems are integrated, so that staff can track the status of invoices throughout the payment cycle. If you can’t approve an invoice within 5 days you will not have the choice of reverse factoring or dynamic discounting.

But for companies that have that integration and control over their cycle, purchase-to-pay automation offers a real payback.

How much of an impact has the financial crisis had on the BPO industry? And what has it meant for BPO locations around the globe outside of India?

Market uncertainty since the financial crisis has led to a conservatism which has forced companies to delay their decision making, concentrate on reducing operating costs, and focus on short-term objectives. At the same time the demand for protectionist measures is also becoming more forceful.

In their latest 2010 Market Vista report, Everest argues that the global outsourcing market has rebounded well with the overall number of outsourcing transactions increasing from 1,730 in 2009 to 1,979 in 2010. The recovery is being led by North America with Banking, Financial Services and Insurance and Manufacturing, Distribution and Retail continuing to dominate. Together these two verticals represent 35% of the total market in 2010 compared to 30% in 2008. Recovery in Europe is being spearheaded by the UK with a global overall share of outsourcing transactions of 14% in 2010. Everest reports how offshore suppliers on average continue to outpace traditional global service providers with growth of nearly 30 % in 2010 whilst traditional global providers have lost ground.

Significantly, Everest predicts a consolidation in the Tier-II service provider landscape in the near future citing recent M&A activity such as Hewitt and AON, Atos Origin and Siemens, IBM and Netezza. This kind of activity underpins the change in market structure by showing that the consolidation of vendors will reduce risk as will less focus on arbitrage and more focus on quality. Everest concludes that Africa can benefit from this market shift and can become the new frontier in global services.

In February this year, representatives from South Africa participated at NASSCOM’s leading industry event, the “India Leadership Forum”. The forum backed up many of Everest’s observations. With over 1600 delegates from 32 countries participating in the conference, it was used as a platform to show South Africa’s role in the future of the industry. Keen interest was shown around the discussion of “global delivery strategy” with two prominent Indian BPO companies, Genpact and Aegis, explaining their decision to base operations in South Africa and how they will use the country as a gateway to the rest of the continent.

Genpact and Aegis highlighted the strengths of the South African value proposition with its English speaking capabilities and cultural affinity to the UK. The world class infrastructure, placed under the critical global spotlight of the World Cup, was applauded, as was the stable political environment. Preference for a similar legal and regulatory framework also plays an important role in the decision making process. On the cost side South African government officials from the Department of Trade and Industry were able to demonstrate South Africa’s competitiveness by explaining the new incentive scheme which reduces costs by an impressive 20%. In the last 24 months, five of the top 10 global voice companies have moved to South Africa making it the third largest low cost offshore location for the UK market and I believe we will be seeing further investment, from both UK and Indian companies this year.

As global financial uncertainty has lifted, we are witnessing a much higher level of interest in the BPO offering in South Africa. Most recently Amazon has opened its doors with 1,000+ seats planned and the level of activity for inbound missions has also increased substantially. Recently a large Indian BPO provider came to the Cape Town to view operations on the ground. Why? “Because our clients are insisting we deliver a more global offering”. Their excitement after engaging with local industry representatives confirmed that BPO has a strong future in South Africa.

Recently we showed a major UK telecom company the Australian iiNet site which is being run by Merchants. The iiNet environment is increasingly governed by new metrics such as Net Promoter Score which underlines the relevance of managing the customer experience in a holistic manner. The site received rave reviews from the UK visitor. Aegis, too, also stresses the importance of ensuring that “customer service process outsourcing is not about cost cutting but is seen as an investment to retain customers and enhance the customer experience”.

The combination of global players entering South Africa’s BPO market with the already flourishing local market highlight the country’s key role as a hub for BPO’s global services.

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.'