Industry news

A recent study conducted by Forrester Consulting on our behalf produced some genuinely interesting findings. We had a fair amount of anecdotal evidence from our own observations that sourcing of telecommunications and network services (TNS) doesn't go to plan. But when the research findings came in we were taken aback at just how widespread the problem actually is.

The independently conducted study found that eight out of 10 TNS sourcing projects are not nearly as efficient as they should be. In fact, the average large firm was wasting the equivalent of 20 per cent of spend for each contract. In total, this wastage adds up to an annual estimated loss of £12 billion. And that's just from the top 500 global companies. Add in smaller businesses and who knows what that figure would be?

Part of the problem seems to be that TNS doesn't get the respect it deserves. According to the research findings, enterprises are spending around 20 per cent of their total IT budgets on TNS. But the amount of time, talent and resources allotted to TNS strategy, sourcing and contract governance doesn't come anywhere near that figure. As a result, businesses end up spending too much money to get too little service from their service providers.

There are, however, enterprises doing it right and we can learn from their experiences. And there are a number of best practices that organisations can follow.

The first key point may sound simplistic but it is far too often overlooked. It is vitally important to formulate a TNS strategic plan that identifies your present and future TNS needs and determines what technologies and services will best meet them. This strategic plan needs to align closely with your IT strategy, which, of course, must align with the overall business strategy. Forrester found that just 54% of organisations pay significant attention to defining their TNS strategy, suggesting that almost half of organisations currently fail to fully align their TNS needs with the future needs of the business.

Next, you need to develop a sourcing strategy. There's far more to this than simply selecting a vendor. In fact, multisourcing, whilst potentially more time-consuming and complex, generally produces better results at lower overall cost than single-vendor projects. The independent research found that most businesses greatly under-estimate the time it takes to undertake a major TNS sourcing project. That can be a huge mistake as there is a clear correlation between under-resourcing and negative outcomes.

The final tip is to bring in external expertise when and where you need it. Naturally, as the CEO of a consultancy, you'd probably expect me to say that. But the independent research backs this up. As Forrester state in the report, "With enterprises typically negotiating a major telecoms contract once every 3+ years, it is unlikely that internal teams will have the necessary experience, skills and tools to manage the process as efficiently as possible. The engagement of external specialists is key – their fees will be more than recouped due to the lower charges and better quality of service achieved." To this point, the research showed significantly higher levels of satisfaction when external help is retained, particularly when assistance was sought in the areas of service level agreement design, RFP processes, contract drafting, pricing and business case modelling, short-list selection, and negotiation.

Adherence to the basic principles highlighted above will go a long way towards positioning you in the group of enterprises who are getting it right. And getting it right has never been more important. With the convergence of voice, data and mobile services into a single unified enterprise-wide infrastructure, the reality is that to neglect the network is to neglect the business.

Uptake of clean energy in the post-Copenhagen world will be driven by national and sub-national policies and the private investment community rather than federal or international policy frameworks, according to Datamonitor.

A new report from the firm predicts that investment in the cleantech sector in 2010 will exceed that in 2009 by a margin of as much as 35 per cent, despite significant current uncertainty in US and EU carbon markets.

Alternatives to emissions cap-and-trade frameworks have emerged in the form of sub-national mandates and incentives for clean energy. Datamonitor expects progress on new global and US climate regimes will be slow and unconvincing this year, but that the race to dominate the emerging clean economy will accelerate regardless, fuelled by unprecedented quantities of green and clean stimulus funding.

Alex Desbarres, senior renewables analyst at Datamonitor, said: “Copenhagen did not deliver the low-carbon vision, clear policy landscape and regulatory frameworks that the energy cleantech investment community had hoped for.

“For all its flaws, however, the Copenhagen accord gave the cleantech community the sense that private investors will drive the transition to a low-carbon economy.”

Freelancer.com, the micro-outsourcing marketplace, has become the world’s most popular outsourcing website topping almost 1,100 jobs per day and 640,000 jobs posted to date.

On March 22nd 2010, Freelancer.com topped 1,100 jobs posted within a 24 hour period, with over 2,100 new users signing up. Around the same time, freelancer.com became also the world's #1 freelancing marketplace for web traffic, with around 0.15% of global Internet users reached, according to Alexa.

"The world is flattening and we are a catalyst for this," said Matt Barrie, CEO of Freelancer.com. "Small businesses in the US or UK can now get their brochures designed in Bangladesh, their customer support run from the Philippines, blog managed from Romania, and website developed in India- all for less than the cost of a part time employee in the United States. We are proud to be assisting small businesses increase their efficiency, grow their sales and lower their costs. We are extremely proud that we are the largest and most liquid market for small business outsourcing!" he said.

The National Outsourcing Association (NOA) has launched a survey looking into the outsourcing industry's views on green and corporate social responsibility (CSR) issues. Those readers that take part in the survey will be entered into a prize draw to win Mark Kobayashi Hillary's popular Talking Outsourcing book.

Click to take part in the 10 minute survey.

The NOA will be releasing results in the coming months and going over initial findings at the Association's Green Issues and Corporate Social Responsibility event on the 20th of April.

The Indian BPO services market grew by 7.3 percent year-on-year in 2009 due primarily to the global recession and resulting price and volume pressures. The market is on track to reach $1.2 billion by 2011 and $1.8 billion by 2013, according to Gartner.

“In the short term, market trends such as changing demographics and affluence levels, consumption of value-based services, increasing focus on service quality and the continued momentum of mergers and acquisitions (M&As) bear watching, as their impact is certain to influence shifts in buyer needs and behaviour,” said T.J. Singh, research director at Gartner.

Three quarters of UK organisations are disappointed with the quality of work provided by offshore outsourcers, according research from Valueshore Spain, a group of IT consultancies. However 78 per cent of organisations said they still base their outsourcing decisions on cost rather than quality.

Though cost was still the main deciding factor in outsourcing deals, 94 per cent of respondents admitted they were increasing the likelihood of their IT projects failing to meet their requirements by focusing on cost alone.

“There needs to be a fundamental change in the way that many businesses think about offshore outsourcing,” said Daniel Naoum, co-founder of Valueshore Spain. “Taking a cost-only approach can have a detrimental effect on the quality of work received. Businesses also need to open their eyes towards the ‘hidden’ costs. The cheapest option doesn’t always provide to the biggest overall savings, as quality concerns can often result in more management time being required and increased travel and troubleshooting costs.”

Torbay Council has signed a £130m outsourcing contract with May Gurney for an initial period of ten years. The company will provide a range of outsourced council services including maintenance and waste management.

The contract has a possible extension of a further 15 years and will be delivered through a new Joint Venture Company (JVC) between Torbay Council and May Gurney.

Services provided will include: waste and recycling collections; the maintenance of highways, grounds, parks, car parks, buildings and the Council's vehicle fleet; street and beach cleansing; and out of hours call centre support

This was a week of ones to watch – the first of which was the global procurement outsourcing (PO) market, which was reported on Wednesday to have grown rapidly in 2009 with new contract signings and extensions increasing 30 and 90 per cent respectively, according to Everest.

The market is now expected to grow in excess of 20 per cent this year and reach nearly US$1.3 billion in annual contract value.

Meanwhile, a handful of potentially winning offshore destinations have reared their heads this week thanks to a new study from Gartner, which indicated that several credible alternatives to India and China are slowly but surely emerging.

Countries such as Malaysia, the Philippines and Vietnam have continued to strengthen their position, while Indonesia has also entered the top ten for the first time, according to the research.

In other news, a host of deals amongst major companies were announced this week, with technology and outsourcing giants Microsoft, Firstsource, AT&T, and Tech Machindra all securing and announcing contracts.

And finally, in this week of emerging and increasing trends, it appears an entirely new type of outsourcing is on the rise – dinner-making skills. The time has arrived for those whose culinary expertise starts and ends with beans on toast to impress their friends and family with gourmet meals that Delia Smith herself would be proud of.

The current pioneer of this type of sourcing is meal preparations company D’Lish, which makes a number of main courses for customers to take home to their freezer for later use. The day of DDO (dinner dish outsourcing) is upon us, perhaps?

Insurance firm AXA is unlikely to outsource any more jobs this year, group HR director Sonia Wolsey-Cooper said in an interview with the Financial Times.

The revelation follows the company’s deal last year to outsource administration of much of its life and pensions business to Capita.

Wolsey Cooper told Recruiter: “Our contract with Capita is a 15-year contract and all work and employees transferred from AXA to Capita in 2009.

“As such, there will not be further outsourcing activity during 2010.

“There is a clear strategic advantage for AXA in outsourcing the administration. As the number of policies in this area of our business declines, due to the life and pensions products no longer being actively marketed to new customers, it becomes less cost effective for AXA to invest in new technology to improve our service to these customers,” she concluded.

The 2010 budget has been dismissed by many as a phantom budget – a political step that saved the major announcements for during or after the election campaign. But there are some elements of the budget statement that should be of interest to the sourcing community; some presenting opportunities.

For example, National Insurance contributions are being raised by 1% for anyone earning over £20,000 annually. This small amount may not be that material overall, but does it sweeten the pill for those already considering offshoring to consider it more strongly, or even actually take the plunge?

The government has also pledged an aspiration to pay a minimum of 80% of all undisputed invoices within five days, in an effort to improve cash flow conditions for small and medium sized enterprises. Those who work in finance and accounting services will know how hard this will be to achieve in practice. To achieve this level of performance, Civil Service accounts departments would need to be operating at a level comparable with the best external service providers. Given that many do not possess the technology, scanning and workflow assets required to achieve this, it’s a worthy, but probably unachievable idea, without investment or considering using procure to pay outsourcing solutions.

Finally, with talks of significant spending cuts and moves of thousands of civil service jobs from London, an increase in public sector sourcing is inevitable. The £11Bn of efficiency gains announced this week is only the start. Of those private sector companies that have reported health and growth in the last few months, the majority have undertaken considerable internal shake-ups and restructuring, resulting in cost savings, more variable cost bases and more effective operating models. This will continue to be a tactic that the UK government will look to emulate, opening up greater public sector sourcing opportunities across a variety of functions. It is just the shape and nature of the sourcing that is to be determined, and this will become clear over the next two years or so.

In this climate, public sector departments and their service providers should remember old lessons; not to deploy new outsourced arrangements too quickly. Care should be taken to fully understand the true intent for the contract and ensure that this is baked into the sourcing process, contract and ultimately way that the service is operated. This intent is likely to include technology innovations, which need to be carefully planned and introduced. The oft-mentioned sacrifice of long term effectiveness for the sake of short term cost-cutting is of real concern right now. As is the duplication of effort between departments, where the same problems are being tackled in different ways.

Perhaps we could take a leaf from the Danish book. Their government has taken a direct approach to sourcing, albeit in a much smaller country. The government manages all IT hosting and delivery via central contracts, leaving the intricacies of the application of technology to the individual departments – although in its infancy, the approach appears to have merits. Perhaps the UK government should set similar strong direction about how sourcing should be undertaken, preventing departments from using unnecessarily divergent approaches.