Industry news

sourcingfocus.com’s news had a distinct British feel to it this week. The Round-Up has come over all patriotic and decided to highlight the British companies who are taking advantage of the benefits of outsourcing. After all, it is nice to have a breather from India’s over representation in all things outsourcing related. More importantly, we have all heard enough about Britain’s MP’s and their expenses. Let’s praise Brits who are being clever with their money, for a change.

The International Olympic Committee (IOC) has extended its contract with Atos Origin to serve as the IT systems integrator for the Olympic Games for an additional four-year period. After Vancouver in 2010 and London in 2012, Atos Origin will provide IT systems for the Sochi Olympic Winter Games in 2014 in Russia and the Olympic Games in 2016, the host country of which will be announced on 2 October 2009.

The agreement represents the largest sports related information technology contract ever awarded, and further entrenches a partnership of more than 20 years between the Olympic Movement and Atos Origin.

The London Underground maintenance company, Tube Lines, has signed a contract with Capgemini UK plc to extend its IT services agreement for another two years. As previous apprehension conceded, it seems the recession has hit the public sector.

Under the new contract, Capgemini will continue to be responsible for the IT systems that assist Tube Lines in its work with London Underground. Tube Lines maintains the trains, tracks and stations for the Jubilee, Northern and Piccadilly lines which together carry almost two million passengers a day. Unlike many, I am not going to take this opportunity to make any snide comments about the efficiency of the London Underground. For once, my lips are sealed.

And finally, Johnston Press, which publishes over 300 newspapers and magazines throughout the UK, has announced plans to outsource the production of certain local glossy magazines to the Press Association news agency.

The Press Association (PA) will deliver its production services from its headquarters in Howden, east Yorkshire. You can’t get any more quintessentially English than the Yorkshire Dales. Cricket, old churches, cream teas and bad weather.

The services provided by PA will include page setting, advertising placement and some editorial content. However, Johnston Press journalists will continue to provide the majority of the editorial content. Phew, so outsourcing has not yet reached the vainglorious realm of the journalist.

I hope you have enjoyed the essence of Britain represented in this weeks Round-Up. We are set for another scorcher of a weekend and sourcingfocus.com looks forward to divulging more outsourcing news next week.

Vikas Kapoor, President and Chief Executive officer of iQor, Inc., a provider of business process outsourcing (BPO) services, cited the Philippine's as the premier country in the world in the fast-growing BPO sector. Kapoor made his remarks as part of an expert panel, "The Forecast for Emerging Markets," at the Milken Global Institute annual conference. Kapoor was invited by Milken to address more than 3,000 leaders from 60 countries working in business, government, philanthropic organizations and more at the Los Angeles conference on April 27.

"In the call centre business, if I compare performance--whether it's cost, quality, people, retention, etc.--the Philippines is far ahead of everyone else," said Kapoor. He went on to credit the Philippines' large population of highly skilled workers, service ethic and strong government support for its superior performance and dramatic growth.

Like his fellow panellists, Kapoor's outlook was generally optimistic and predicted substantial future growth for emerging markets, especially in the Philippines, calling it "the biggest boomer across the world." iQor Philippines has undergone rapid growth since establishing it's first call centre in Manila in 2005. Today, it has three call centres with a total of 2,700 employees. Kapoor says iQor is poised to grow even more to take advantage of the competitive attributes of doing business in the Philippines.

London Underground maintenance company, Tube Lines, has signed a contract with Capgemini UK plc to extend its IT services agreement for another two years.

Under the new contract, Capgemini will continue to be responsible for IT systems that assist Tube Lines in its work with London Underground. Tube Lines maintains the trains, tracks and stations for the Jubilee, Northern and Piccadilly lines which together carry almost two million passengers a day.

The Capgemini service also involves supporting some 2,500 Tube Lines staff at its 70 locations across the capital.

Adrian Davey, Head of IT at Tube Lines, commented, “IT underpins the services we provide and simply has to work well if the current massive investment in London Underground infrastructure is to deliver the major improvements that our customers and passengers expect from it.”

Hertz New Zealand has signed a three-year contract renewal with Unisys New Zealand for IT outsourcing services.

Unisys will continue to provide IT support for business continuity services, communications and network management, and administration systems. In addition, Unisys will provide support for a number of key Hertz applications written using Unisys Enterprise Application Environment (EAE).

“As one of the largest global car rental companies and with 50 locations across New Zealand, as well as a 24-hour online booking system, we need reliable IT to be able to efficiently manage customer bookings and to stay competitive. We have renewed our contract with Unisys because the continued reliable outsourcing service we receive allows us to better serve our customers,” said Murray Hodges, Managing Director, Hertz New Zealand.

The recent research published by Vanson Bourne and Patni Computer Systems which claims that outsourcing confidence remains high has to raise a few eyebrows. While that specific question may have been asked of this sample, the other statistics within the research reveal that an entirely different, and concerning, conclusion is possible, if not more likely.

If 40 percent of respondents are planning to outsource more, which it cannot be denied is reassuring, then 60 percent are either outsourcing the same amount or even less, which surely cannot support the conclusion that confidence in outsourcing remains high.

Indeed, if you consider some other recent research undertaken by Harvey Nash and PA Consulting, polling almost 1500 CIOs across Europe, it appears that confidence is if anything waning as outsourcing spend is being cut by 24 percent, almost double the 13 percent of last year. Additionally, dissatisfaction with offshore outsourcing has grown from 62 percent to 66 percent.

Therefore, the conclusions drawn from this research can be considered to be misleading at best, and hide some important and potentially rather worrying trends – ones that both sides of the outsourcing community cannot afford to miss. “Lies, damned lies and statistics” after all!

Perhaps a more apt conclusion, drawing from both sets of research, is that the jury is still out over whether confidence remains high within outsourcing. Outsourcing has become something of a standard modus operandi for UK business, but given the recession, in order for this to remain a safe course of action, there are a number of areas which both clients and suppliers have to not only concentrate upon, but actively co-operate over.

For instance, we have seen many examples within the last year alone of good outsourcing strategy being implemented with either a single outsourced provider, or a well-managed multi-sourcing programme. However, we have seen at least an equal number of horror stories with massive over-dependence on one supplier, or an entirely uncoordinated multi-sourcing policy, and on many occasions, it has been caused by lack of resource, time and effort being dedicated to managing the relationships.

We are also all aware of national political pressures to bring jobs back into the country, rather than offshoring, meaning that those who do offer an offshore service must prove that they will actively pursue adding business value. Therefore, there is a real need for the development of more equitable commercial models – a move away from a negotiation of manpower levels being provided, to instead ensuring that the contract signed generates business value for both sides, especially through innovation, and that the commercial terms are output not input-based.

Similarly, governance on both sides of many outsourcing relationships has to be improved. Huge numbers of companies are terrifyingly unaware of how much an outsourced arrangement actually costs, or do not fully understand what the end goal of the arrangement is – a state of affairs that cannot be tolerated in good economical times, let alone now.

Sourcing cannot afford to be left as business as usual – it must be about adding business value, and if outsourcing clients and suppliers are confident that this is the case in their outsourcing relationships, I would be very surprised.

I'm always sceptical - but curious - when any location is presented to me as "the new Bangalore". Lately, it seems to be happening more frequently, as various regions of the world jockey for position, attempting to grab the business of companies that might otherwise consider India to be the de facto location of choice for offshoring.

There's plenty of evidence to suggest that some of these new regions will succeed, especially as the cost advantages offered by Indian outsourcers continue to deteriorate.

Earlier this month, consultants at AT Kearney published their research into how the geography of outsourcing is shifting. If you haven't seen the findings already, I'd urge you to take a look. They make for pretty interesting reading.

On the whole, it seems to me that trying to pinpoint the countries or regions that have the best offshoring proposition is a dicey business and raises a whole host of questions for prospective customers. Do these emerging outsourcing hubs have the necessary people, with the right language and skills capabilities, to meet the requirements of multinational companies? Is the technical infrastructure in place (and sufficiently robust) to support the high-volume data flows involved? What financial incentive are outsourcers in that region able to offer its target audience? Can they guarantee the kind of political stability that this audience will expect? What cultural barriers may be encountered?

Prospective customers will expect robust answers to these questions from suppliers in any new offshoring location.

They might also be wise to take a look at the recent performance of that region's currency against their own. In the last year, many companies have been caught out by the volatility of foreign exchange markets when it comes to offshoring their activities - and these shifts have, in some cases, made nonsense of carefully forged cost structures and pricing schemes. Both buyers and sellers of offshoring need to become a whole lot better at hedging against currency fluctuations and, in particular, at calcuating whether a devaluation of the local currency against the pound or dollar is likely to be outstripped by wage increases in that region.

Of course, no-one is saying that offshoring can't provide a very attractive option for organisations looking to make savings - just that they need to think very carefully about the particular region they choose. In June, I'll be blogging from Nairobi, where I'll be asking these questions of prospective suppliers, employees and government supporters of offshoring there. Is Kenya the new Bangalore? We'll see!

Johnston Press, which publishes over 300 newspapers and magazines throughout the UK, has announced plans to outsource the production of certain local glossy magazines to the Press Association news agency.

The deal covers 15 monthly, bimonthly or quarterly magazines produced at Johnston Press publishing centres across the UK.

The Press Association will deliver its production services from its headquarters in Howden, east Yorkshire. The publisher will be tasked with producing over 700 complete pages for Johnston Press each month.

The services provided by PA will include, page setting, advertising placement and some editorial content. However, Johnston Press journalists will continue to provide the majority of the editorial content.

US Citizenship and Immigration Service (USCIS) has signed a contract with CSC to conduct scanning, indexing and file management operations at a records digitisation facility. The new agreement has a one-year base period and a contract value of US $27 million.

USCIS is the government agency that oversees lawful immigration to the United States of America. The Agency establishes immigration services and policies.

Under the terms of the agreement, CSC will support USCIS by providing file maintenance activities and electronic access to various types of records, including receipt, temporary and account files, and imaged data that reside in various USCIS offices. The digitisation of these files, which are stored in the USCIS Enterprise Document Management System, allows USCIS and its customers to electronically access specific digitised A-Files for processing immigrant applications or investigations. The applications include immigrant requests for naturalisation or permanent status in the United States.

USCIS originally signed the contract over to Datatrac Information Systems Inc. in 2006 for a term of five years with an estimated contract value of $150 million. CSC acquired Datatrac in December 2006.

The International Olympic Committee (IOC) has extended its contract with Atos Origin to serve as the IT systems integrator for the Olympic Games for an additional four-year period. After Vancouver in 2010 and London in 2012, Atos Origin will provide IT systems for the Sochi Olympic Winter Games in 2014 in Russia and the Olympic Games in 2016, the host country of which will be announced on 2 October 2009.

"Atos Origin, our long-term partner, is the brains behind the technology operations for the Olympic Games, consistently delivering high-quality services on schedule. The Beijing Olympic Games were spectacular and Atos Origin provided a crucial role in ensuring the success of the event from a technological perspective, and in making sure that the IT systems functioned perfectly. We are confident that Atos Origin will once again deliver an outstanding job for future Games”, said Jacques Rogge, President of the International Olympic Committee.

Under the contract terms, Atos Origin will continue to work on the integration and management of the vast IT system that relays competition results and information about athletes in less than 0.3 seconds to spectators and media around the world.

The agreement represents the largest sports related information technology contract ever awarded, and further entrenches a partnership of more than 20 years between the Olympic Movement and Atos Origin.

In today’s tough economy the telecoms sector has a lot to teach us about outsourcing. The telecoms industry not only represents a large proportion of IT spend (Gartner recently predicted this to be more than 57% in 2009) but the competitive nature of this industry and the consumer demand for service providers to deliver rich applications at lower costs means that the industry experts cannot afford to make the wrong decisions when it comes to outsourcing.

Due to intense cost cutting measures many CIOs are looking at outsourcing as a way to lower operating costs while simultaneously introducing modernisation and integration of systems. In fact, Amdocs recently commissioned a survey which found that 91% of service providers regard modernisation as a key component of operational support systems.

The survey of more than 100 executives with financial and operational responsibility from wireline and wireless service providers around the world highlights how important it is to go beyond simply surviving the current economic climate by cutting operational costs. In fact, increased service profitability improved customer experience, and improved time to market ranked nearly as highly in the survey as a reason to outsource as operational cost savings, demonstrating the expanded business value of OSS outsourcing.

As expected, outsourcing helps service providers to overcome major OSS challenges such as the moves towards complex next generation services and overcoming long delays in launching new services. The survey also found that some two thirds of the respondents would prefer to outsource business support systems (BSS) with OSS to help create a seamless integration between their BSS and OSS— a way to improve the customer experience and give them a competitive advantage.

If service providers don’t succeed in transforming their OSS/BSS systems as we move out of downturn, they miss the opportunity to re-define their cost base and position for growth ahead. Transformation of OSS/BSS systems in conjunction with managed services will ensure that service providers are ready to capitalise on market opportunities now and into the future, as we move beyond these turbulent times.