Industry news

  • 15 Jul 2008 12:00 AM | Anonymous

    A major new survey from Oracle, conducted across 12 countries reveals that the CEE is underperforming in terms of innovation. As a result the region could compromise five years of economic growth as its status as a low-cost labour base begins to erode, says the IT giant.

    The survey, conducted by the Economist Intelligence Unit (EIU) on behalf of Oracle, examines current and future innovation performance and the overall ‘innovation environment’ in 12 countries: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia and Ukraine.

    The report found that, while the CEE area has benefited economically from innovation over the past five years from foreign multinational investment, there have been insufficient ‘spillovers’ of technology and know-how, meaning that these innovations have largely failed to permeate the domestic business environment.

    The research also determined that innovation and the development of new products, services, business models and management techniques will be vital to the continued economic success of the CEE area as its status as a low-cost labour base begins to erode. This follows regular commentary about the changing role of India as costs continue to rise.

    Alfonso Di Ianni, Senior Vice President, Oracle Eastern Europe and CIS Region, commented: “The advantage of low-cost labour, initially a short-term catalyst for economic growth in the region, is being eroded and must be replaced with a more sustainable and long-term strategy for success. A structured approach to fostering innovation is what differentiates the successful economies, and collectively governments, educational institutions and businesses can create a dynamic environment which allows the untapped wealth of domestic talent to flourish. Information Technology today forms the foundation for a high percentage of the world’s most innovative solutions and can have a transformational effect on economic development – ideas, innovation and IT, an unbeatable combination.”

    The report found that Slovenia showed the highest levels of innovation performance in the region, while the Czech Republic was the most favourable environment for innovation. Romania had the least favourable performance, while the most challenging environment was to be found in Ukraine.

    The region possesses many talented home-grown entrepreneurs and innovative companies that are being held back due to less than optimum innovation environments. Several of these companies are profiled in the study.

    Paul Lewis, Managing Editor, Executive Briefing, Economist Intelligence Unit, added: “The post-communist economic transition of the CEE countries has been remarkable, but it has relied on investment from foreign companies. Governments need to be aware that it is no longer enough to imitate and assimilate innovation from abroad – they must encourage a favourable environment for home-grown innovation, or the long-term growth potential of the region will suffer.”

    The report provided some recommendations for turning the dearth of innovation around. ‘Governments, businesses and academia can work together to improve the environment for innovation in their respective countries. The report offers specific recommendations including investing in skills, research and IT infrastructure, and relaxing bureaucracy, taxation and labour laws.’

    The report can be seen in full here: A Time For New Ideas

  • 11 Jul 2008 12:00 AM | Anonymous

    NXP, the independent semiconductor company founded by Philips, has awarded a five-year outsourcing contract to international IT services company Atos Origin for the management of its global datacenters.

    As part of the new contract, Atos Origin will manage all infrastructure services for NXP’s core business to help consolidate and optimize all global manufacturing and engineering data centres.

    Louis Luijten, CIO of NXP Semiconductors, said:: “Our strategy focuses on increased efficiency by returning to our core activities, and Atos Origin will be our long-term partner to strengthen our competitive presence and increase our output”.

    The new contract follows an existing business ITO agreement signed last month between the two companies. The combined contracts are worth €155 million. NXP recently signed another outsourcing contract with TCS.

  • 11 Jul 2008 12:00 AM | Anonymous

    Hydro One Networks Inc., a large North American transmission and distribution electric utility company, has extended its agreement with Capgemini to provide Smart Metering services for the company’s Automated Metering Infrastructure (AMI) programme.

    Under the terms of the agreement Capgemini will provide a range of services including, programme management, process design, systems, integration and infrastructure management.

    The project will employ approximately 100 Capgemini staff, including global subject matter specialists and a large team of local project delivery professionals, providing the following services to Hydro One over the four-year project lifecycle:

  • 11 Jul 2008 12:00 AM | Anonymous

    National Australia Bank plans to send 400 information technology jobs to India by the end of the year.

    On the shortlist for the new deal are Infosys and Oracle who will compete for a billion-dollar, next-generation platform, which will form the key pillar in the bank's technology transformation plan, Program NEOS.

    NAB Chief Information Officer Michelle Tredenick told technology staff this week that it was ramping up its offshoring initiatives as part of Program NEOS, in an email quoted by 'The Australian' newspaper.

  • 10 Jul 2008 12:00 AM | Anonymous

    The Transportation Security Administration (TSA), a US governmental body, has awarded Lockheed Martin a $1.2 billion contract to manage its ‘Integrated Hiring Operations and Personnel’ (IHOP) Program. 

    Under the potential eight-year contract, Lockheed Martin will develop a fully-integrated human resources system to support the recruiting, assessing, hiring, paying and promoting of all TSA employees.  Lockheed Martin will develop and deploy an advanced HR system, as well as provide the people and processes to manage TSA's human resource services. 

    Elmer Nelson, Vice President of homeland security solutions, commented: "It is a privilege to continue our support to the TSA. Our IHOP solution will allow the TSA to have the right staff at the right time and at the right place to support its critical mission of keeping our nation safe and secure."

    The contract will be managed by TSA's Office of Human Capital, who is responsible for hiring and retaining qualified personnel to carry out the agency's critical missions.

    Lockheed Martin has supported the TSA since its inception in 2002 on programs such as screener training and checkpoint reconfiguration.  The contract also builds on the corporation's previous experience in managing large federal human capital programs.

  • 10 Jul 2008 12:00 AM | Anonymous
    We launched sourcingfocus.com in April with a consumer survey that revealed for the first time the full of extent of people's dissatisfaction with offshore customer service. In all parts of the country and across all social groups, offshore contact centres languished in single-digit approval rates, in some cases as low as one percent. That story made the national and international news.

    Now two US academics have piled pelion on ossa for the outsourcing industry with bad news from the other side of the Atlantic. In a rigourous, eight-year study they found that enterprises that outsource front-office work, or locate customer services offshore, may save on labour, but will pay a high price in terms of unhappy customers.

    Researchers from Michigan University found that offshoring and domestic outsourcing of front-office functions both result in customer satisfaction declines that represent a drop of one to five percent in a firm's market capitalisation , depending on the industry.

    However, when it comes to offshoring back-office functions, such as IT, human resources, and finance and accounting, they found found no decline in customer satisfaction with the enterprises concerned. No surprise there, perhaps.

    Rather than talk to customers as we did, MS Krishnan, professor of business information technology at Michigan University's Stephen M Ross School of Business, and colleagues Claes Fornell of the Ross School and Jonathan Whitaker of the University of Richmond, analysed the offshoring and outsourcing activities of 150 US enterprises between 1998 and 2006,together with some 50,000 news reports on firms' offshoring and outsourcing activities.

    "Firms may have a limited and short-term perspective in their initial decision to outsource – onshore or offshore – based on internal business process performance," said Krishnan. "Our research enables firms to account for customer perceptions in making their decision, and facilitates a more a comprehensive approach to the decision process for offshoring and outsourcing."

    So how to redress the balance? As a starting point, firms should invest some of the savings from offshoring to serve customers they previously could not afford to serve, said Krishnan, or to provide additional services to current customers. As a next step, he said, enterprises can use offshoring to access additional innovation in the marketplace for global resources and pass these innovations on to their customers.

    So there you have it: from both the customer and enterprise perspective, front-office outsourcing and offshoring are not initiatives that should ever be entered into lightly, or merely to reduce cost.

    Customer relationships pay the bills, and so before making that strategic move – or facilitating it for your own customers – consider both your customer experience, and your shareholders or stakeholders.

  • 10 Jul 2008 12:00 AM | Anonymous
    Indian IT outsourcing body NASSCOM has reduced its forecast cumulative growth rate for the Indian IT BPO sector for 2008-09 to 21-24%, a significant fall-off from the 28% growth reported in its year-end results for 2007-08, released this week.

    The reduced growth, while still stellar by US and UK standards, is the first evidence of the credit crunch and soaring energy and food bills impacting on the West's outsourcing partners in the East.

    While the local economy in India remains strong and largely immune from the economic woes of the past twelve months, NASSCOM clearly sees the beginnings of an impact of reduced customer circumstances and decision-making on order books.

    It's a significant issue for the Indian services market: NASSCOM president Som Mittal said that the estimated slowdown in the growth of IT-BPO spending would translate to revenues of $62-64 billion, with $50-billion of that coming from the export sector. Any real downturn in spending there over the next 18 months to two years would hit India hard.

    The report comes at a time when many in the broader outsourcing sector are bullish about prospects of increased spending, while NASSCOM's own summary of the situation sees steady, if reduced growth. Its domestic market remains strong, with full-year growth rates for 2007-08 reported as being 26%, with revenues of $11.6 billion.

  • 10 Jul 2008 12:00 AM | Anonymous

    Before the ‘credit crunch’ hit, it was estimated that the amount spent on public sector outsourcing would grow to £65.2 billion by 2009, largely due to pressure on the public sector to control costs and improve service delivery. Following the crunch, some doubt has crept in as to whether this growth rate is possible, not because the public sector has lost its appetite, but because the credit squeeze may limit outsource providers’ ability to take on major new capital investment projects.

    A huge change has undoubtedly occurred in the past six months. Straight debt facilities are not as readily available as they once were, making it more difficult for outsourcers to raise the necessary funds that in the past provided the up-front capital injection that many projects in the sector require.

    This has to be a big worry for Healthcare Trusts who have become used to the many benefits of outsourcing. First and foremost of these is direct access to services and technology without the associated risk or capital expenditure exposure. This enables patients to get the healthcare they need, when they need it, allowing staff to concentrate on the job in hand; caring for patients.

    Following the tightening of the credit markets and the resulting limited availability of cheap debt facilities, it can only be a matter of time before outsource providers are forced to rein in their offers.

    On the face of it, this may sound bleak for the Healthcare sector, however, outsource providers needn’t become ailing patients themselves. Firstly, it is important to state that not all outsourcers will be affected, and certainly not in the same way. Catering and cleaning outsourcers, for example, may be relatively unaffected simply because they are less likely to have major capital investments to contend with. On the other hand, high tech medical equipment providers could find the current credit climate more of a challenge.

    The real question will be: how will the outsourcers, and ultimately the Healthcare Trusts, cope? Some outsource specialists will be cash rich, and therefore in a good position to fund capital expenditure direct from their own balance sheet. Others will have contracts already in place, but without specific project related funding. In these circumstances, there is the potential to free up normal banking debt lines to be used for other capital expenditure or other operating expenditure. In order to do this the banks would have to assess and conclude that there is a proportion of a payment in a service contract that is isolated from the majority, if not all, of the service delivery related payments due from the Healthcare Trust.

    Similarly saleable, structured or asset-based financing can be set up at the outset of the contract that allow for the long-term value of the end customer’s service payments to be taken into account as a financial asset, so that in times where funding liquidity is a more scarce resource, outsourcers can open up additional avenues of financing. In this circumstance it is clearly in the mutual interest of the Healthcare Trusts and the Service Providers to work together. In doing so they will be in a better position to arrange funding secured on the payments in the service contract, helping to widen the funding sources available to the Service Provider, which in turn allows them to continue offering a service based solution to large capital projects.

    However, the longer the current credit climate continues, the more likely it is that outsourcers will have to consider new ways of raising debt to overcome the reducing availability of banking facilities. As a result, it is entirely feasible that Healthcare Trusts could find it an increasing challenge to identify outsourcers with sufficient funds to take on new large capital projects.

    So does this sound the death knell for the outsource industry? Well, no, but it may lead to a new era in which outsourcers and Healthcare Trusts need to work together in a rather different way.

    Whereas in the past many outsource providers would have swallowed the cost of investment, tighter margins combined with lack of cheap debt means that outsourcers may now need to consider how they can reduce the impact of significant expenditure at the start of a contract. As a result, Healthcare Trusts may need to work closely with their potential outsource partners to help them realise value in their contracts on which banks can then lend money to cover the cost of the up-front capital investment projects.

    The good news is that there are a number of solutions available, ranging from structured loans to receivables based funding solutions, which can be used by outsourcers to raise funds. In both these cases the financier will look to the value of the contract over its lifetime to identify the underlying payment streams within the outsource contract from which they can generate a pool of cash which can be used to fund capital expenditure immediately and in the future.

    One way of managing the working partnership between outsource provider and Healthcare Trust is to look to an external financier who can fund the ongoing expenditure by identifying value in the underlying contract. The terms of the payment stream in the contract are key in this respect as they need to provide recognition for the recovery of set-up costs in such a way that enables the funder to attach value. If funders are unable to identify future payments with a degree of certainty they are less likely to be in a position to provide front-loaded finance, so it is very much in the interest of the Healthcare Trusts to find ways that they can include an element of recurring payment to assist the outsourcers in their contracts. One way to do this would be to include minimum guaranteed throughput activity related payments, reviewed on an annual basis. The certainty around this element of the future service payment would allow it to be discounted and provide a present-day value funding sum.

    In practical terms this may mean that amendments to financial schedules and contractual terms become more commonplace over the next year. But if Healthcare Trusts are to keep capital costs off their books, a new way of viewing value in outsource contracts may indeed be on the cards. Talking to specialist financiers will smooth this process enabling Healthcare Trusts to focus on the important decisions – such as identifying which outsourcer is best placed to provide the service required and how the relationship with the outsourcer should be managed over the life of the requirement – rather than being concerned about exactly where the cash will come from to finance service critical assets.

  • 9 Jul 2008 12:00 AM | Anonymous

    Islamic codes make traditional finance and outsourcing difficult in many cases. Here Accenture presents an overview of the key issues, opportunities and challenges in the growth of Islamic finance and products compatible with Muslim beliefs.

  • 9 Jul 2008 12:00 AM | Anonymous
    The tables are turning on the suppliers of goods and services.

    The web and penetration of broadband allows tools, previously only available to large public and private organisations to publish RFIs and RFQs to their preferred supplier list, to be developed to provide SMEs and individual Consumers to ‘pull’ relevant marketing information and quotations from potential suppliers.

    Until now CRM, in its many forms, has been used to capture data about customers and prospects with the commendable intention of understanding their ‘needs’ and pushing appropriate marketing messages. This data may originally have been provided voluntarily and in good faith in exchange for a specific purpose (convenience) or reward (loyalty card). Unfortunately this has got so out of hand that today data about an individual, including personal and sensitive information, is being harvested, collected and stored on 1,000 data silos around the globe.

    Some of this data is 10 minutes old - some of it 10 years old, much of it is out of date and inaccurate and organisations are making decisions which could, for example, affect the credit rating of an individual or SME based upon this erroneous data. It certainly wasn’t provided to be shared, sold or stolen without the individuals’ knowledge or permission resulting in an increasing avalanche of spam and junk mail. It also wasn’t provided for organisations, public and private, to treat identifying information in such a cavalier manner as to expose a company or individual to the risk of identity theft and fraud.

    Never forget that the ‘R’ in CRM stands for 'Relationship' and, to make that worthwhile, the supply chain needs to participate in a two-way conversation between buyer and seller. There is no need to ‘guess’ what a customer or prospect may want when we now have the ability to let them tell a supplier precisely what they want – RFIs and RFQs for everyone right down to the all important consumer.

    The reciprocal to CRM is VRM (vendor relationship management) which allows the individual to enter, store and maintain their information in their own data silo. From this they can anonymously ‘publish’ their wants and needs (RFIs) for suppliers to respond and correspond (RFQs) only revealing their relevant identity details at the appropriate time in the conversation/transaction.

    The benefits for both parties in this scenario include:

    • Both seller and buyer can be authenticated by a trusted third party;

    •Only relevant information provided by buyer, with their permissio;

    • data, if relevant, can be verified and certified by the trusted third party;

    • the ability to ‘write once, use many’ reduces repetitive effort by the buyer and ensures consistency of information when comparing responses from suppliers;

    • The communication channel, email address/phone number, can be unique to a supplier (unrelated spam to that address will immediately identify the source of the information breach);

    • There is an audit trail for buyer of what data provided to whom, when and why;

    • The data feed can be one-time or persistent so that suppliers are always up-to-date;

    • The data feed can use machine-readable code to synchronise (two ways) with the seller's CRM;

    • The data feed can be turned off at the end of the relationship;

    • Unsuccessful potential suppliers are not able to ‘spam’ a prospect or to share, lose or sell data;

    • The seller reinforces the relationship with the buyer by demonstrating respect for sensitive data;

    • The seller demonstrates compliance with Data Protection Act.

    The key issue here is that the buyer is now able to ‘pull’ relevant information rather than surfing, searching or filtering.

    A buyer's ‘invitation’ could be specific and temporary (e.g. replacement double glazing) or more general and persistent (promotional gifts). The more ‘granular’ the invitation (let's say, the supplier has to be within 50 miles of your location, the maximum price is £5,000, and after-sales service capability is essential, and so on) then the more relevant the responses will be.

    This ability to ‘invite’ relevant email marketing messages will result in spam becoming a sales inhibitor rather than a cheap, albeit increasingly ineffective, sales enabler. Spam used to be merey irritating (and you don’t want to irritate your customers and prospects) but it is now out of control. Reputable suppliers will want to distance themselves from such intrusive tactics – after all, customer relationships are at stake.

    Numerous applications based upon consumer-driven VRM principals will be launched starting in 2008. Many of these will be simple, light widgets in the social networking space expressing an interest in, say, Chardonnay and requesting marketing information. Others will be heavier, providing highly secure personal digital safe deposit boxes from which an individual can confidently manage their health, wealth and happiness.

    I often recall the classic marketing poster, spotted in a New York print shop window some years ago, which all buyers would do well to keep in mind. It read “Quality, Speed, Price – Choose any two”.

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