Industry news

Virgin Mobile USA, a leading national provider of prepaid and hybrid wireless plans to North America, has signed off on a new IT services agreement with IBM.

Under the terms of the agreement IBM will manage Virgin Mobile’s IT operations and new applications development. This will entail the migration of existing it infrastructure and applications to IBM systems and the ongoing development of differentiated wireless applications and service offerings in partnership with Virgin. IBM will also provide data centre outsourcing and application management services

Virgin Mobile USA expects that, as a result of its new relationship with IBM, the company will achieve IT-related operational cost savings over the next five years, while increasing the company's competitive advantage in new product and service delivery. The expected benefits of the company's new relationship with IBM are key components of Virgin Mobile USA's focused expansion and value creation strategy.

Jonathan Marchbank, Chief Operations Officer for Virgin Mobile USA, said: "We have built our success as a customer-centric innovator, and always seek to enhance our product and service offerings. These steps will continue to raise the standards in the prepaid market overall and allow us to stay current with, and ahead of, trends and evolutions in the overall wireless industry. With over 5 million customers, the scale we've achieved now puts us in a position to take advantage of IBM's proven best practices, scope and unparalleled experience in running and building IT infrastructure."

The company expects the transition of its existing IT infrastructure and application suite to IBM to be completed by December 31, 2008.

Excelon Corporation, one of the largest electric utilities companies in the US, has signed a new five year IT services deal with CSC.

The contract, reported to be in excess of $150 million, will see CSC provide Exelon with a broad spectrum of infrastructure support services, including help desk, desktop support, database administration, telecommunications and data network support and server management services. Work will be performed at various locations in the US as well as CSC’s World Sourcing delivery centres in Malaysia and India.

Daniel Hill, Senior Vice President and CIO of Exelon, commented: “We are pleased to have CSC bring their experience and expertise to Exelon. Exelon is committed to operational excellence and providing superior value for our customers, shareholders and employees. We believe CSC will be a valuable partner in helping Exelon deliver on our commitments."

The U.S. Centers for Medicare & Medicaid Services (CMS) has awarded EDS subsidiary, NHIC Corp., a $148 million contract to administer Medicare claims payments to health care providers for parts of the US Northwest.

The contract, lasting an intial one year, will see NHIC serve approximately 54,000 physicians and practitioners and 233 Medicare hospitals within Alaska, Idaho, Oregon and Washington.

Lockheed Martin, a US group of technology companies, has won an $89 million information convergence contract from the US Transportation Command (USTRANSCOM) and the Defense Logistics Agency (DLA) to help enhance the performance of the military's distribution network. 

The Lockheed Martin team, including SAIC, Data Networks Corporation, PRTM, BearingPoint, Rainbow Data Systems, Innolog, Business Objects, Teradata and Oakland Consulting, was awarded the fixed-price, multi-year contract, which includes provisions for supplemental contract extensions in future years.

The contract will see the Lockheed Martin team merge DLA's ‘Integrated Data Environment’ (IDE) distribution system with USTRANSCOM's ‘Global Transportation Network’ (GTN) into a unified system using the increasingly popular, SOA technology.

The finished product will be a common information platform that enables the military to more collaboratively and cost-effectively improve end-to-end supply visibility, responsiveness, decision-making, service and logistics processes.  The platform includes a single repository and universal access to logistics data so that any user or developer can easily find, access or manage supply chain information.  

The Department of Justice (DOJ) for the USA has awarded Unisys, the global IT outsourcer, three ‘task orders’ to provide professional and technical services, expanding an existing long-standing arrangement.

Under the contract Unisys will provide investigative services, training, and program analysis – in support of the DOJ Asset Forfeiture Program (AFP). The task orders form part of a $475 million multi-vendor contract awarded in March 2008.

The AFP is a nationwide law enforcement program that manages assets forfeited in the prosecution of criminals and criminal enterprises. As part of the contract Unisys will be eligible to compete for ‘task orders’ to provide a range of services to AFP management and field professionals. These services include investigative and analytical services, consulting, technical services, and case-related professional support during the investigation and prosecution of criminal cases.

Unisys has supported the DOJ on various AFP services since 2002.

CSC announced today that it has signed a new information technology (IT) outsourcing contract with US aircraft manufacturer Hawker Beechcraft Corp. The nine-year agreement is an extension a contract that began in 2002.

Under the new deal, CSC will continue to manage Hawker Beechcraft’s IT infrastructure, including mid-range computers and desktops, help desk operations, IT security, engineering computing, voice and video telecommunications, servers, and local and wide-area networks. CSC will provide these services for Hawker Beechcraft’s operations globally.

Nationwide Building Society has signed a new agreement with BT to manage its networked IT services in an outsourcing deal worth £160 million.

Under the terms of the agreement, lasting an initial seven years, Nationwide will transfer all voice and data networking infrastructure, third party network contracts and in-scope staff to BT.

As part of the contract, BT will deliver a service transformation programme under which they will consolidate Nationwide’s multiple networks onto its industry-leading 21CN Global network which will support both voice and data services on a single converged platform. BT will also deliver enhanced remote access facilities to Nationwide’s non-office based employees. 

The new model will introduce a flexible commercial model providing Nationwide with cost predictability whilst based on industry best practice and a framework of service level agreements (SLAs) at a reduced overall total cost of ownership. 

Traditionally, Nationwide has developed and managed its IT operations in-house and procured point solutions from external suppliers where necessary. This agreement marks a shift towards a preference for a multi-sourcing model for IT services that can provide Nationwide with a reduced overall service cost and with improved service flexibility.

Peter Stafford, Head of IT Infrastructure at Nationwide, said: “Nationwide’s growth in recent years has meant that our IT infrastructure has also had to evolve at an exponential rate to keep up with demand and we must now seek the most efficient and scalable infrastructure service possible to support this. Having worked with BT for a number of years, we are very confident in the team’s ability to fulfil our requirements.”

Under the agreement, Logica will develop and implement a management system for the alliance’s electronic documents across Europe, Turkey and the USA.

Previously, Logica installed a “Document Handling System” (DHS) product for the “NATO Secret” network in ten of the organization’s locations worldwide. By December 2008, DHS is expected to be set up at 14 more locations. Once the project is completed, the majority of NATO’s military community will be using the system.

Prior to the introduction of DHS, NATO was using several separate systems for document management that were closely geared to the individual command centers and institutions of the organisation. With DHS from Logica, NATO employees are now able to access internal documents from any of the organisation’s locations. A powerful search function ensures that documents from a wide variety of different sources can be found quickly and easily.

Steven Janis, Core portfolio coordinator at the NATO C3 Agency, said: “What we wanted from our new document management solution was a user-friendly application that offered our users enterprise-wide rapid access to all appropriate documents stored in the business in a controlled manner, balancing the need-to-know against the need-to-share. Logica has implemented a solution that does exactly that for us”.

The use of global delivery models is now common practice within the business process outsourcing (BPO) market and Latin America is becoming an increasingly popular destination for IT services and BPO vendors who are looking to provide low-cost services to clients, reveals a new report by independent market analysis firm Datamonitor. 

The report, titled “Global Delivery Locations for BPO – Focus on Latin America”, looks at the factors driving this trend, discusses the main players currently active in the market and analyses possible strategies for including Latin America in a coherent global sourcing model. It also investigates the key BPO delivery locations within this region and the main business factors that will help companies choose the destination that best suits their needs.

“The last two years have seen a marked increase in the number of outsourcing vendors utilising Latin America as a low-cost delivery location”, says Ed Thomas, associate analyst for BPO at Datamonitor and author of the report. “Key examples include major players such as IBM, EDS, Tata Consultancy Services and ACS, all of which have significantly increased their presence in the region since 2006, while providers such as Infosys and Cognizant have opened centers in Latin America for the first time.”

Latin America has a competitive advantage due to proximity and linguistics

Due to its geographical proximity, Latin America can be used as a nearshore location to serve customers in the US. This enables client and vendor to maintain a close relationship, including more face-to-face meetings, and also means that problems can be solved in real-time, without the delays that inevitably occur when work from the US is offshored to more distant locations such as India or China.

Operating in Latin America gives clients access to a major pool of native Spanish and Portuguese speakers. Particularly in the case of customer-facing BPO functions, this offers the potential to provide better and more efficient services to the Hispanic community in the US, as well as opening up the Spanish and Portuguese markets in Southern Europe. Providing local language services also improves the quality of services offered to end users, increasing customer retention.

Many vendors are using Latin America as part of a multi-shore delivery model

Thomas points out that, in the past, IT services vendors tended to pick one offshore location, usually India, and deliver a range of services from there. “Now, more and more companies are adopting a multi-shoring strategy, whereby they set up centers in a number of countries in different geographic regions. This not only allows them to provide services from closer to the customer, but also reduces the risks associated with housing all their operations in one location.”

Many vendors have expressed to Datamonitor a fear of ‘putting all their eggs in one basket’, mindful of the chaos that could be caused should India’s economy crash or wage inflation in the country hit new peaks. In this context, Latin America is an attractive alternative location for vendors with an existing presence in India.

Skill shortages and concerns over stability will hinder the region’s growth

One of the main drivers behind the rise of India to its position as the pre-eminent global sourcing location was its vast reserve of skilled labor. Similarly, up-and-coming locations such as China and Russia offer large untapped labor pools, enabling vendors to scale up a delivery center quickly.

Customers may find that Latin American countries are unable to deliver the kind of scale available in these other, more populous regions. This is partly due to simple population size, but it is also the case that regions like India and Russia churn out more technical graduates than their counterparts in Latin America.

Latin American countries can circumvent this potential problem by offering highly skilled services in niche areas. Also, the region’s positioning as primarily a nearshore location necessitates a different operating model from the one utilised in India, for example, in which scale is of lesser importance.

Thomas notes that Latin America also still has some perception challenges to overcome in its development as a sourcing location. “Concerns about stability (both economic and political) and security continue to hang over many Latin American countries, including Brazil, Mexico and Colombia. This may cause vendors to think twice before setting up there.”

The recent activity in Latin America is set to continue

All of the vendors Datamonitor spoke to indicated that they expected the recent expansion of Latin America’s IT services and BPO sector to continue for the foreseeable future, with more vendors moving into the market.

The investment by international IT services and BPO providers has tended to focus around certain countries (most notably Mexico, Brazil and Argentina) and certain locations within those countries (including Mexico City, Monterrey and Guadalajara in Mexico, Sao Paulo and Rio de Janeiro in Brazil and Buenos Aires in Argentina). There are many other cities within those tier one countries which could be tapped, and also many other countries within Latin America which are still to be utilised to their full potential.

The second tier Latin American countries identified by Thomas in the report (including Chile, Colombia, Costa Rica, Panama and Uruguay) in some cases still represent relatively unknown quantities for many within the IT services and BPO industry. These locations each have their own unique set of strengths and weaknesses, but are all viable sourcing locations, many of which have yet to be fully exploited.

Research sponsored by Firstsource, the global business process outsourcing company, indicates that the credit crunch has not yet had a major impact on the consumer debt management industry. More than a quarter of respondents (26 percent) said they had not been affected by the declining economic environment, and over half (53 percent) reported that they had monitored only minimal impact.

The poll covered nearly 1,000 consumer debt managers of companies in the financial services, telecommunications, retail, and utility industries.

However, although debt managers say they have not yet been significantly affected by the credit crunch, the research showed signs that consumers are starting to take longer to pay their bills, and that write-offs of consumer debt are increasing. Twenty-seven percent of respondents said that some consumers are delaying payment of bills by up to three months, and twenty-two percent of debt managers reported that they had increased their write-offs of customer debt in the last 12 months.

In response to the uncertain economic outlook, debt managers expect to outsource more work to specialist collections and recovery agencies to increase their collections levels, reduce defaults, and lower their costs. Sixty eight percent of debt managers said they planned to increase their use of outsourcing within the next year; 27 percent said they would outsource more within the UK, 18 percent reported they would collect more from offshore, and 23 percent expect to outsource more both within the UK and offshore.

Matthew Vallance, Firstsource’s president, said: “Although most consumer debt managers report that they haven’t been rocked by the credit crisis, the trend amongst consumers is towards later payments which will consequently affect cash flow. Therefore debt managers are looking to specialist consumer debt collections and recoveries outsourcers in the UK and offshore that have the expertise and resources to collect more debt, in faster time frames and at lower cost than is possible in-house.”

Debt managers said that the main benefits of an offshore strategy are further cost reduction, the ability to recover more debt, and increased access to talent.

Most of the collections work that has been outsourced to date is debt collection (35 percent of respondents), tracing (identifying and prioritising debtors to contact, 25 percent) and legal collections (24 percent).

The majority of outsourced collections relates to early stage work (debt that is one to 60 days old, 42 percent of respondents), followed by recoveries (six months, 26 percent), late stage (90 to 180 days, 21 per cent), then mid stage (60 to 90 days, 10 percent).

Respondents said that there were many areas where they could see obvious rooms for improvement in their collections strategies. The main failings relate to poor use of technology. Over half of debt managers said greater use of online payment systems would improve their collections levels. Many managers also felt that they should make more use of interactive messaging and interactive voice recognition systems.

Better analysis of customers’ debt levels and internal training were two other key areas identified for improvement.