Industry news

Let us pretend it’s not January 2010 – let us instead pretend it’s January 2009, and we are predicting what will happen in the year to follow.

I cannot conceive that many would have even considered the possibility that within six weeks of the new year, the Indian outsourcing industry would be in complete turmoil over the largest ever fraud – i.e. the Satyam situation.

How many could have realistically predicted that by May 2009, EDS, the bastion of the sourcing world, would be bought by HP for £13.9 billion, doubling its services business in one fell swoop? Who would have also thought that ACS would have been bought by Xerox, transforming their global proposition?

And how much of the trend reversal in the financial sector could have been predicted? Citibank and Aviva have proclaimed for years how important their captive offshoring operations were; how they formed a distinct competitive advantage and how they fundamentally disagreed with the prospect of outsourcing as a viable alternative – within six months of 2009, Citibank had sold its captive to Genpact, and Aviva had in turn sold its to WNS.

I don’t think many people really would have predicted that!

So, today, the dawning of 2010, what do we think we will be talking about this time next year? Will the ongoing expectation that one of the principal Indian outsourcing companies will buy a major European player eventually become reality? Will innovation come back into the forefront of the market’s thoughts as a renewed priority and not continue to be shunned in favour of basic cost reductions? Will cloud computing really start to mature, or will there be a horrific security disaster from using cloud-based technology in sourcing that delays its wider uptake, or worse, leads to ongoing distrust of the concept?

Will there be an unexpected, or even aggressive, merger of two or more of the major sourcing players?

Will multi-sourcing no longer be the flavour of the month as companies struggle to believe that multiple supplier relationships could be efficiently managed, when managing just one causes so many problems?

I certainly don’t know the answers to these speculations just yet, but hopefully during 2010 I will be able to keep you abreast of the latest rumours and happenings in the sourcing world.

So I trust you all had a Merry Christmas, and here’s wishing you a happy (but most likely unpredictable!) 2010!

The age of uSwitch took many companies by surprise. The fact that customers can simply ‘up-sticks’ and buy services from a competitor virtually instantaneously, still confounds many companies. An industry hit badly by this customer-led revolution is the utilities sector. Some providers have begun to offer increasingly attractive deals, hoping to tie customers in for long profitable contracts. The mobile phone industry, by its nature saturated, has responded to the switching culture with instant ‘gifts’ for taking out seemingly never ending contracts. Orange, for example, has recently introduced the 36 month contract tying customers to £10 a month for three whole years. Yet amid the price wars and contract battles, companies are in danger of neglecting a key component of the equation – keeping customers happy.

As the UK approaches the end (possibly!) of the recession, it would do well to consider this point. A widely reported survey from market research firm One Poll, released this year, found that six out of ten people had switched companies because of a poor level of customer service. Also, in a 16-country survey, Genesys Lab found that poor customer service costs $338.5 billion per year in lost business. It is clear that short-term promotions and long-term contracts are not the solution.

At the centre of all customer relationships is the ability of an organisation to communicate promptly, rapidly and usefully with customers. The ability to please a customer in the first instance, placate where things have gone wrong and provide support for technical problems are all part of a company’s commitment to each new customer. The recession has caused companies to lose focus as they go for the quick new business wins, and attempt to gain business at any cost. For example, can you ever remember there being so many sales and reductions on the highstreet before Christmas?

Of course there are other factors at play, for example, the continued move to internet retailing. These factors serve to confuse the most important issue - if companies want to properly adapt to the age of uSwitch and online shopping, they need to reassess how they look after their customers. Only by providing a consistent and outstanding customer service from end to end, can companies ever provide the added-value necessary to stop customers ending up ‘down the road. And this means polishing everything from the shop floor to the call centre.

IBM has announced plans to expand its Indian BPO business, having significantly cut its US and European workforce in 2009. It has been reported that the company will increase its Indian capacity by at least 5,000 people this year.

The IT giant currently operates outsourcing facilities in a number of Indian cities, including Mumbai, Kolkata, Pune, Hyderabad and Gurgaon, and indicates that any expansion will likely take place in existing locations. The company hopes to capitalise on an anticipated rise in demand for BPO services during the coming year, it said in a statement.

Selby Mascarenhas, IBM Poland’s senior advisory consultant, commented, "We plan to focus more in the services sector by opening more BPO centres in India."

Virgin Atlantic has signed a five-year agreement with SITA services to provide IT support for the airline. Under the five-year agreement, SITA services will provide Virgin with more than 100 sites worldwide in addition to taking over 40 contracts from previous suppliers.

The airline IT specialist will also supply international and domestic IP virtual private networks, voice-managed local area networks, cabling, core network support as well as vendor and service management.

According to the airline’s director of finance and business services, Tim Livett, the agreement is intended to improve service delivery while generating “significant economies of scale".

The deal, which forms an important part of Virgin Atlantic’s IT cost reduction strategy, is expected to be completed by this summer. “[Virgin] will have the added benefits of simplified supplier management, faster deployment, improved reporting and reduced incident resolution times. All hugely valuable in addition to the monetary savings” said the firm’s head of IT services, Matthew Billings.

Walgreens, America’s largest pharmacy chain, has signed a ten year finance and accounting outsourcing (FAO) contract with India’s Genpact.

As part of the contract, Walgreens will move its accounting processes and staff to Genpact, a move that will involve the transfer of at least 500 jobs.

The Genpact-Walgreens agreement will impact accounting staff at its offices in Deerfield, Illinois and surrounding areas, including Danville and nine smaller accounting locations across the US, reported the Offshoring Times.

Wade Miquelon, Walgreens executive vice-president and CFO, commented: ‘The deal will help us improve cost productivity and facilitate our growth strategy, while maintaining an agile and service-focused organisation’.

Laundry and kitchen equipment supplier, Miele Professional has appointed voice specialist GasboxDMG to provide a two-year lead generation campaign.

Under the agreement, GasboxDMG will deliver highly focused lead generation activity in addition to inbound customer service support, marketing response handling and contact management. The agreement is hoped to further support Miele’s sales and growth in the market.

Lead generation for the Miele Professional dealer network will be further enhanced by the use of GasboxDMG’s integrated email tool, delivering the ability to engage with prospects using personalised and relevant content.

“We are pleased to announce that Miele has re-signed the contract with GasboxDMG for the next two years. GasboxDMG continue to provide us with the latest technologies and the highest standards of leads in terms of both quantity and quality”, Les Marshall, commercial director at Miele Professional said.

xoserve, the company which manages the commercial links between gas suppliers, transporters, and all 22 million UK gas customers, has signed a contract with Capgemini UK plc to manage an IT replacement programme.

xoserve distributes data which enables Britain’s gas companies to bill one another as gas moves through the UK supply chain. It also manages one of the largest customer databases in the UK, with two terabytes of data relating to the 22 million domestic, commercial and industrial gas supply points in Britain.

Steve Adcock, Head of Project Delivery at xoserve, commented: “With Capgemini’s help we are now able to implement a modern, cost-effective information capability, with new IT practices and systems, and better utilisation of data. As a result we are set to gain improved flexibility to enable us to meet future challenges.”

Capgemini worked with xoserve to carry out a comprehensive assessment of its information requirements and existing capabilities, producing a detailed strategic plan for its future systems.

Bosch Communication Centre is set to open a new contact centre in Manila to expand the language capabilities of its customer services. The centre will take on an initial 200 employees.

Bosh hopes that its new language capacity will enable it to increase its customer base. Additional languages offered by the centre will include Chinese, Korean and Japanese options. The languages will be provided in addition to the existing services offered to English speaking markets in both Europe and America.

Initially the new centre will provide support to the IT helpdesk project within the Asia-Pacific region. There are already teams in Berlin, Buenos Aires and Timisoara, Romania, working for the same project having a forth team will ensure worldwide multi-language support for technical questions.

2010 has started off with a bang as the National Outsourcing Association has released its annual predictions. Apparently, amongst others, things to watch out for are a surge in public sector outsourcing, shrinking multisourcing deals (mini-multisourcing) and a boom in business process outsourcing. That said, the festive season has brought a mixed bag of sourcing news.

The start of the week saw a report released showing one in seven manufacturing companies have brought its offshore operations back to the UK in the past two years. So it seems the NOA’s predictions have not come into fruition yet. It is only the eighth of January after all.

The study was conducted by EEF and revealed that manufacturers were moving production back to the UK due to concerns about poor quality and higher freight costs.

The NHS was not left unscathed over the festive period either. It has been criticized for spending around £1m on outsourcing to consultants, according to Express.co.uk. I think it is fare to say that the NHS is not new to bad publicity. Rest assured they will take it on the chin.

India has also had a rough start to the year with major players like Tata Consultancy Services (TCS), Infosys and Wipro losing contracts to nearshore rivals, including Ness Technologies of Israel, CPM Braxis of Brazil and Mexico-headquartered Softtek.

Emerging destinations are becoming increasingly attractive for top outsourcing customers as companies seek to work with local, specialised vendors instead of sending all projects to offshore locations like India.

It seems that the Round Up is full of doom and gloom on its return. However, the NOA have predicted good things for the year ahead and I have a sneaky suspicion they know what they are talking about.

by Howard Teale, general manager, Indicia Training

It’s fair to say that the number of people out of work in the UK - at 2.47 million - is at the highest level in 14 years. And more than one in three 16-24 year-olds, about 366,000, have been out of work for over six months. That’s the highest number of long-term unemployed young for 15 years. If things don’t start to improve, we could be facing losing another generation from the workforce, similar to what happened in the 1980s.

So what can be done to reverse this year-on-year rise in unemployment that the UK is currently experiencing? First of all, we must look at the skills people have to succeed in the workplace. And it’s here that a huge irony becomes immediately apparent. The UK’s young people are more skilled in IT than ever before - their use of social networking platforms, computer games, file-sharing and multi-media applications leaves most people over the age of 35 baffled. But they can’t operate most office systems. It would appear to me that their appetite for computer-based knowledge is being unexploited by our education system.

At Indicia Training we have seen the number of basic IT courses being booked by UK firms rise dramatically over the past few years. Courses on how to use Microsoft packages – the most commonly used computer programmes in business – have risen by 55% over the past year. And there is a simple reason as to why - more than half of all jobs in the UK are office based, and need these skills. Feedback from clients suggests that unfortunately, our young people are leaving school or college without these skills.

As such, private sector businesses are increasingly having to pay for the shortfall in these crucial skills by turning to private providers for training in basic business competency.

For many private sector firms, these skills mean a matter of commercial life and death. Take Scotland for example. Having done their bit to bring out the talent than undoubtedly exists in these intelligent and lively young people, the business manager wearily reads the words of the Scottish Government’s report Skills for Scotland: A Lifelong Skills Strategy “from cradle to grave.” One of the key areas was “a response to the needs of the economy and the demand of employers.” So far we have yet to see these plans put into practice.

Standards of literacy and numeracy in Scottish schools have been stagnant for nearly two decades - 25% of 17-25 year olds are illiterate - and many academics fear the new curriculum is unlikely to resolve the issue. If basic literacy and numeracy skills aren’t increasing, how can young people be expected to grasp the skills needed to survive in business?

And it seems the Government has realised they’ve got it wrong. Education Secretary Fiona Hyslop has recently been demoted, to be replaced by Culture Minister Mike Russell. Hyslop has come under fire for months now over everything from class sizes, teacher numbers to the new curriculum. In his reshuffle, First Minister Alex Salmond stated that education needed a “fresh look” – an admission that his Government got it wrong?

So why are companies happy to fork out so much on training? I believe that research from the Federation of Small Businesses, which shows companies that invest in training are two and a half times more likely to survive the recession, has spurred a lot of firms into taking action. And with the UK economy on track to come out of recession by the end of this year, according to a variety of business monitors, it will be these firms, the ones that have invested in training, who will be the ones that begin to see the benefits. They will emerge stronger than before and will be better placed than their competitors to capitalise on the available opportunities.