Industry news

Vertex has entered into a contract with Service Birmingham, the joint venture between Capita and Birmingham City Council, to extend its current contract to deliver contact centre services to the Council until March 2012 in a deal worth £40 million.

Since March 2002, Vertex has provided contact centre services on behalf of the council at Waterlinks House, Birmingham, where it employs 300 staff.

Under the new extension agreement, Vertex will be responsible for a wider range of contact centre services, handling contacts for Council customers including citizens, businesses and visitors. Vertex will manage the day-to-day operations and deliver new improved service levels.

The Vertex contract extension will be managed by Birmingham City Council and Capita through the joint venture, 'Service Birmingham', and it integrates the contact centre with Birmingham City Council's 'Customer First' transformation programme, creating easier ways for Council customers to access services.

Andrew Warren, Vertex MD of Public Sector and Retail Financial Services said, 'Vertex's contract extension demonstrates our deep understanding of the customer experience coupled with delivery of an outcomes based contract. We are pleased to be part of an innovative and strengthened partnership with Capita and Birmingham City Council."

The global carbon footprint of IT is equal to that of the airline industry, warned Gartner today, and green IT will become a key differentiator for outsourcing providers over the next two to three years.

“What you will see as you place your IT and business process bets is that this increasingly becomes an element of the jigsaw you need to consider,” said analyst Ben Pring in his address to the annual outsourcing summit in London.

Pring explained that as CO2 emissions from IT usage match those of the airline industry (with each contributing two percent of the total), we are beginning to see how this reflects itself in our industry with the rise of green consulting services and benchmarking. “Being a good corporate citizen will become more and more important, he said, and a key differentiator for providers between now and 2010.

Despite the downturn, global services spending is on the cusp of a substantial increase and CIOs must learn to grasp the opportunities this presents, said Gartner analysts at today's Outsourcing summit keynote address in London.

The closing presentation identified the challenges that will determine the CIO's role over the next few years, and how these will impact on enterprise outsourcing strategies. Externalisation, the primacy of business, globalisation, the internet, legacy modernisation, green IT, and global sourcing will be the critical factors for all IT-enabled business, said analysts.

Gartner said that, despite the downturn, spending on external services will continue to increase until the IT services industry becomes the largest overall sector of the IT marketplace by 2011.

Analyst Ben Pring said that services – including outsourcing and consulting – will reach “the commanding heights” of the IT industry. “You may change as a customer what you buy within the mix of the differing services that are available to you,” he said, “you may buy more application outsourcing in the downturn of the economic cycle... and less innovative consulting, but in total, and in aggregate, spending on all IT services is set to increase substantially. There is no sign that spending on external services will reverse in this period of the business cycle.”

However, the strategic decisions that businesses make about their sourcing strategies cannot themselves be outsourced, he advised. “Lawyers make a very good living sorting out that complexity. You must learn and must continue to improve your understanding of the techniques of multisourcing,” he said.

Top of the list of critical factors will be business primacy, said Gartner analyst Allie Young, referring to projects that enable business growth, linking IT more and more with business strategies. Attracting, developing and retaining IT personnel will be at the heart of this, she added.

This contradicted statements made at Monday's fringe event hosted by Getronics, which strongly suggested that CIOs often leave the enterprise once outsourcing partnerships become established.

The Getronics event – chaired by sourcingfocus.com's Chris Middleton – discussed the fact that once CIOs lose departmental staff they find themselves managing networks of suppliers rather than a coherent internal function – a role for which they are not necessarily qualified, and which challenges the fabled notion of the 'chief innovation officer'. As a result, many switch sides to the outsourcing provider. (See Editor's Blog).

Of course, the reality of outsourcing in a downturn is that 'cost takeout' is the primary aim of many projects, and not strategic enhancement of the business. This was acknowledged by Gartner's Young. All too often “cheaper dominates”, she said, followed by “better and faster”, and it is this that dictates the buying decision. However, she warned that it should not be a cost takeout that is crippling to the company when the economy rebounds.

“What organisations need is growth, speed and agility," Young continued. "Sourcing decisions must align to business goals. We individually have to take responsibility to break down that separation of business and IT. We all must become business leaders to think and connect business and IT in all we do."

On the topic of globalisation, Young said the challenge of establishing globally integrated IT and business processes was what “kept CEOs awake at night”. A lot of companies get stuck in the immediate benefits of labour arbitrage, she said. However, the smart buyers will begin to balance cost imperatives with other benefits.

Core to the future of sourcing strategies will be the internet, specifically the promise of technology virtualisation, remote management, software as a service (SaaS), VMware, alternative delivery models, and enterprise virtualisation.

“Visionary business leaders exploit moments of change to innovate,” said Gartner's Ben Pring, who went on to describe the “double-edged sword of legacy IT”. He said: "All of your business IP is invested in that technology; you've made big bets in the past, you've got skills based on that technology, and processes are invested in that too; but maintaining and enhancing that legacy footprint is expensive and getting more expensive, and the lack of flexibility means that changing things is difficult and too expensive.

“Legacy is not dead, the legacy is not turned off overnight, but simply is in terminal decline,” he said.

The gradual switch to net-native, web 2.0, and 'cloud computing' -based applications is inevitable, and will form a larger and larger proportion of your spending, and of the overall marketplace, he said.

“You need to understand that this is not a project... not like buying a new suit so you can look as though you are in fashionable times; it is not another upgrade, and if you treat it as such you will fail.”

HR outsourcing (HRO) is one of the most popular forms of outsourcing. As a sector it's booming, with Everest Research Institute predicting that it will top $2.85 billion this year. It's no surprise: after all, the one thing that every company has in common is people, so people management needs to be on every corporate agenda.

But not everyone wants to go down the full outsourcing route, which is why there is such growth in the HR software as a service (SaaS) market. According to Forrester Research, among enterprises that use or are piloting SaaS applications, adoption of HR applications is running at 54 percent compared to CRM at 38 percent. "CRM used to be the poster child for SaaS,” noted Forrester analyst Ray Wang. “It's now HR apps areas like performance management and talent management, all these ancillary pieces, where people are using hosted applications.”

The most successful of these HR SaaS firms is SuccessFactors which boasts 3.7 million subscribers in 2,000 companies worldwide. In fact, while companies such as Salesforce.com and NetSuite have been feted as the leading lights of the SaaS movement, SuccessFactors stakes a claim to be the most successful SaaS firm in the industry. “SuccessFactors leads the SaaS industry with pure organic revenue growth of 89 percent,” argues founder and CEO Lars Dalgaard. “Few companies have ever grown this fast organically at this size, which is the engine of long-term, sustainable value creation.

“One of the world’s largest retailers has become a customer of SuccessFactors with the world’s largest planned SaaS deployment with 300,000 initial users. We think that’s three times bigger than anything that’s ever been done before. Also a large insurance agency added 24,000 users. SuccessFactors has a history of delivering the largest on-demand SaaS deployments in the past years.”

Dalgaard has a stated ambition: revolutionising the future of work... one employee at a time. “How many companies are there out there who have employees who just check in and do what they have to do to collect a pay cheque?” he asks. “It's maddening on a human level that we have people who go to work and hate what it is that they do. Who is responsible for that situation? The employees are to a degree and the employers certainly are. If you are in a situation where half your workforce is not engaged with what they are doing and does not know why they're doing it, then you have a problem.”

His other mantra is earthier: "No assholes!" All employees at SuccessFactors have to sign a contract that obliges them to guarantee they will not (in his words) "act like assholes". “It's all about respect for the individual,” he explains. “I want no assholes, no jerks. The contract says that people will not talk behind other people's backs. No politics! Politics is the biggest stifler of personal performance.”

This week the firm held its user conference in San Francisco – a European event will follow later in the year – where more than 300 customers shared experiences of using SuccessFactors' SaaS offering. For some, it's been a long journey: Textron, a manufacturer of helicopters, aircraft, fastening systems, tools and components, and a provider of financing tools, began its deployment as far back as 2001, making it a veteran among SaaS users of any vendor in any business category.

“One of the major factors that made us take the plunge with SuccessFactors was that they could host this,” recalls Will Roth, director, organisational development at Textron. “The timing was right for us. At the time we were trying to outsource a lot of our IT infrastructure. Taking care of servers in-house wasn't something that we saw as bringing us strategic competitive advantage. So in terms of making the business case, it just fitted right in with our wider thinking.

“We talked about the idea of doing the whole human resource outsourcing [sic], but there is a certain level of control that we still like to have on the HR side of things. If you do some of this internally, then it also forces you to know what you don't know. That said, there are benefits to full outsourcing – and there are some applications that we dream about fully outsourcing – but you need to have a great deal of confidence and be comfortable with the level of customer support you're going to get.”

Companies like Textron are evidence that SaaS is a viable alternative to full-blown outsourcing for enterprise organisations, not just the mid-market where the model has been most commonly seen. Roth argues that some of the often-cited concerns about SaaS, such as service outages, just don't stand up to scrutiny. “I had experience of a downtime situation when I worked for Merck,” he notes. “We had a recruiting software application that was externally hosted, It usually worked beautifully I used to use it myself, checked it every couple of days and actually got a job through it. Then one Wednesday we came in and there was nothing there, the link was just gone. The company had gone bankrupt and it was a total disaster.

“The long and the short of it was that we had to decide to put our trust in SuccessFactors and that they had done their homework. Naturally, we audited them and there was nothing that we were doing any better than they could do. With IBM hosting the application, you're just not going to be able to duplicate their level of quality. We have had outages but the majority of times they've only lasted a matter of minutes. We also built a lot of guarantees into our contract so that if we're down for more than x amount of time, then the provider owes us money. But we've never had to get close to that.”

Gartner has revealed its top 30 destinations for offshore services, plus its 'ones to watch' for the remainder of the decade.

Region by region, the top locations are (not in order of merit): Argentina; Brazil; Canada; Chile; Costa Rica; Mexico, and Uruguay; the Czech Republic; Hungary; Ireland; Northern Ireland; Israel; Poland; Romania; Russia; Slovakia; Spain; Turkey, and Ukraine; South Africa; Australia; China; India; Malaysia; New Zealand; Pakistan; the Philippines; Singapore; Sri Lanka, and Vietnam.

Countries to watch, which have the potential for elevation to the list, include: Colombia; Guatemala; Panama; Peru; Puerto Rico Venezuela; Indonesia; Mauritius; Thailand; Belarus; Egypt; Latvia, and Morocco.

In addition, Gartner has identified Cuba, Jamaica, Nicaragua, Bangladesh, and Madagascar as already offering some offshore services, although in some cases they remain hamstrung by political and other considerations, said the analyst firm.

Gartner's criteria for inclusion in the list include language proficiency and availability; government support in the promotion of IT-relevant education and the promotion of offshore services; cost; an educated labour pool; infrastructure robustness and pervasiveness, including transportation, communications, satellites, power, road, rail, ports and airports; the competitiveness of labour rates against other countries; and the political and economic environment, including currency volatility, corruption levels, and the risk of war or civil unrest.

More controversially, Gartner included the “potential for moving the legal system forward” and “a willingness to talk to Gartner” as being essential considerations – along with more familiar criteria, such as cultural affinity, data security and privacy. This was a refreshing dose of self-awareness and realpolitik from an organisation that is sometimes known for a paternalistic stance towards clients and prospects, and perhaps now even countries. (Not quite Naomi Klein's 'disaster capitalism', perhaps, but certainly on the same path.)

There were some words of caution from the conference platform as well. Maturing locations mean higher cost locations, while low-cost destinations such as Vietnam fare badly in areas such as IP security.

So the picture is vibrant and constantly changing, especially as some parts of the world seem immune from the downturn that plagues the West. For example, hundreds of companies are emerging in China and beginning to engage with Western European companies that have a presence in Asia Pacific. Meanwhile, Latin American countries (the Americas as a whole showed strongly) often use Spain as a bridge to move into western Europe. At the same time, Israeli company Ness has made acquisitions in Russia to enable it to expand into Europe.

So a buyer's market, perhaps, but one where it is essential that companies establish a framework for global sourcing.

Whether buyers are country led or vendor led, it is imperative that they do not just “seek the leader”, said analyst Ian Marriott, but determine which is the right organisation for the business.

Asked about ethical and human rights considerations, Marriott claimed that the kind of sweatshop and child labour issues that afflict the clothing and textiles industries do not apply to IT outsourcing, because workers typically have a much higher standard of living and are “upper middle class”. Nevertheless, he conceded, human rights issues remain a matter of conscience – for both individuals and companies.

In a packed week for me at the Gartner outsourcing conference, Dutch vendor Getronics was kind enough to ask me to chair a Monday afternoon discussion about the future of the CIO at a fringe event.

Getronics (which is busy divesting parts of itself and rebuilding around a "narrower but deeper" strategy, according to Jos Schoemaker, chief operations officer Global Services) saw the event as an opportunity to talk about itself in the context of new opportunities for the CIO in the great, globally multi-sourced future that has become the lingua franca of all such events.

A few days previously, I chaired a similar discussion at a European Outsourcing Association event nearby, where the idea that 'CIO' now stands for 'chief innovation officer' got the biggest laugh of the day. As one delegate said, "We haven't got to grips with the information bit yet". So what is going on?

Perhaps the answer emerged at the Getronics event this week. One member of the panel was Albert Sprokholt, director Europe for EquaTerra. The problem, he said, is that CIOs quit once an IT programme has become outsourced, because they find themselves no longer inside the information, as it were, but instead at the thin end of a chain of suppliers which they are now being asked to manage. Not only that, but they have responsibility for the contract, while not having any direct operational involvement in its workings.

In other words, the bits of the job they are good at are taken away, they are not necessarily qualified to be supplier managers, and they are liable for the success or failure of a contract but without getting involved in the fun stuff. In those circumstances, innovation is perhaps not top of the list of achievables.

So what did Mr Sprokholt do when this happened to him? He joined the outsourcing provider, and now earns his keep in business development, marketing and delivery.

Tata Consultancy Services (TCS), the leading ITO and BPO provider, has won a £100 million contract to provide global IT applications services to NXP Semiconductors B.V, a top 10 semiconductor company and offshoot of Philips.

The five year contract will see TCS provide consulting services as well as application management, development and support services across NXP’s supply chain operations. The company will also support NXP’s global technology infrastructure covering ERP, CRM applications in addition to the company’s portal-based applications.

Through the deal TCS aims to consolidate and solidify NXP’s complex application portfolio whilst delivering considerable operational cost savings. Its R&D department will also be drafted in to drive application innovation which NXP hopes will deliver competitive advantage across all stages of the product cycle.

Louis Luijten, Senior Vice President and Chief Information Officer, NXP said: “The engagement with TCS reflects NXP’s commitment to optimizing our processes and driving business value from all aspects of our operations.”

Delivery of the services will be implemented using TCS’s global delivery model from centres in India, Asia and the US. The contract will be coordinated by a local ‘High Tech Centre of Excellence’ based in Eindhoven.

Recent headlines regarding the DVLA and the Child Benefit agency have highlighted how data loss as a result of negligence can springboard an organisation into the headlines for all the wrong reasons. With data controls set to get stricter, those companies looking at outsourcing data banks need to be aware of both the legal requirements, and the associated risks. Michael Porter, Director of commercial and contract management consultancy Blake Newport explains…

Legally within the UK there is still very little control regarding how data is held or outsourced, and common law has no recognition of data privacy. This has ultimately led to the creation of the Data Protection Act. But whilst the Act sets out eight principles by which those organisations holding personal data should abide, it is generally seen as guidance only with penalties for its breach historically difficult to quantify in court.

Those organisations that see this lack of legislation as a free reign on data management however should think again. If recent recommendations by the House of Commons Justice Committee go through and negligent data loss becomes a criminal offence, the issues surronding corporate responsibility for the protection of data will only become more pressing. Couple this with the fact that many UK businesses currently outsource to countries where data privacy law is applicable and we have a significant issue on our hands.

Lets take a look at Germany for example. Here data can only be held for a single specific use, for which full permission is needed from the originator. Once the data has been used for the reason it was obtained, it must not be passed on, either externally or to other internal departments. UK companies outsourcing abroad need to be comply with these laws or face possible prosecution.

Regardless of the legislation, stringent controls on the outsourcing of data make good business sense as aside from the obvious public relations issues there are also many operational risks associated with outsourcing data management, with the misplacement of critical information potentially resulting in significant delays and costs being incurred.

So what can be done?

The integrity and security of those companies that you may outsource to should be of key concern and if sensitive data is to be processed or transferred offshore, a compliance mechanism to deal with data protection will be required.

Whether outsourcing internationally or nationally, effective contract management presents the legal mechanism by which organisations can ensure full control over the data that is being outsourced. By utilising clauses within a contract to stipulate how information can be used and stored, your business can ultimately gain more control and ensure that damages can be sought if the contract is breached.

And whilst the rules surrounding the outsourcing of data are foggy at best, there are still some simple questions that organisations can pose namely:

 Is the data being sent to the company going to be held in a safe, secure and appropriate manner?

 Will the data only be used in the manner for which it is being held?

 Does the outsourced company have appropriate security processes in place such as high levels of encryption or email policy to ensure that employees cannot transfer data out of the organisation?

Clear commercial and contract management will ensure that the outsourced company can answer positively to the above questions. But if in doubt ask an expert and follow the guidance laid out in the Data Protection Act. After all ‘best practice’ working only creates better business efficiencies, minimising risks and maximising profits. What more motivation do you need?

There is a secret to successfully distributed Agile development, and it has nothing to do with AJAX, Java, .NET or perfect hours. In cases where English is a second (or third) language and employees have different cultural morals and religious affiliations, successful communication is the key issue. Challenges, such as working over multiple time zones, or simply working with a new colleague for the first time, can also present communication problems. The keys to successful communication are cultural awareness and team building.

Cultural Differences and how to Anticipate Friction

Distributed Agile projects with multinational team locations are becoming the norm. The primarily reason for this is cost reduction, but skill set is another driver. Each geographic region has its own cultural subtleties that must be taken into consideration. For example, in the Indian and Chinese cultures, it is considered impolite to say no or to disagree with someone in too strong a manner, while in the Russian and Baltic cultures, voicing strong opinions are expected. As you can imagine, both reactions can cause friction if a team is not used to these cultural nuances.

The manner in which team members feel comfortable communicating is another common source of friction, often English is the second or third language for a team member. Perhaps their writing skills are more advanced than their verbal, or vise versa. Typically, Baltic and Indian cultures feel more adept with writing than they do with speaking English. Conversely, the French and Latin American cultures are often more comfortable with the spoken English word.

Another issue to be aware of when working with diverse teams is that each culture has its own work ethic, holiday schedule and accepted office behaviours. These seemingly harmless differences can lead to a lot of friction. For example, the French believe strongly in a 35-hour working week, while Americans often work more than 50 hours each week. Holidays are another planning issue that needs attention. Each country has its own set of national holidays, and different religions observe different Holy days. Finally, in regards to all planning, it is always important to be aware of daylight savings issues for the different locations.

Fortunately, these are all fairly consistent, easy to decipher differences. But, there are other issues that do not stand-out like these. Differing cultures have varying senses of urgency, such as the British and French. Their cultural norm varies greatly from that in China, India, Russia and the Baltic nations. What is considered appropriate conversation and behavior can also vary widely between geographies.

Team Building from the Start to Avoid Animosity

Much of the animosity and friction that can grow between members in any team, whether globally dispersed or crammed into one small office, can be avoided through strong, repetitive team building activities.

It is strongly recommended to arrange face-to-face meetings at the start of any release plan that involves, multi-site distributed teams. It is also best, if possible, to have periodic follow-up meetings after the launch. It is true that planning can be done over the phone using collaboration tools such as WebEx or NetMeeting. However, even though the output may look the same, there is a distinct lack of chemistry and familiarity within teams that never meet face-to-face and rely solely on collaboration technologies. Developers are people, and they won’t bond with programs – personal rapport goes a long way. Face-to-face meetings are ideal for hammering out how to communicate within the team.

The travel costs involved in setting up these face-to-face meetings can easily run into thousands, and management will almost always refuse at first. Simply remind them of what the cost could be if the development team delivers the wrong functionality or the accrued cost of developer run-rate if they have to start over, which often happens when a team doesn’t meet regularly. In this case, the financial impact could be much greater than the cost of a few flights! If you have a team of developers doing the "wrong" thing for a period of time and then getting into a blame situation with a product owner and vice versa, the cost can often be the entire sprint or even the project.

Plan to have team-wide meetings every week via audio or video conference where every sub-team reports on what they’ve done, issues they’re facing and something non-work related to share. The more conversation the team members can have that does not involve work, the closer they will grow to each other. Team member familiarity goes a long way to relieving tension, and letting each others know you have a sense of humour will help during the inevitable stressful moments. Be considerate of the team’s time zone issues too. Rotate meetings to share the burden of off-hours meetings so that the same geographic region isn’t always inconvenienced with a late or early meeting.

Distributed Agile success is dependent on developing good communication skills between team members. Keeping an open mind, watching out for cultural differences and working to build kinship beyond the project at hand can be the difference between failure or success. This is not a hard process, but it does take effort from everyone. And, the likelihood is if your company has decided to try distributed Agile through outsourcing or its own distributed locations, you’ll end up working with these coworkers on further project. Working to improve inter-cultural communication is an important investment that will continue to benefit your company throughout many future endeavors.

About the Author

Clive Jenkins currently serves as Delivery and Assurance Manager for Exigen Services. A certified Prince2 Practitioner and Product Owner, he has been working with distributed Agile teams for more than four years, with more than 20 years of development experience in total. Clive lives in Wiltshire, England and works in London.

The green datacentre is a myth for many companies, who either lack the skill or the will to implement green policies, despite their public support of green policies. Those are the findings of an investigation into the green datacentre, at a time when increased power consumption globally is linked to the demand for IT services.

A survey by datacentre specialist Aperture Research Institute (ARI) of more than 100 datacentre professionals has shown that organisations are unable or unwilling to meet the expectations set by their adoption of green initiatives for the datacentre. Organisations lack the tools to measure energy efficiency, lack processes to charge the business for energy use, and that many do not decommission ‘ghost’ servers that are no longer needed.

This follows an earlier ARI report published in March 2008, which discovered that 70% of organisations say they are adopting green initiatives – although 19% of those had omitted the datacentre from that programme.

In the latest ARI study, 74% of those surveyed refused to activate power saving features on devices if it would require a drop in performance. While 37% are concerned that the power/performance ratio doesn’t add up, 15% worry that they have no way to track whether the power saving setting is on or off. Nearly half (48%) of those surveyed blame the business for not using power-saving features, saying that users wouldn’t tolerate a drop in performance in the interests of saving power.

When it comes to procurement, energy efficiency and ease of disposal are the lowest priorities, rated as less significant than brand and price. 37% of datacentres have no plans to measure energy efficiency, and 76% do not charge the business for the power used by the IT it commissions. One reason for that is a lack of infrastructure for measuring power consumption.

Steve Yellen, principal of the Aperture Research Institute, said: “Although many organisations have made a commitment to cutting their environmental impact, when it comes to the datacentre, most lack the tools and processes they need if they are to deliver on that promise. The number one cause of increasing power consumption is an increase in demand for IT services, so business managers must be made accountable for the energy their applications consume. Only 24% of organisations we surveyed said the IT department charges the business for energy use. They simply don’t have the technology to be able to implement the management processes they need.”

The survey also found that decommissioning processes are not strictly followed, and “ghost servers” haunt the datacentres of 19% of organisations. Ghost servers are those servers which the business no longer needs, but which have not been switched off, and which are as a result needlessly consuming electricity, space and other limited resources.

The report comes in the wake of the recent European Outsourcing Association conference in London, where delegates said that datacentres were – in theory, at least – top of their green agenda in terms of IT services, but also voiced the opinion that innovation and education are often expected to come from their outsourcing services providers.