Industry news

The Co-operative has brought 36 IT roles back in-house following its acquisition last year of supermarket chain Somerfield. The roles relate to helpdesk and store systems support, as the company opts to re-create jobs previously outsourced by Somerfield.

According to reports, 613 of the original 1,022 employees working at Somerfields Bristol headquarters, have already left, with most of the remaining staff expected to leave by Christmas. The Co-operative began its plans to close the Somerfield headquarters over a year ago in order to deliver cost savings.

Director of information systems food retail Mark Hale insisted that the grocery chain’s IT department will not be hit by the plans:

“What happened within Somerfield was that the vast majority of IT functions were outsourced to Tata Consultancy Services (TCS), which left a fairly small retained team of about 18 people. We’ve decided to take a number of services back in-house and so we’ve created some new roles.

“We’ve actually created a number of roles and brought a number of those jobs back from TCS into Manchester,”

Hale explained that Somerfield used a totally outsourced approach to IT, whereas Co-op had been selectively outsourcing IT functions, depending on where it could see value in outsourcing.

“We decided that our model of selective outsourcing is the model we wanted to use moving forwards, rather than a total outsource,” said Hale.

"We reviewed the cost. Our cost model was, broadly speaking, the same as Somerfield if not slightly better, and we didn't see any benefit of going down the total outsourcing model route."

CSC’s Business Process Outsourcing Services Help Reinsurer Optimize Operations and Improve Customer Service.

CSC (NYSE: CSC) today announced a 10-year extension to its business process outsourcing (BPO) services agreement with Swiss Re, one of the world’s largest and most diversified reinsurers. Under the extension, CSC will continue to provide industry-leading administration for Swiss Re’s direct life insurance business through July 2020.

Building on a relationship that began in 1995, CSC supports Swiss Re’s Admin Re® business unit in the United States, one of the highest growth areas for Swiss Re’s global life and health segment. Through its Admin Re® programs, Swiss Re provides capital and risk solutions to primary life insurance carriers by acquiring blocks of life insurance business, enabling these primary insurers to release capital and gain access to future profit streams from in-force portfolios. This strategic renewal solidifies the global market leadership and commitment of both organizations in providing cost-efficient alternatives for life insurance policy administration.

To strengthen the combined offering, CSC and Swiss Re have jointly outlined innovation strategies to drive even greater efficiencies in administration, improved customer service and enhanced system alignment across the business. As part of this initiative, the team will be incorporating new features of CSC’s CyberLife, Customer Service Accelerator and Claims Management Accelerator software to provide additional e-delivery and self-service capabilities and enhancements to claims processing.

“Having worked with CSC for 15 years, we know the team understands our unique strategic goals,” said Donna Kinnaird, president, Swiss Re Life & Health America Inc. “Our renewed agreement positions Swiss Re to continue pursuing Admin Re® acquisition opportunities and to benefit from CSC’s insurance processing expertise and system capabilities.”

“We continue to help Swiss Re achieve its business, service and cost goals through unparalleled levels of industry service and competitive pricing,” said Michael W. Risley, president of CSC’s Life Insurance and Annuity Division. “Insurers of all sizes can benefit from our dual focus on technology advancements and insurance industry expertise, which enable continuous process improvements and long-term cost performance.”

In December 2003, Swiss Re and CSC entered into a 10-year BPO arrangement that surpassed industry benchmarks for service capability and quality. To date, Swiss Re has successfully acquired and transitioned more than 40 U.S. life insurance blocks into CSC’s Life and Annuity BPO operations for full policy and claims administration.

According to reports, Accenture has been awarded a contract by The Singapore Ministry of Health to implement the National Electronic Health Record (NEHR) system, a key enabler of Singapore’s vision toward a national, integrated health care system. The NEHR is designed to improve the quality of healthcare for citizens, lower the costs of health services, and promote more effective health policies.

With an initial system release in April 2011, Singapore will be one of the first countries in the world to implement a national electronic health record system, which will allow key medical information such as patient demographics, allergies, clinical diagnoses, medication history, radiology reports, laboratory investigations and discharge summaries to be exchanged among healthcare providers.

“As the centerpiece of Singapore’s connected health vision, the NEHR is intended to provide a holistic view of a patient’s health information. With this market-leading offering, health care providers can have the right information at the right time to make the best care decisions,” said Stephen J. Rohleder, group chief executive of Accenture’s Health & Public Service operating group. “We congratulate the Ministry of Health for taking this bold step to create a new foundation to help support meaningful advances to Singapore’s health care system.”

Global software product engineering outsourcing services specialists Symphony Service Corp. today announced the appointment of Sanjay Dhawan as President and Chief Executive Officer, effective immediately. The move sees Pallab Chatterjee, Symphony Services' current Chairman & CEO, reverting to his role as Chairman of the company's Board of Directors.

Dhawan’s appointment comes after Symphony Services achieved impressive recent business results. The company's laser focus on Engineering Outcome Certainty has translated into 10 percent quarter-over-quarter revenue growth, with 30 percent EBITDA growth. The total contract value of new bookings is at 90 percent of the company's annual revenue run rate level in the June quarter.

"I'm very excited to welcome Sanjay Dhawan to Symphony Services," said Pallab Chatterjee, Chairman of the board of Symphony Services. "Over the last year we have virtually transformed the company to ensure we commit to delivering on business outcomes for clients that span multiple technology and industry sectors and Sanjay's leadership will help us accelerate growth in the ISV, embedded and engineering services markets."

Wipro Infotech, a leading provider of IT and business transformation services, has been selected as the Software Development Agency (SDA) for the Centre for Crime and Criminal Tracking Network System (CCTNS) project, a mission mode project under the National e-Governance Plan (NeGP), one of India’s largest e-governance projects to date.

CCTNS is a scheme from Ministry of Home Affairs, aimed at creating a nationwide networked infrastructure for the evolution of IT-enabled and state-of-the-art, criminal tracking system. The CCTNS will span across all 35 States and Union Territories and electronically link over 14,000 Police Stations and 6,000 Higher Police Offices across the country. The project includes vertical connectivity of police units (linking police units at various levels within the State and between States and Union Territories) as well as horizontal connectivity (linking police functions at State and Central levels to external entities). CCTNS will also present a citizen-interface to provide basic services to citizens.

As part of the scope, Wipro will develop the core application software to be used by the States and another core application to be used by the Center for digitization of crime and criminal records. Once implemented, the application will link the State Crime Records Bureau with the National Crime Record Bureau, thereby creating a database that can be accessed in real-time from any police station across the country. Wipro’s solution is expected to greatly enhance police efficiency in the detection and prevention of crimes.

Global consulting, technology and outsourcing services firm Capgemini has acquired Swedish IT and Business Process Outsourcing (BPO) service provider Skvader Systems AB (Skvader), specialising in the provision of smart meter deployment services and smart meter managed business services. .

As a part of the deal Capgemini will acquire a software solution developed by Skvader to support its managed business services contracts.

The software is sold to other utilities and utility service providers through SaaS contracts to support 1 million smart meter deployments. This software will enhance the solutions that Capgemini currently deploys in support of Smart Energy Services contracts in Europe and North America

Skvader is one of the delivery partners of Landis+Gyr, a leading provider of integrated energy management solutions, in Landis+Gyr’s contract for the installation and management of 400,000 meters in Sweden at power and gas company E.ON.

This will now be a part of Capgemini’s Smart Energy Services business, further extending the company’s share of both the Swedish and European smart energy market.

Capgemini estimates that over €300m of smart energy service contracts will come to the Nordics over the next three years, underlining the strategic significance of this acquisition.

Mid year results seem to be showing positive results despite on-going price pressures. During the first half of the year, Steria revenue increased by 1.4% on a like-for-like basis in the first half 2010. During the second quarter 2010, activity was stable, with consolidated revenue amounting to €417.5m (-0.1% like-for-like versus the second quarter 2009).

Indeed, Steria’s figures have been positive across most European geographies – Spain was perhaps the exception with results being ‘close to flat’ but given the difficulties the Spanish economies has faced in recent months, this is still good news.

In the United Kingdom, excluding currency, the trend in second quarter revenue exceeded initial expectations at -3.9% versus the second quarter 2009. The quarter was notably characterised by the signature, in June 2010 with the Cleveland Police Authority, of one of the largest contracts ever won by the Group for an inital amount of €211m over 10 years.

While some may be quick to point out that the optimism may be misplaced –it does take 18-24 months from the initial tender to the awarding and signing of the contract – Steria also recorded a 17.6% rise in new orders during the second quarter 2010, leading to a total increase of 3.2% in the first half 2010 versus the first half 2009.

Similarly, H1 has proven a good one for the Indian ITO sector, holding out the promise of higher perks for the millions of IT professionals. Results for HCL, showed a positive trend. While Patni showed a 10.7% year-on-year results despite a 2.8% drop in revenue quarter on quarter. The company’s revenues stood at $167.6m, down from $172.3m in Q1. The company attributed the revenue drop due to project delays by some of its BPO clients.

Wipro also beat estimates in the June quarter, though a softening in Europe's revenue contribution raised concerns about profits ahead. The software services exporter's Europe revenue share fell mainly due to currency volatility, but it continued to see a strong business pipeline from the region. Indeed, the company posted a 31% jump in profit and beat analysts’ estimates as demand for computer services rose.

Wipro’s results add to those of industry leader Tata Consultancy Services.

In recent weeks, IBM has been in the news the other side of the Atlantic as it tries to respond to two legal cases brought against it.

It is interesting to note how, despite the maturity of the outsourcing sector – particularly in the US - it seems as though the issue of managing relationships and expectations is a skill that has not yet been perfected by the industry.

Although legal action is always considered a ‘last resort’ option, the public sector is under pressure to deliver savings and efficiencies. When multi-million contracts have ‘gone wrong’ or are ‘significantly delayed’ somebody – usually, it seems, the vendor – has to be responsible.

But it’s much more complicated than that. More often than not, vendors and suppliers deliver what they were asked to deliver. Where they seem to fail is to meet the untold or unclarified expectations that buyers and end-users have in mind for the venture.

A recent example is IBM, who has been facing two recent legal disputes in the US.

The first of these relates to the state of Texas and a seven-page letter the Texas Department of Information Resources sent detailing what it calls “chronic failures” of agreed service levels.

In the letter Texas expresses to IBM it remains discontented with services provided, indicating that IBM is in breach of its contract.

This is not a new problem. Indeed, it has been ongoing since 2008, when the state first suspended the $863m, seven-year outsourcing contract.

IBM obviously contests the claims. Meanwhile, Texas IT officials are hoping for the best and preparing for the worst after giving IBM 30 days to fix alleged problems with the state's $863 million data centre outsourcing contract.

The second incident involves the state of Indiana and sees both parties suing each other since May. The heart of the problem: Indiana's 10-year, $1.6bn outsourcing contract with IBM to streamline welfare eligibility in the state, which the state governor cancelled in October last year.

According to reports, the Indiana Family and Social Services Administration (FSSA) is trying to recover $437.6m it paid IBM until 31 January. The lawsuit also includes costs incurred for any third-party lawsuits, federal penalties and employee overtime, plus triple damages worth more than $1.3bn.

As for IBM, it has counter-sued Indiana for $52.8m reportedly for hardware, software and automated processes Indiana IBM left there and is still using.

In both cases, each side disputes the other's claims. We’ll just have to stay tuned to see how the saga unfolds; only then will we get sight of what the possible repercussions for the outsourcing industry will be.

In his fifth and final blog on the series of 'critical intangibles Alex Blues, Head of IT Sourcing at PA Consulting Group, examines the differences between being commercially open and commercially closed.

In this fifth and final blog in the series on ‘critical intangibles’ we are examining the differences between being commercially open and commercially closed.

This is closely aligned to a previous discussion about the difference between trust and suspicion. If your approach is trusting in a supplier relationship, you might automatically expect to also be commercially open, and if your approach is to be suspicious, you might also expect to be commercially closed.

However, it is important to look beyond this obvious correlation.

Being commercially open is about sharing your figures, for example costs and profits, from both the client and the supplier’s perspective. This is particularly important in situations where there is: potential ambiguity, where the scope is fluid or ill-defined or where there is a high chance of change moving forward.

Even if your natural trait is to be suspicious, being commercially closed in these circumstances will not work. It is important that both client and supplier can see the impact of each other’s actions on the economic model of the deal.

On the other hand, commercially closed is where both sides treat the commercial details as confidential, and often they become a key ingredient in negotiations. This is okay when there is certainty, the scope is clear, the change required is minimal and where one side or the other will not always be wondering "could I have done better?"

It is important to agree whether you need an open or closed approach as part of the sourcing strategy, as some suppliers are prepared to open the bonnet on their commercials whilst others will not. Determining this as part of an initial market test can avoid a lot of wasted effort.

Discussing critical intangibles with my clients has now become an integral part of agreeing supplier engagements and, although a few clients still look at me quizzically, many more believe it is a valuable exercise.

Robin James, insurance practice lead at FusionExperience, addresses some of the reasons why insurers should look to Cloud as a means to cope with increasing regulatory demands.

Financial regulators have always set a framework of good business practice which they see as the foundation for sound business. However, there has been a notable shift in the breadth and depth of this regulatory oversight and regulators are now increasingly demanding that organisations demonstrate that they are complying not only with the letter of the law but also the spirit within which the regulation was created. With the rule makers using increasingly vague language and broad brush examples, it is clear that the days when instructions were precise and easily followed are most definitely gone.

These developments will continue to pose a challenge to the insurance sector in particular, which is set to fall under a particularly strong regulatory microscope. To cater for this, insurance firms need to start employing ‘interpreters’ to help them understand its complex language and to enable them to capture enough data.

This should enable them to produce the information that will help them to demonstrate that they are compliant with the regulator’s wishes. Systems to support regulatory disclosure have to be agile and capable of being configured in hours and days, not months and years. Although this may sound like a tall order, but there is a very real and easy solution that already exists.

By moving towards cloud based architecture, insurance firms will be able to deliver secure, agile, sophisticated solutions that can be rapidly tweaked to meet changing business imperatives. These can range from straight forward measurements right up to a full blown enterprise solution and be based on robust solution sets and secure data repositories, reducing the risk factors reviewed by the regulator.

The cloud is also standards based and this allows for a more sophisticated model of usage. Insurance companies will be able to isolate and select the most appropriate components rather than entire solutions, allowing companies to change components quickly, and to respond efficiently to either business imperatives or regulatory stimulus. Insurance companies that have moved into the cloud have found that it gives back control to the owning organisation in ways that traditional outsourcing has never been able to.

Despite this, the insurance industry has shown itself to be wary of stepping into the unknown underlining reluctance to move into the cloud. However, far from being an ethereal unattainable dream, the cloud has many proven benefits. It is considerably cheaper than running an in-house IT department and cheaper than traditional conventional outsourcing.

The cloud also offers the opportunity to not only outsource infrastructure, but software and other services as well. The cloud will give organisations responsibility in managing their business, an essential requirement if companies want to have any hope of managing risk in an increasingly regulated environment.

By moving into the cloud, insurance companies will be able to be more dynamic and capable of evolving in timescales that have seemed impossible thus far, but will prove vital when faced with more intrusive and sophisticated regulation. This approach to outsourcing IT will allow the insurance industry to take a significant step forward to becoming ready for business in the 21st century.