Industry news

Less than half of HR and finance professionals in charge of payroll have any efficiency measures in place, according to research published today by ADP Employer Services.

In a week of challenging surveys, this is the latest depressing evidence that companies look for quick-fix ways of saving money (cancelled contracts, redundancies) but often ignore the entrenched areas where money is being slowly drained out of the enterprise by inefficient systems.

ADP surveyed over 750 HR and finance professionals, and found finance professionals faired worse than their HR counterparts, with only 39% measuring payroll efficiency, compared with 49% in HR. Less than one third of all respondents consider payroll expenditure (aside from staff costs) when looking to reduce costs in the business.

The research also highlighted disagreement as to where responsibility for payroll rests in the organisation: in large businesses it is more likely to fall under finance than HR (49% versus 40%), rising to 69% versus 31% in smaller companies.

Despite this reluctance to grapple with payroll inefficiencies, 63% of all organisations retain the function in house – rising to more than three-quarters of finance companies. Data control and security were cited as the main causes of the decision not to outsource.

This, of course, is the key point: nearly forty percent of IT directors have experienced data theft or leakage and see internal security as the biggest threat to the enterprise. Specialist BPO companies, whose business bedrock must be security and process expertise to survive are perhaps better placed to take the problem off CIOs hands.

While payroll might be an often overlooked area of inefficiency, it joins energy consumption as a cause of money being wasted internally because no one has the skill or the will to tackle a deeply embedded and costly problem that haemorrhages money out of the enterprise. A separate report this week finds that 37% of datacentres have no plans to measure energy efficiency, and 76% of IT professionals do not charge the business for the power used by the IT it commissions (or refuses to decommission, in the case of 'ghost servers' that are never switched off).

In a large enterprise, power consumption is directly related to IT services demand, and many of those systems remain switched on even when dormant or no longer used.

The recent European Outsourcing Association conference in central London found cancelled contracts and slashed budgets were the response to the downturn in roughly a third of delegates' companies. How many of these could save that money by tackling inefficiency on an enterprise scale, rather than hacking away at strategic investment?

More than one third (37%) of IT directors say their company has experienced data leakage or data theft in the last 12 months, and more than 80% of IT directors see internal security threats as being more significant than malicious hacks.

These are the findings of a report by Secure Computing Corporation, which uncovers rising concern about insider threats – presumably in the wake of high-profile public- and private-sector data losses in the last year. Despite the once traditional view of security threats being the domain of 'black hat' hackers, IT directors offered their widespread acknowledgement of being unprepared for Web-based attacks. Less than one in five respondents (17 per cent) feel that external threats are more dangerous.

With 37% of respondents reporting data theft or leakage in the past 12 months, internal security is at the top of IT Directors’ shopping lists when respondents were asked to rank potential future investments that included perimeter security, staff mobility and network performance.

The report found that email remains the enterprise Achilles heel, cited by 34 percent of respondents as a significant security threat. Interestingly, Voice over IP (VoIP) comes second, cited by one quarter of the directors surveyed.

The biggest budgets will be spent on strengthening internal security, with 35 percent of IT Directors identifying it as their priority planned investment. Surprisingly, considering the global downturn in the economy, 'IT asset management for cost savings' is the lowest priority.

The government's National Programme for IT initiative to computerise all patient records nationally suffered another blow as the £896 million NHS contract with Fujitsu was terminated earlier today.

Connecting for Health's talks with Fujitsu to revise contract terms in favour of greater flexibility failed. Fujitsu had held out for more money or a return to the original terms.

Fujitsu clinched the 10-year deal for installing the programme in the south of England in 2004, but renegotiation talks began in July 2007. Severance of the deal could cost the Japanese electronics company some £300 million.

The overall NHS project has been dogged by controversy, delays, overspending and security fears, along with criticism that it is fundamentally misconceived. The programme was one of the foundation stones of former prime minister Tony Blair's quest for modernity in government. In practice, this and other public-sector programmes have demonstrated that government and large-scale technology project management are rarely natural bedfellows.

A spokeswoman for NHS Connecting for Health said: "Regrettably and despite best efforts by all parties, it has not been possible to reach an agreement on the core Fujitsu contract that is acceptable to all parties. The NHS will therefore end the contract early by issuing a termination notice.”

Fujitsu is the second IT firm to leave the project. In 2006 Accenture – which was responsible for the north and north east England components of the project – walked away from parts of the programme.

Indian telco Reliance Globalcom is to pay $76.9 million for the UK's virtual network operator Vanco, which sourcingfocus.com reported recently has been in financial difficulties and had lost its founding CEO.

Reliance says that the deal is part of a strategy of increasing its share of the international telecoms market. Vanco will provide Reliance with a European enterprise arm, with an established base in the UK, France, Germany and the US.

• However, sourcingfocus.com believes that Vanco's real asset remains its detailed technical map of the world's telecoms infrastructure, which would offer a logical foundation for consultancy services, especially to the world's emerging economies.

Last week's European Outsourcing Association (EOA) conference in London provided a real insight into how the industry is thinking about itself as economic woes bed in after ten years of life on credit.

Delegates from the UK, Europe, China and the US, and from a range of companies, including media, broadcasting, finance and legal services mixed with outsourcing suppliers in interactive sessions that explored the future of the industry in Europe.

Asked if their company had suffered any negative effects from the credit crunch, over one-third (36%) said yes. A similar figure reported contract negotiations being suspended, while 39% said that budgets were being restricted and eight percent reported terminated contracts. BPO contracts were being affected the most, said 78% of delegates.

By contrast, 24% said the downturn promised greater opportunities to outsource. Sixty-four percent believed the credit crunch was a significant opportunity for the industry, most notably in terms of offshoring, while 59% predicted that global outsourcing will rise over the next five years.

First and foremost this was a European event, of course, and the view from the floor was that outsourcing is becoming an accepted strategy in formerly 'culturally opposed' countries. such as France and Germany, while many saw the possibility of brand-name services arising out of Eastern Europe.

Fifty-nine percent of delegates believed that recent EU entrants Romania and Bulgaria have become more attractive to work with since joining the community.

Asked for their thoughts on the Lisbon Strategy for making the EU the knowledge centre of the world – due to be renewed in just over a year – 32% of delegates (the largest voting bloc) said “We manage to earn a living despite the EU, not thanks to the commissioners”.

In a bear market, the Russian bear – as it so often is – was a divisive issue. Thirty-nine percent of delegates believed Russia is an important part of the European outsourcing picture, while 52% did not even consider it relevant.

Still looking East, just 17% of delegates thought that Indian providers are leaps and bonds ahead of other regions. That said, three-quarters of delegates said that Indian players will inevitably acquire European or American providers.

Talking of acquisitions, the elephant in the room was HP. Unfortunately, just 23% of the conference thought the EDS deal was good news for either HP or EDS customers.

• Apologies for my recent absence from this blog due to a dose of flu. Fully recovered, next week I shall be speaking at the Gartner outsourcing conference in London. I look forward to meeting and talking with you there.

Centro, the executive arm of the body responsible for public transport in the West Midlands, has partnered with Logica to develop the largest smartcard travel scheme outside of London.

The initial phase of the deal saw Logica develop and deliver 430,000 National Concessionary Passes for the over 60s and blind and disabled people in the West Midlands region. The system, which has now gone live, allows one in six people living in the West Midlands to use the bus anywhere in England for free.

Built upon smartcard technology, the passes can integrate with technology on many UK busses and will soon allow people to swipe on and off over 2,600 buses from over 50 depots in the region, as well as trains and trams.

Geoff Inskip, Chief Executive of Centro said: “We were delighted to appoint Logica, who provide us with the detailed knowledge and experience in transport technology and smart retailing we need to provide passengers with a smart transport system in the West Midlands.”

The cards were issued across the country as part of a Government scheme - the new English National Concessionary Transport Scheme (ENCTS). After the initial success, Centro and Logica will continue to work together to develop the remaining part of the programme which will go live during 2009.

UNAT DIRECT Insurance Management Limited, a wholly-owned subsidiary of American International Group Inc (AIG), has been fined £640,000 by the FSA for failures in due dilligence regarding the appointment and operation of nine of its call centres.

While UNAT did implement procedures to check their call centres’ compliance with the FSA, the firm failed to prevent them from selling to consumers before the full due diligence process had been completed. The FSA also stated that senior management were not fully appraised of the call centres’ ability to properly sell insurance projects.

In one case mentioned by the FSA, UNAT had not completed its due diligence over 250 days after the call centre had begun selling whereas another call centre sold 4,000 insurance policies when it was not authorised by the FSA to do so.

Margaret Cole, Director of Enforcement at the FSA, said: "Selling general insurance products to consumers through call centres involves greater risk. UNAT was aware of the higher risk but failed to carry out proper checks on the call centres it used. UNAT's failure to have effective control over its due diligence process exposed customers who bought policies from the call centres to an unacceptable level of risk that they would not be treated fairly. The FSA will impose significant fines on general insurance firms whose management of call centre risks falls below acceptable standards."

UNAT ceased all sales of general insurance through call centres on 22 March 2007 pending the outcome of the FSA review. According to the FSA UNAT has now improved its systems and controls following the recommendations in the review and is working with the FSA to ensure that no customer has suffered loss by putting in place a comprehensive restitution package.

A report from the NAO has slammed Department for Transport (DfT) shared services initiatives, branding initial department plans to be ‘unrealistic’ and ‘over optimistic’.

The report looked into DfT plans made in 2005 to implement a comprehensive shared services arrangement between the Driver and Vehicle Licensing Agency, Driving Standards Agency. Initial plans projected savings of £112.4m with a set-up cost of £55.4 million.

However, the report stated that: “Inadequate contract management and poor initial implementation of the Programme have meant that the Programme as originally envisaged will not achieve value for money”. The failings mentioned in the report elevated costs profoundly which the NAO expect to reach £121.2m in 2008 achieving savings of just £40.1m by March 2015.

IBM was named as the principal supplier in the deal but appears to have played little part in any of the failings that took place. The report blamed the DfT for ‘insufficient management’ and ‘poor specification of requirements’ in its dealings with the ITO giant.

Accenture has expanded its worldwide reach with the opening of a new delivery centre in Mexico.

Sharing the same methodologies, tools and architectures that Accenture uses across its Global Delivery Network, Accenture will use the new site to complement and extend its ongoing relationships in North America.

The move marks Accenture’s second foray into Mexico after it set up in Mexico City in 2004. Accenture now has six delivery centres across Central and South America in Mexico, Brazil and Argentina bringing the total number of delivery centres in Accenture’s Global Delivery Network to 51.

“The ability to serve the needs of our clients using a global capability is a key feature of Accenture’s global sourcing approach,” said Keith Haviland, senior managing director, Delivery Centre Network for Technology. “We bring together the right mix of people, skills and common standards to provide our clients with price-competitive and cost-effective solutions and services. Our global network offers the flexibility of multiple locations for the integrated delivery of services to clients.”

The move takes Accenture’s global staff to 76,000 across more than 50 delivery centres worldwide.

Centrica, the utilities group and parent company of British Gas, has awarded Fujitsu Services a £2.1 million IT outsourcing contract.

The new three-year contract will see Fujitsu manage a portfolio of applications supporting British Gas’s residential and business customers. Under the terms of the contract Fujitsu will provide 365x24 application maintenance and support services.

Fujitsu plans to use its bespoke portfolio management approach to optimise Centrica’s legacy and future applications portfolio. Centrica expects the deal to reduce their application maintenance costs by 50%.

Neil Coop, senior commercial manager, Centrica, says, “We are delighted to have appointed Fujitsu to continue to help us modernise our legacy systems using its extensive skills and resources in application management and development.”

The agreement comes as part of the latest chapter in a 30 year history in supporting Centrica and enhancing its IT systems.