Industry news

The 'Winter of Discontent' was in 1978-79: exactly thirty years ago. Today as we face freezing weather, spreading wildcat strikes, the recession, a resurgent right, and an embattled Labour prime minister, it does not seem quite so long ago. We shiver in the snow, and the country grinds to a halt (snow in the winter: who would have thought it?).

In one sense, our annual national panic about levels of snowfall that Canada, Russia, or Switzerland would ignore reveals the state of the UK psyche. Predictable, cyclical events throw us into confusion and we instead believe we are in the grip of the kind of forces that sent King Lear raging across the heath.

The reality is that we are in a downturn one third of the time, and it is winter one quarter of the time. Yet just as we have the wrong kind of snow, so we have the wrong kind of downturn. Some commentators now see a depression, with a record slowdown in the US economy and every sign of green shoots snapping in the frost over here. As in the 1930s, the spectres of protectionism and nationalism lurk never far from the table.

The country is also coming to a standstill because of wildcat strikes that have spread from business to business in the old economy – energy and manufacturing. We may be a service economy today, but it will always be one rooted in the industrial revolution and we should be grateful for that, valuing our modern labour power.

At the root of these disputes are – oh happy day, alas, for dyed-in-the-twinset Thatcherites and the BNP – European workers and European regulations, which together have conspired to create an uneven playing field for homegrown personnel, in the view of striking workers across the UK. The result, says union Unite, is UK-based jobs ringfenced for European workers at knock-down rates.

This afternoon, business secretary Lord Mandelson addressed the House of Lords about the dispute at Total UK's Lindsey refinery, which resulted in a walk-out last week and triggered wildcat actions in solidarity.

He said arbitration service ACAS would rule on whether there had been fair and proper application of EU labour laws, and cited Total's claim that no laws had been broken, no discrimination against UK workers had taken place, and that wages were on a par with the UK norm. On the face of it, the Government appears to have accepted that claim.

Lord Mandelson then reinforced the Government's commitment to EU regulations and stressed the importance of the mobility of labour.

However, whatever Lord Mandelson's negotiating skills and political clout, he is a divisive figure and perhaps not best suited to fronting Whitehall's response to national unease. Unless the Government is spoiling for a fight, that is.

Whatever the truth of the matter, the perception that overseas workers are taking local jobs for less money has shaken many people's confidence here, just as it has in the US and throughout Europe.

For the outsourcing industry, this is an uncomfortable moment as we witness national outrage at jobs sourced from abroad through labour arbitrage – in this case, within our own shores. Gordon Brown's promise of 'UK jobs for UK workers' is currently spread across strikers' placards.

Rightly, Unite has said it is not opposed to foreign workers securing roles in the UK – that is central to the economy's success – only that the playing field should be level for UK workers to apply.

Of course, that must be the case, and these deals were struck in the boomtime, despite warnings about their implications in a bear economy.

Nevertheless, all companies and organisations now need to consider sourcing far more sensitively than before. Having witnessed reports myself about how the recession is good news for ambitious HR professionals who can get stuck into restructuring and redundancies, it is certainly an issue that needs to be handled with greater tact.

In the current climate any announcement about sourcing agreements struck overseas could trigger industrial action and escalating hostility. These are angry people: not just about their jobs, but also about the wider state of the economy. The Government itself needs to listen, and not see this as another industrial dispute to face down.

In politics, timing is everything, and unfortunately that has never been Mr. Brown's strong suit. We lack the galvanising optimism of Obama's refreshed US (its internal divisions notwithstanding) and instead have a Government whose own new dawn was over a decade ago.

As for 'Broon' himself – a glowering spectre at the feast in the best of times – the prime minister has now taken to smiling as the recession deepens. (Ill fortune does that to politicians, as we witnessed in the last days of Bush's presidency.)

Today, Mr Brown deployed his smile at a trade event between the UK and China, attended by Wen Jiabao. As well as having an excellent name (Question: When d'ya bow? Answer: whenever you greet him), Mr. Wen is, rather more importantly, the Chinese premier.

This morning both he and Mr. Brown smiled as they launched a new initiative called 'China Tomorrow' – a refreshing eastern twist on 'jam tomorrow', as it turned out, once our Prime Minister had apologised for being late because of the weather.

Mr. Brown took the opportunity to remind us of the often overlooked diversity in the UK economy – electrical equipment, high-tech manufacturing, the creative industries, big pharma – and promised a new era in Sino-British trade rooted in sustainable cities, partnership, a low-carbon economy, and the exchange of education, innovation and skills. No doubt outsourcing will – shhhh don't mention it, though – play a key role in that relationship.

At present, UK exports to China total £5 billion, and the prime minister promised to work towards doubling that in 18 months, the recession be damned.

An excellent initiative, no doubt, Prime Minister; the sun is certainly rising in the East. But the timing, Mr. Brown... the timing...

Nokia, has entered into a multi-year, multi-regional end-to-end global helpdesk and desktop management outsourcing services agreement with HCL Technologies

This deal will span Nokia’s operation in 76 countries through HCL’s global delivery centres in Finland, Poland, China, US and India. The scope of the engagement encompasses multilingual helpdesk services in 13 languages, Global Account Management, workstation packaging, creation and maintenance, workstation security management and onsite support services strengthened by a robust partner eco-system.

The signing of the deal coincides with opening of HCL’s new delivery centre in Helsinki, Finland. This centre will have 100 people supporting near-shore delivery for HCL’s clients in the Nordic and Baltic region providing them with ‘right-shoring’ options to enable a customized mix of offshore/near-shore resources.

Liselotte Hägertz Engstam, Vice President and head of Nordic Regions for HCL Technologies, said; “Nokia has a very large footprint across the world and a much diversified end user base. Through this engagement we will aim to deliver a predictive, highly optimized and standardized end user computing experience to its end users. We look forward to collaborating on this critical area to serve Nokia in ways that provide agility, innovation and performance the company needs to support its business agenda.”

TCS Financial Solutions has announced that its client, CIG Kozep-Europai Biztosito Zrt., (Pannonia Insurance) in Hungary, a recently-incorporated Insurance company based in Budapest, has gone live with TCS BaNCS Insurance. The new system will allow the company to launch its 'Unit-linked Life Insurance' business.

TCS BaNCS Insurance provides a complete end-to-end, web based solution for the life and pensions business, supporting unit linked and traditional products, sales channels, and lifecycle functionalities, including customer management, product differentiation, policy servicing, claims management, insurance accounting and other new product innovations. TCS BaNCS Insurance was configured for Pannonia Insurance to suit the entire core ‘Unit Linked Life insurance’, claim, accounting, customer portfolio management, sales channel commission management, document manager and interfacing functionalities as required by Pannonia.

The 4UGroup, holding company of Phones 4U and other telecommunication organisations, has chosen TCS to provide end-to-end managed IT services.

Under the $100m agreement, TCS will provide a full range of IT services to 4U Group including service management and application support.

Darren Billings, CTO at 4U Group, said, “This relationship with TCS is part of our ongoing commitment to further enhance our business, deliver on our strategy and meet the ongoing needs of our customers.”

Gloucestershire County Council plans to effect savings totaling some £60 million over the next four years in a major programme of transformation carried out with business and IT consultants from Capgemini.

The programme aims to improve efficiency across all departments and put greater focus on improved customer services.

Peter Bungard, chief executive of Gloucestershire County Council, said, ‘Our new IT system provides a springboard for change by improving communications across the council.”

Only 3% of UK organisations have a completely automated procurement process.

Research of 110 public and private sector organisations, by the National Computing Centre (NCC) and business management service provider, COA Solutions, has revealed that just 3% of UK organisations have a totally automated procurement process.

The research also highlighted that just 25% of respondents have established a green and sustainable procurement policy across their entire organisations.

Mark Thompson, MD of COA Solutions, says, “This research highlights that UK organisations are still not taking full advantage of automated procurement, which is surprising because during challenging economic times, cutting costs and streamlining procurement should be at the top of organisations’ agendas.”

A summary of the report can be found here.

British support services group, Capita, is the preferred bidder for a pensions outsourcing contract with French insurer, Axa. The deal could be worth up to £500 million over 15 years.

Under the deal, Capita would take over customer service and other administrative duties relating to 3.2 million life and pension policies written by Axa subsidiary Axa Sun Life.

About 1,300 of Axa's British staff would transfer to Capita, as would a further 600 employees based in India.

A BT backed team of UK and Indian scientists and engineers will head a £9.2m research project to develop ‘Next Generation Networks’, vital to pushing forward the digital economy.

This collaboration between the UK and Indian Governments, universities and ICT specialists in both countries will work to develop 'Next Generation' telecom networks, ICT services and applications in the two countries, along with work on wireless sensor networks, which could aid healthcare and early warning weather systems in rural areas.

Funding will be used by the India-UK Advanced Technology Centre (IU-ATC) to drive collaborative research and the sharing of new communications technology between India and the UK. The wider IU-ATC consortium currently comprises nine UK universities, six Indian research Institutes, seven industry partners in both countries including BT, InfoSys, Wipro, Sasken, Tejas and Midas and a number of small business partners.

The grant money includes £5m jointly from the Research Councils UK (RCUK) Digital Economy Programme, led by the Engineering and Physical Sciences Research Council (EPSRC), and the Indian Government’s Department of Science and Technology (DST). This is matched by a further contribution of over £4m from a consortium of the IU-ATC academic and industrial partners.

The funding bid was led by Professor Gerard Parr at the University of Ulster in Coleraine and Professor Ashok Jhunjhunwala of the Indian Institute of Technology Madras, together with Professor Nader Azarmi of BT.

Prof Parr said: “This funding will support an exciting research and innovation programme for the IU-ATC in Next Generation Networks, Systems and Services which will give a massive boost to the digital economy of both countries.”

Funding will be specifically used to conduct research into Next Generation network enabled applications and services, converged network protocols and systems and wireless communications and mobility. The research is designed to underpin the development of policies and initiatives for both rural and urban Digital Economy programmes in India and the UK.

Chief executive of BT Innovate and BT Group Chief Technology Officer, Matt Bross, added: “These next generation networks form the future foundations of the digital economy and research in this area is crucial. The IU-ATC will allow us to explore novel solutions and provide research, innovation and wealth creation opportunities between the UK and India that are of benefit to citizens, business, government and industry.”

The Research Councils UK (RCUK) Office in India and the Department of Science and Technology have worked closely together to create a joint UK-India funding mechanism to review this proposal. Dr Alicia Greated, Director of the RCUK Office in India stated: “We are extremely pleased that this initiative has been funded as it is an excellent example of India-UK research collaborations being developed across both the private and public sectors.”

Outokumpu, an international stainless steel company, has awarded Accenture a five-year application outsourcing contract to provide application development and application management services for its enterprise resource planning (ERP) system on a global basis.

The agreement extends a contract signed in 2005 under which Outokumpu outsourced to Accenture the management and development of its finance, human resources and logistics applications on its SAP-based ERP system. The new agreement extends the scope of the work to include .NET applications for sales order management.

"Accenture’s strong competence in SAP has helped us streamline our core processes over the last three years,” said Mikael Dahl, Outokumpu’s vice president for IT procurement. “The added combination of Accenture’s .NET capabilities and its global network of professional resources led us to extend the scope and length of our relationship.”

Accenture will provide the application management services for Outokumpu’s existing SAP platform and for its .Net applications from its delivery center in Hyderabad, India, which is part of Accenture's global network of more than 50 delivery centers.

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every

difficulty.” – Winston Churchill

These turbulent economic times are a growth opportunity for the outsourcing industry. We like

to say we are a good company in good economic times, but a great company in bad economic

times.

During the last economic slowdown, industry growth continued despite tighter budgets in the

commercial and public sectors – largely because BPO service offerings were valued and sought

after. Once again, there is a sense that enterprises have not only a hunger - some say even

desperation – to look for ways to save money in this economy.

This growth will lead to job creation in the outsourcing industry. As an anecdotal example, ACS

recently completed the hiring of more than 1,100 people in the Raleigh, N.C. area, over a four

month period. We expect our renewal rates to be at about 90% for the remainder of FY09, which

will also lead to job growth.

Companies that in the past have been hesitant to embrace outsourcing, are now likely to look at

new opportunities and will also be willing to outsource higher tier services. Companies are

looking at short term solutions that can bring savings in 30-60 days, because some firms may not

survive much longer. Once these new customers experience these new solutions and are

comfortable that they are not losing quality, but are saving money, they will see that what was

once viewed as a short term solution actually also adds long term value to their bottom line.

Again, creating new opportunities and jobs in the outsourcing industry.

The jobs will be located all over the world and will include, at home workers, rural sourcing,

domestic, near shore and off shore. Businesses will have to determine which model best supports

their needs and buffers their bottom line. Those decisions will vary by company.

Not every outsourcing firm will be as well positioned to seize this opportunity. BPO firms not

only have to offer a high quality mix of horizontal and vertical solutions, their diversity will have

to include a variety of alternatives to meet a customers needs such as location, cost and other

sensitivities. Companies that can offer experience, expertise and expediency will thrive in this

economy.

Many small to midsize companies may incorrectly believe they cannot afford outsourced

solutions. They may not be able to afford customized solutions, but Business Process Utility

(BPU) offers a standardized solution that may be a perfect fit for smaller businesses. This

innovative offering will also help grow the industry, possibly adding jobs.

BPU is an emerging trend—a faster, more economical level of outsourcing that can be applied to

almost any industry. Instead of creating a customized outsourcing solution, BPU applies existing

standardized systems designed by using best practices.

Implementation time is faster. In many cases, transaction-based pricing lets companies pay only

for what and how much they use. Economies of scale and standardization keep costs down.

Some BPU examples include payments such as loan processing, claims administration, toll ticket

processing, and payroll processing.

There is another scenario where the outsourcing industry will grow, but not create any net new

jobs. Asset acquisitions are gaining in popularity. BPO firms can take over the real estate,

personnel and other recurring costs, eliminating a variety of problems for a customer – an

inefficient process, an inexperienced work force, a facility that is not filled to capacity and other

issues – and make them our own. Depending upon the way the deal is structured, the customer

can also see an immediate infusion of cash as well as a long term solution that will generate

efficiencies and savings over time for the company.

Due to the current economic situation, the industry should expect more activity and larger deals.

That trend will continue based on the fact that we are also seeing a more aggressive approach

from customers. Even companies that are on solid financial footing can and are using the current

business climate as the rationale to make changes that while not essential to their survival, will

result in a marked improvement in their bottom line.

About Tom Blodgett

Tom Blodgett is Executive Vice President and Group President for ACS’ Business Process

Solutions line of business. Tom has nearly 20 years of senior management expertise in business

process outsourcing (BPO). Blodgett is a pioneer in the BPO arena. In 1985, his family founded

Unibase, a data entry company acquired by ACS in 1996. The acquisition expanded ACS’

capabilities in the relatively new BPO services market and created an entire service segment

dedicated to delivering superior business process solutions. His Business Process Solutions

group represents $1.3 billion in annual revenue.

About ACS

ACS touches millions of lives every day. As an outsourcing partner to some of the world’s most

complex corporations and governments, we focus on serving their business operations so they

can serve their clients.

As a FORTUNE 500 company with approximately 70,000 people, our presence is wide,

supporting client operations in more than 100 countries. But our contribution to our clients’

business success runs deep – by simplifying their business processes and improving their

information technology capabilities

You can earn more about ACS at http://www.acs-inc.com.