Industry news

For those of you who haven't seen the story – perhaps because you were at the NOA summit In London yesterday and today – The National Outsourcing Association has today launched the UK’s first accredited professional outsourcing qualifications and training programmes.

Available immediately and delivered through its newly formed professional development arm, NOA Pathway, the qualifications are accredited by Middlesex University.

The programmes range from the entry-level NOA Gateway, which offers learners a solid foundation in outsourcing, through to the masters level NOA Diploma.

A range of training programmes covering all aspects of the outsourcing lifecycle are also being launched.

Martyn Hart, chairman of the NOA commented: “Globalisation has accelerated the rise of outsourcing. While this brings opportunities, it also brings some challenges. Until now, there has been no common best practice standard or benchmark for outsourcing and there is no way of recognising whether staff involved know their subject or not.

”NOA Pathways helps organisations evaluate suppliers/vendors and enables them to trust the supplier’s outsourcing knowledge, commitment and ability.”

On day two of the NOA Summit today in Westminster, I and other delegates were treated to an in-depth discussion of the challenges of outsourcing contracts.

Far from being documents to fling into the bottom drawer once deals are struck (and never look at again until litigation is imminent), contracts are the bedrock of any sourcing relationship's success or failure – as evidenced by such high-profile fallings out as the Department of Health and Fujitsu earlier this year.

Contract negotiations will become an increasingly contentious area for everyone in the industry as the downturn deepens and the temptation for either side to drag deals back to the table is strong.

Sanjay Kumar, general manager Banking and Financial Servuces Solutions for ITC Infotech India said that the reasons for contract failures are underperformance, outsourcer over-expectations, poor management, cost overruns and contract inflexibility.

With common drivers for outsourcing being cost, resource scarcity and the need to either survive or grow in the market, the customers often try to “outsource their troubles away”, he said – sometimes without discussing it with management sponsors and stakeholders.

Asked by sourcingfocus.com about the DoH's and other public sector organisations' sometimes fraught outsourcing relationships, he said: “The moment a contract is being scanned [for ways to catch out the supplier or customer] the relationship has broken.”

In a concise and upbeat presentation on next-generation contracts, NOA Award-winning advisor Rob Sumroy of lawyers Slaughter and May said that people often rush into contracts with little understanding of what they are for, devoting inadequate resources to them in the belief that “one size fits all”.

While admitting that standardisation is important, on their own boilerplate clauses cannot hope to reflect a complex relationship, he said.

Sumroy blamed poor tendering for being the root of failed contracts. “The RFP process does not link in to a good contracting process; but the output of RFP is the contract,” he said.

“Contracts are supposed to assign activities and responsibilities, and allocate risk for where things go wrong,” he continued, adding that a good contract should define operational tasks, telling you what's going on (or should be going on) on an operational basis.

In other words, Sumroy was essentially saying that a good contract should be the operational manual for a working relationship, not the output of a tortuous legal process that's then buried in the bottom drawer until trouble rears its head – as it inevitably will if the contract is misconceived at the outset.

Transport for London (TfL) CIO Phil Pavitt drew the morning session to an entertaining close with his insights into the workings of the public sector – that sector which has, so often in recent years, got outsourcing wrong, despite its fondness for buying in private expertise.

Pavitt put up his hands and said that, in the not so distant past, TfL and other public sector organisations had got it wrong – not the outsourced service providers – because there was often no in-house expertise to help manage outsourced relationships.

In other words, contracts break down because they have been poorly understood and drawn up by the client, the government – which has come to rely so heavily on third parties working in partnership on large public projects.

Pavitt's transformative zeal has, in just 18 months, brought TfL almost to the point of being an outsourcing provider itself – he revealed that The Greater London Authority, the London Development Agency and the Metropolitan Police are among five London organisations being brought under his wing in an effort to make IT management processes more efficient.

All this is good news, but I can think of at least one other public sector outsourcing grandee who came into office trailing clouds of transformative glory just a few years ago – and he ended up bailing out of the National Health's IT programme in high dudgeon having offended just about everyone involved.

Fortunately, however, Phil Pavitt seems much more pragmatic, amusing and good with people than a certain Mr Granger – who is now on the other side of the planet.

We wish Mr. Pavitt well: a promising future beckons, methinks.

The Department of Health has commissioned Capita Group Plc to develop and deliver NHS Choices, a new digital channel to connect citizens and intermediaries with the NHS. The contract is worth £60 million over three years, with an option to extend for a further two years.

Capita will be responsible for the hosting, technical and content development of the NHS online presence and related digital services. A key focus will be on ensuring innovative engagement with citizens and clinicians to support a healthier nation.

The agreement will involve the transfer of approximately 55 staff and 82 contractors from the previous provider to Capita.

Chris Sellers, Capita’s Managing Director for Health, commented: “We are delighted to have this opportunity to support NHS Choices and look forward to working with everyone involved to further develop the way the NHS connects with its citizens and clinicians online. We welcome all those transferring to Capita and will benefit greatly from their vast experience as this further strengthens our growing presence in the healthcare sector. Together we will help transform the way patients interact with clinicians and provide more efficient access to health education and self help services.”

Work on the channel began last week.

Homeshoring will remain an attractive option for service providers and their employees, as the global economy slips into a recession, says IDC.

A new IDC study confirms that "Current economic ripples are buffeting American wage earners, including customer care agents, at a time when workers already face significant challenges to both their productivity and their wallets," said Stephen Loynd, program manager, Contact Center Services research. "I am convinced that when it comes to outsourced customer care, by the time we emerge from a possibly severe global recession, homeshoring will have developed into a more formidable sibling to offshoring than many would have expected just a few years ago."

Despite current economic indicators, IDC's new market forecast for U.S. home-based agents shows that the projected compound annual growth rate (CAGR) remains robust at nearly 19%. IDC is seeing a high degree of interest in this model of service delivery. Indeed, the contact center industry is replete with players moving to adopt the home-based agent offering.

This IDC study, U.S. Home-Based Agent 2008–2012 Forecast: Homeshoring in an Underwater World is based on analysis of key trends and events in CY08 and their predicted impact on the home-based services market for the five-year period from 2008 to 2012. It includes a forecast specific to outsourced home-based agents in the United States. This study also examines particularly important trends that are impacting how, depending on requirements, customer care might best be delivered.

Readers can check out the line-up for the Sourcing Summit at this link: http://marketforce.eu.com/sourcing/

EMEA IT market poised for slowdown in 2009

IDC, the global intelligence firm, have released their latest update on IT spending in Europe, the Middle East, and Africa which reveals a bleaker outlook for the near term in the wake of the worldwide financial crisis. Growth of just under 3% is now expected for the EMEA IT market in 2009, which represents a 1.5-point drop compared to IDC's previous, pre-crisis forecast.

Marcel Warmerdam, research director of European IT Markets commented, "The IT market in Western Europe has moved into a phase of very sluggish growth for the foreseeable future, many IT users are already resetting priorities in view of tougher times, with many projects being postponed or canceled."

The full IDC report can be requested at http://www.idc.com/

Sheffield City Council has selected The Capita Group Plc to perform a wide range of back office processes. Capita will also support the council in business transformation; the first two programmes are likely to be customer services and the introduction of flexible working.

Cllr Simon Clement Jones, cabinet member for finance and customer focussed services at Sheffield City Council, said: “We said we would make Sheffield City Council more efficient and better for customers and this change is a huge statement of our determination to deliver that for the people of Sheffield.”

Final negotiations are currently in progress with the contract expected to commence in January 2009.

With the UK halfway into a financial crisis, in the view of many analysts, we are also halfway into job cuts and cost reductions. BT has announced it plans to slash 10,000 jobs worldwide: six percent of its workforce.

As reported previously on this blog, the telco announced an 11% fall in Q2 profits, blaming poor performance by its Global Services division.

With 6,000 BT jobs due to go by April, principally among the company's UK direct workforce, many will point the finger at the Services unit. CEO Ian Livingston has denied any blame lies with Global Services and maintains that, wherever possible, the cuts will be made by not filling vacated posts.

That said, turning around Global services will doubtless involve a mixture of building a more efficient, targeted business – and cutting costs and jobs.

Meanwhile, the eurozone has entered recession for the first time in its history, with Germany – one of the twin engines of the European economy – joining the downward slide.

The strength of Indian offshoring, however, stands as a useful sounding board for the weakness of the home economy, with Genpact (among other providers) reporting strong financial results.

The financial crisis and global recession will accelerate adoption of global outsourcing and offshoring as strategic business tools, according sourcing advisory firm EquaTerra.

Factors expected to impact outsourcing and offshoring over the next year are:

Globalisation will continue but at a slower pace –Numerous factors, including the severe global economic downturn, repeated product health/ safety scares related to Chinese goods, a collapse of commodity prices (critical to supporting many emerging market economies) and the election of a new U.S. administration concerned with the loss of domestic jobs will slow globalisation and one of its key manifestations, the global sourcing of services. But the compelling business benefits of global sourcing – especially in tough economic times – will continue to drive growth.

Reassessment of current global outsourcing strategies/destinations – As buyer focus shifts to cost reduction and cost avoidance, organisations will carefully analyse current and future outsourcing efforts and service provider partners to ensure they are getting services from the most cost-effective location.

Steep learning curves – As buyers turn to outsourcing/offshoring to help weather economic turbulence, they will need to consider mitigating factors, including service provider capacity levels, prior direct experience and whether engaging a service provider expands or consolidates the supplier base – supplier consolidation/rationalisation is viewed as a means to gain economies of scale, reduce overall costs and speed implementation of new efforts to meet shorter term business needs.

Volatility in foreign exchange markets – Outsourcing buyers and sellers must become more effective/efficient at hedging against currency fluctuations that often negatively impact local currencies in emerging markets, creating instability in cost structure/pricing/profit margins. The seesawing value of the dollar will make calculating the true costs of outsourcing/offshoring more complicated, challenging buyers and service providers to plan/project longer-term pricing, cost and profitability levels. Efforts to do this should include explicit contractual contingencies and, when possible, spreading global service delivery efforts across multiple markets.

Wage inflation in offshoring markets will abate, at least temporarily – As Western markets pause to digest events and determine a go-forward strategy, demand for global outsourcing services will slow temporarily, curbing the recent trend toward wage inflation in offshoring markets and helping top outsourcing destinations remain competitive.

Evolving outsourcing business model – Buyers will continue to shift away from the use of project-based contract labor in favor of longer term, formalised outsourcing relationships. By committing to longer term and larger scale deals, buyers can get better pricing from service providers, better levels of service and lock-in longer term cost savings strategies.

Move toward flexible service delivery models and acquiring in-house skills needed to manage sourcing successfully – As buyers gain outsourcing/offshoring management experience, they will seek greater flexibility in service delivery models to fit form to function and tasks. The result will be a mix of domestic, nearshore and offshore shared services/captive centres and other outsourcing efforts that will evolve with the marketplace. Organisations will also place greater emphasis on defining, acquiring and transferring skills needed to successfully govern outsourcing/offshoring efforts.

IT recruitment company, Harvey Nash Group Plc has signed a strategic outsourcing partnership with telecoms infrastructure group Alcatel-Lucent.

A new subsidiary company will be created called Nash Technologies GmbH to provide wireless technology maintenance, research and development services.

Harvey Nash said it expects to create revenues of about 54 million euros over the term of the contract which runs until the end of 2010.