Industry news

According to reports, the Department for Business Innovation and Skills (BIS) has predicted that the renegotiation of its Elgar contract will save £5m this year.

Elgar is an outsourcing contract to supply and manage IT equipment and core services put in place by the former Department for Trade and Industry. Fujitsu receives about £28m annually under the terms of the deal.

The renegotiations with supplier Fujitsu were completed last autumn, and "resulted in savings of £50m a year over the life of the contract," from 1 April 2009 to 2014.

The department's resource accounts for 2009-10 say that it renegotiated the contract to remove the majority of the 'technology refresh' element.

BIS will now pay for new hardware directly from its own capital budgets for the remainder of the contract period.

Alex Blues, Head of IT Sourcing at PA Consulting Group, comments on Africa's rising popularity as a offshoring destination.

According to the 2009 A.T. Kearney Global Services Location index, Africa has become one of the fastest growing offshoring destinations in the world.

• Egypt is the 6th most popular location moving up from 13th,

• Ghana has moved from 27th to 15th,

• Tunisia 26th to 17th,

• Senegal 39th to 26th,

• Morocco from 36th to 30th

• And interestingly South Africa has moved the other way from the 31st to 39th.

Looking at Africa it is important to realise that you can divide the country into three areas, firstly Northern and Saharan Africa, the up and coming West and East African countries and then Southern Africa, particularly South Africa.

Northern Africa

Egypt has become a much more popular destination as American giants such as IBM and EDS have both had operations here for some time and interestingly, Wipro and Infosys have been expanding into Cairo, thereby taking advantage of the availability of low cost well qualified people. Egypt, like Morocco, also has huge support from the government to expand this ability which is key to sustainable success.

Moving along the African coast, then Morocco has rapidly found its presence as a supplier of outsourcing services to the French market. Until recently, Morocco’s outsourcing market had focused on call centres, but its expansion into banking/ insurance, telecommunications and information technology is being supported by infrastructure investment and the development of four outsourcing hubs at Fes, Marrakech, Tangier and Casablanca. A good example of increased presence is Capgemini’s recent investment in Morocco, providing sourcing services to the French market. Tunisia meanwhile is looking to emulate Morocco’s success.

West and East Africa

Kenya is heavily promoting itself as an offshore destination. As part of Kenya’s strategic plan called ‘Vision 2030’, BPO (Business Process Offshoring) has been selected as one of the six main economic pillars. With this is mind, Kenya hopes to quickly become one of the top three destinations in Africa, and government goals by 2012 are to create 7500 jobs in the BPO industry of which 5000 will be located in BPO parks.

Countries in West Africa, particularly countries like Ghana and Senegal, are growing from a very small base and outsourcing in these countries is quite often done by providing outsourced services to other West African or Central African countries. However these countries are ones to watch for the future.

Southern Africa

Moving further south, to South Africa, 5-6 years ago this was a very popular destination particularly for call centres and for financial service applications, especially in and around Cape Town and to a lesser extent Johannesburg and Durban. Interestingly, the reason for the decline is an increasing concern about the increasing value of the rand, as the economic case becomes less compelling and concerns about infrastructure deterioration grow.

Like Egypt, South Africa has looked to partner with India. The reason for this is that India is geographically closer to Europe than South Africa by roughly four hours but the time zone difference in Africa is no more than two hours + or – GMT.

In all, we are seeing much more complex relationships, with countries such as South Africa for the UK market and Morocco for the French and Spanish markets, providing first line support with India providing second and third line support, making Africa one of the fastest growing offshoring destinations in the world.

Over the past decade we’ve seen an increasing number of large organisations applying the concept of outsourcing to their human resources functions. And perhaps one of the most effective applications of the approach in this area has been in the allocation of the process driven aspects of recruitment to outside specialists.

But are too many employers now entering into such relationships simply because it has become’ accepted practice’ in the HR arena and without a real grasp of what recruitment process outsourcing (RPO) can actually achieve?

Towards the end of 2009 Ochre House conducted a survey of over 100 companies and financial institutions across the EMEA region and found the main reason for outsourcing recruitment functions was to reduce financial costs. On average, organisations had expected to make a saving of 37% but in practice this turned out to be closer to 20%. So does this mean that recruitment process outsourcing cannot actually deliver what it promises?

More detailed examination of the research tends to suggest that the real problem lies, not in a failure to deliver, but in a lack of understanding of the real benefits of RPO. Not a single one of the organisations questioned, that regarded their outsourcing decision as ‘successful’ or very successful,’ had rated cost saving as a highly important criterion. Instead their motivations had included the improvement of employer brand, more efficient sourcing and hiring processes and access to specialist expertise.

According to one respondent, Simon Patton, the then HR director of supermarket chain Somerfield (now part of the Co-operative Group), “Of course price played a part in the final negotiation process but it wasn’t the factor that got us there in the first place. You can make cost savings through outsourcing but it shouldn’t be your major driver, because if you are focused purely on the bottom line you risk being disappointed.

“Efficiency, simplification and added value are the areas where you can make real wins. I don’t say this lightly and it wouldn’t be the right move for everyone, but outsourcing was the best decision I’ve made as an HR director.”

What the research also uncovered, however, was that the organisations which took a wider view of outsourcing were often those that ended up making the most significant financial savings. One of the major reasons for this is that improving processes through more efficient technology, the employment of more effective talent sourcing channels and a move to best market practice can all combine to deliver better value in the mid to long term.

However, perhaps even more importantly, the businesses that take the strategic approach tend to be those which recognise that outsourcing should cover a much wider agenda than has traditionally been the norm. Recruitment is never a ‘stand alone’ function. Instead it is part of a complete talent management process, which needs to be addressed holistically.

After all, what is the point of creating an efficient and effective talent sourcing machinery if you do not subsequently get the best out of your recruits by ensuring that they are fully engaged and their training and development is effective or if a significant proportion of them leave before you can derive the maximum benefit from them?

Significant reductions in labour costs can be made but only if an outsource provider is allowed to work with an organisation on a strategic rather than a purely tactical basis. This means being able to address the whole talent management spectrum from recruitment itself through engagement to training and development and retention.

This could represent the true future of outsourcing in the employment arena, but one that can only come into being if a buyer undertakes the sort of rigorous selection process that will give them enough faith in a supplier to enter into a genuine partnership relationship.

As Ian Ruddy, European People Services Director for telecoms giant, Telefonica O2, puts it, “The day you have to take the contract out of the drawer is the day you don’t have a partnership anymore.”

India already holds at least 50% of the global outsourcing market, and has become the world's back office where Western firms set up call centres, number-crunching and software development outlets to cut costs.

It is, therefore, not without good reason that the visa bill which, if passed, would double the cost of visa application fees and add $200m in visa costs to Indian companies, has had such an unsettling effect in India.

Compared to the US, David Cameron’s statements during his visit to the Indian sub-continent a few weeks back was quite the positive one – comments about Pakistan notwithstanding. Maybe if chicken tikka were also a national dish in the US things would be different…

Indeed, HM Revenue and Customs is considering outsourcing sensitive tax processing work to India, a move that would save tax payers as much as £205m a year. Meanwhile, the British Council could outsource 100 IT and finance jobs also to India; the Foreign and Commonwealth Office as well as the Treasury could all have similar plans.

Outsourcing may be what Cameron had in mind when he devised his ‘Big Society, Not Big Government’ election campaign.

Thus the UK remains open to outsourcers provided there is increased inward investment in the UK.

But while this provision may have been intended to appease the public in general, that jobs are not off-shored does not mean that they won’t disappear; after all, efficiency often comes at the price of redundancies.

Certainly the government probably expects that the private sector will absorb some of the jobs lost in the public sector. But what happens when budget cuts also mean that private sector companies (working with the government) have less money with which to work, grow and create jobs?

Quite a tough decision to make: on one side cost-saving measures supported by efficiencies resulting from outsourcing. On the other increased unemployment, the problem of redundancies and increased cost of benefits.

Ah, the bitter-sweet taste of the path to economic recovery!

Wipro Infotech, the India and Middle East and Africa division of IT and business transformation services Wipro has launch of its FluidStateTM data centres targeted at SMEs.

Based on its model-driven engineering framework for next-generation data centres (DC) called FluidState, the FluidStateTM data centres from Wipro is essentially a pre-designed, prefabricated data centres, which can be setup in less than a week –almost 10 times faster than a conventional data centres.

FluidStateTM framework which stands for Flexible, Lean, Upgradable, Intelligent Data Centre, standardised for accelerated deployment, has been successfully implemented in many of the data centre projects undertaken by Wipro.

The modular design of the DC means it can be upgraded or downgraded without any downtime. The framework offers a greener data centre in terms of a unified computing environment with 24x7 lights out operation, capacity on demand, 4 times higher density per rack, up to 40% lower cooling cost and reduced carbon footprint. The data centre uses virtualisation and highest density in its building blocks.

Business process outsourcing (BPO) provider M&Y Data Solutions has officially changed to M&Y Global Services.

The new name reflects their growth in the Global BPO Services arena with their expanded breadth of service offerings and cross-industry solutions.

Founded in 2001, M&Y initially focused on providing document management services to UK and Australian markets. Today, M&Y provides a range of BPO services to the US and China markets as well.

M&Y Global Services has broadened its range of business processes offerings to include services for domains in insurance and banking, retail, construction and manufacturing.

Additionally, M&Y now offers cross-industry services in finance & accounting (F&A), contact centre, market research and supply chain management.

The Shared Services & Outsourcing Network (SSON), the largest and most established community of over 35,000 shared services and outsourcing professionals, has launched SSON Collaborative Research, powered by Peeriosity a solution for researching and evaluating best practices.

Organised around the interests of the community’s members, advanced communications and networking techniques ensure a knowledgebase is created through member interactions, as a natural outcome of leading companies collaborating on the most pressing issues they face.

Leveraging state-of-the-art technology and professional facilitation, members interact via advanced networking methods, iPolling, and monthly webcasts featuring actual peer experience; with online access to member shared documents, vendor contributed documents and case studies, and high level benchmarking surveys.

Global steel company ArcelorMittal has awarded IT services provider Wipro a five-year transformational engagement consolidate and migrate its messaging systems to the Microsoft Exchange 2010 messaging platform.

The agreement will see Wipro host the new global messaging system on its hardware, hosted at six ArcelorMittal datacentres, spanning across North America, Latin America, East and West Europe and Asia.

As a critical component of this contract, Wipro will secure ArcelorMittal’s global messaging system using state-of-the-art anti-virus, anti-spam and archival solutions.

Wipro will also manage ArcelorMittal’s global messaging systems for the entire period of the contract. This engagement will help transform ArcelorMittal’s messaging environment and curtail their global messaging spending.

Wipro will use its Next Generation Global Command Center (GCC) for rendering the global messaging management services.

It is understood that Spanish IT solutions provider Amadeus is bidding for Philippine Airlines (PAL) comprehensive passenger service system (PSS) system contract.

The PSS system covers the reservation, inventory and departure control of a full-serviced airline. PAL is to upgrade its IT systems in a move to become more cost efficient and globally competitive.

PAL asked bidders to submit their PSS proposals last year. The Lucio Tan-owned company, which is undergoing labour issue problems, is expected to announce the results of its decision by next month.

Currently, Amadeus distributes PAL’s international bookings through its global distribution system, but runs on a 40-year-old IT system PACERS 2 system.

Amadeus would like to expand its partnership by proposing to provide its entire PSS, which covers the reservation, inventory and departure control,of the country’s one and only airline company.

While adapting to the new Amadeus Altea Suite, which is being used by most legacy airline companies globally, could mean displacing some people because this means automating some functions, this new way of doing business would add more value to an airline because it would mean efficient operations and cost efficiency.

Outsourcing of IT system will enable the airline to allocate more resources to more critical areas of their business.

So far, 160 airlines are using the Amadeus platform because it provides better integration with travel agents and airline partners. Amadeus Altea Suites accounts for 64% of One World airline alliances, 30% of Skyteam carriers and 63% of Star Alliance Carriers.

New Delhi has pronounced itself against the hike on the US visa fees for foreign workers; India termed the bill "discriminatory".

The bill, which would see the cost of a visa application to $2,000, would cost Indian companies over $200m a year.

The legislation would raise fees for H1B and L1 visas, which outsourcing companies use to send workers to the US for project work.

The fee increases would only be levied on companies where over half of US -based employees use work visas.

It has been argued that the bill unfairly targets Indian companies as US companies like IBM, Microsoft and Intel - which use more foreign-worker visas than Indian companies - would not be liable for the increased fees because a greater proportion of their workers are American.

The visas, usually issued for a three-year period, allow temporary employment of foreign workers in specialty occupations. The US has a quota of about 100,000 H1-B visas each year.

Indian companies, such as Infosys, Wipro and Tata Consultancy Services, top the list of companies receiving the largest number of these work permits.

Indian software services companies pay over $1bn each year to the US government in the form of Social Security, "with no benefit or prospect of a refund".