THE HOME OF THE GLOBAL SOURCING STANDARD

  • 22 Jan 2008 12:00 AM | Anonymous

    A study by Pierre Audoin Consultants (PAC) has today found that India’s largest IT services suppliers (Wipro, TCS, Infosys, HCL and Satyam) will double their UK market share over the next four years if they keep up their current growth.

    The survey found that the market share of these companies will reach seven per cent by 2011 as more and more UK companies are committing to large (£100m+) contracts with Indian service providers.

  • 22 Jan 2008 12:00 AM | Anonymous

    The new product incorporates all of the functionality of INSideOUT but is a complete redevelopment of the software. The new software is web-based, utilizes a .Net framework, and incorporates Web 2.0 technology. CGI’s insurance vision and commitment to investing in its insurance solutions, resulted in the development of new release of the software. Midwest Family will be the initial client to test the scope and functionality of the new product.

    Midwest Family, established in 1891, is a multiple line property/casualty insurer actively writing Personal and Commercial Lines in seven Midwestern states including: Minnesota, Wisconsin, Illinois, Iowa, Nebraska, North Dakota, and South Dakota.

    “The .NET release of INSideOUT gives Midwest Family a competitive advantage with our agents in terms of agent/company interfacing. It gives our agents the benefit of electronically submitting policies for all Personal and Commercial lines of business. In addition, agents will have the advantage of uploading and downloading all new business transactions, endorsements, quotes, and issuance for all lines of business. Real time feedback for new business and endorsement quoting will result in a more service-oriented approach for Midwest Family agents,” said Ron Boyd, President and CEO, Midwest Family Mutual Insurance Company. “The combination of improved functionality and technology will position us as leaders in our market space.”

    “For over a decade, CGI and Midwest Family have worked together to develop and enhance INSideOUT,” said Paul Raymond, Senior Vice-President, New England and Insurance Services, CGI. “The .NET release of INSideOUT is the logical progression in our investment for this market-leading solution. We are proud to be recognized as Midwest Family’s strategic technology partner, and enable Midwest to be our premier beta site for our new product.”

  • 21 Jan 2008 12:00 AM | Anonymous

    Unite has accused IT services company Capita of breaking their promises to staff on their Capita site in Belfast.

    Capita’s announcement to cut a further 41 jobs has been criticised by Unite, formerly Amicus, as a further sign that promises to secure more contracts and maintain the Belfast site as a centre of excellence are not being kept.

    Graham Goddard, Unite Deputy General Secretary, said: "Unite members are concerned that Capita have failed in their promise to secure the long term future of their life and pensions operation. The announcement of 41 job losses today represents another blow for Capita staff in Belfast who face growing uncertainty as the company have failed to deliver on Chief Executive Paul Pindar's original commitment to the workforce of ‘opportunity and business expansion’. It would appear that Belfast was simply a stepping stone into a new market for Capita.”

    The 116 staff in the life and pensions department in Belfast must now reapply for the remaining 75 roles.

  • 21 Jan 2008 12:00 AM | Anonymous
    Defence secretary Des Brown's appearance in the House of Commons today was a grim, if instructive affair, and only served to reinforce everything I said a couple of weeks ago on this blog: security is first and foremost about people, policies, management and enforcement. Technology comes a long way behind.

    Security is always about the weakest part of the chain – data's interface with everyday employees – and rarely about defence-grade encryption protocols and sexy multibillion-dollar IT programmes. Indeed, those are the things most likely to neglect the little guy.

    Mr Brown admitted that there has not been just one incidence of an MoD laptop going stray with people's personal details on it, but three since 2005. The Tories countered that, in fact, there have been literally hundreds of laptop thefts from armed services employees, many of which computers may also have contained sensitive information. The government has admitted to 69 laptops and seven PCs being stolen in the past year, and has issued a staff ban on the movement of data.

    All told, that is a staggering illustration of how everyday occurrences are where the real risk lies, and not in shadowy bunkers in some far-off corner of the 'Axis of Evil'. We're talking about the Axis of People: careless people; people who don't follow security guidelines; people who are lazy; people who are the victims of opportunistic criminals... everyday human beings, in other words.

    These are the people who, in the real world, have access to databases, and they are rarely technology buffs or experts in data protection and privacy laws. They are too busy doing their own jobs – such as managing the front desk in a busy doctor's surgery, or working in the back office of a local town hall.

    Familiar opposition cries of systemic incompetence in Whitehall miss the main point – most average employees are not security or privacy experts – but amply illustrate another: that senior management gets the blame for the little guy not being considered.

    However, the defence secretary unwittingly raised some other questions that must call into question the government's competence to manage future large-scale technology and data programmes on behalf of the public, such as the NHS IT system and the proposed national ID card. First, he said that none of the data on the laptops was encrypted; and second, that he had no idea why.

    But the major admission was number three: he had no idea why so many employees needed access to such large databases – the implication being that the real weakness in the MoD's security policies was people using the system. Exactly, minister.

    Mr. Brown, should future large-scale projects go ahead without just such a radical rethink of what security and privacy mean in the real world (that security is always, always, always, about people, and especially the little guy, and no amount of money and technology can alter that) then these upcoming schemes risk data loss and theft on an unprecedented scale, even in the wake of the loss of 25 million families' details in the Child Benefit scandal.

    Minister, if the weakness in security is, indeed, lots of people accessing the data, then you have effectively lost your own argument in favour of systems designed to do exactly that: facilitate the widespread sharing of sensitive public data across the NHS, and across all internal and external security services affecting the UK. A staff ban on the movement of data is not a blueprint for the data-sharing future across public services promised by Whitehall.

    The further issue for us in the outsourcing community, though, is that all of these MoD computers were managed by an overarching IT function on behalf of the three armed services. The lessons here? No security policy will stand up to real-world tests if a third party neglects its basic obligations. If those third parties are located offshore – as some schemes undoubtably will be in future, and have been in the past – then your security policy is not just concerned with rules and their enforcement, but also of remote management of the third party, and robust HR policies. What more risks are we prepared to take?

    • With Gordon Brown recently striking a cautionary note on the ID cards scheme, the time has come for a much more realistic appraisal of the advantages and disadvantages. Any compulsory scheme must be put before Parliament; this year, the collective mood of the Commons may have darkened.

    Moreover, as I've said before on this blog, the real question to ask of any large IT schemes is the simple one: why? ID cards will do nothing to prevent home-grown terrorism, as we are always promised, and little to prevent everyday identity theft or fraud. The only possible impetus must be a commercial one for the government: the turning of private data into a public, tradeable commodity.

  • 18 Jan 2008 12:00 AM | Anonymous
    It was interesting for outsourcing professionals to witness two very different approaches to the economic winter that both the US and UK economies may be entering, and one demonstrates the growing influence of a dynamic outsourcing industry. This week, the UK was battered with two pieces of bad news: first, a month-on-month fall in retail figures from November to December 2007 (December being retailing's golden month), and second, news that energy bills may soar by as much as 15%, even for those on green tariffs.

    Even with the risk of rising UK inflation restricting the UK's room for manoeuvre in terms of interest rates, some economists still predict a soft landing for the UK economy, as long as property prices not go into freefall; a necessary economic correction, then, rather than successive quarters of negative growth (recession). Nevertheless, we remain at risk of talking ourselves into recession: a new form of economics brought about by the network effect of news being valued by the speed at which it moves.

    Many economic pundits believe the US has already entered recession; we will not know until the summer, as recessions are only visible in hindsight. However, the gloom is obviously all too visible in the White House, as President Bush stood before the American media this morning, US time, and announced a typically interventionist economic rescue package of tax incentives for US businesses and citizens, designed to inject some adrenaline into flatlining consumer spending. He asked that the package be swiftly approved, and urged that it must be temporary but instantly effective, while also somehow avoiding future tax increases in the long term.

    This would be the economic equivalent of the notorious scene in the movie Pulp Fiction, where John Travolta plunges a syringe into Uma Thurman's heart and instantly wakes her from an overdose-induced coma, restoring her to life.

    Meanwhile, on the other side of the globe, Prime Minister Gordon Brown had headed east for high-level talks in China. Barely minutes after the American announcement, Brown faced the international media and, effectively, pinned the UK's future prosperity onto the booming Chinese economy. Britain was raising the relationship between London and Beijing to a higher level, he said, and predicted that Chinese investment in the UK would create thousands of new jobs.

    This may be the case, but it also paves the way for a much deeper outsourcing relationship in the other direction. The main obstacle – apart from any political fallout from China's human rights record, not that the US has much to crow about post-Guantanamo – is the lack of a rigid intellectual property (IP) culture and supporting structure for IP-based businesses.

    It is a rumour rarely acknowledged that many technology businesses have privately tolerated piracy in the East, as it has established a burgeoning market for their products there. However, such an under-the-counter approach, if it exists, will not work for long. In this month's The Big Questions feature, Tim Wright, Partner at international legal practice Pillsbury Winthrop Shaw Pittman, concurs: "China will continue to grow, although the lack of an intellectual property protection framework is still a concern."

    It seems that Prime Minister Brown is far more bullish than that, and has accepted the massive growth and future global influence of China is something that the UK must be part of. And the next stop for the Prime Minister on his eastern sojourn? The current BPO destination of choice, India. Outsourcing, it seems, is now central to the UK economy, and will be of critical importance in the future.

  • 18 Jan 2008 12:00 AM | Anonymous
    Leading analyst firm IDC has revealed its predictions for the IT industry as a whole for 2008, with not a single mention of the 'r' word (recession). Analysts at the market data giant see the major outsourcing destinations of choice becoming increasingly central to the entire technology industry as the hotbed of future sales growth. IDC believes 2008 will see increased investments in popular destinations, such as India and China, along with the introduction of a raft of new online product and service offerings, especially in packaged solutions for smaller enterprises.

    Analysts predict that global economic uncertainties will dampen IT spending growth in the US and elsewhere. As a result, worldwide IT market growth will between five and six percent, down from 6.9% in 2007. However, the implication of IDC's findings is that the vast majority of this growth will be in overseas markets. IDC expects vednors to concentrate on fast-growth, emerging markets, and to look east to Russia, India and China, but also Brazil – all locations where IT spending growth will remain strong.

    The company's most interesting conclusion makes for challenging reading for all in the outsourcing industry, as it refers to the growth in software as a service (SaaS). IDC believes that to profitably reach the emerging, hyper-growth markets, suppliers must move as many services and products to the Internet, as this will mean lower distribution costs and easier and faster customer adoption. While the SaaS industry to date has seen a long tail wagging a much larger industry dog, with ambitious companies such as Salesforce.com and Netsuite grabbing the headlines and moving from small clients upwards into the enterprise, giants such as SAP and Oracle (Larry Ellison being a major investor in both of the SaaS leading lights) are now having to follow the model as well, in their case shifting focus downwards towards smaller and smaller enterprises.

    IDC also predicts that the internet is compelling suppliers to create customer- and industry-specific solutions, and to build communities around these. Smaller enterprises require simplicity and out-of-the-box utility, says IDC, which means IT suppliers will be working with partners to prepackage solutions, rather than expecting customers or partners to put the pieces together. Clearly there are opportunities for both traditional outsourcing providers, and for the emerging breed of web-based companies who will begin to redefine our industry.

  • 18 Jan 2008 12:00 AM | Anonymous
    Xchanging, the pure-play business process outsourcing company, is pleased to announce that it has extended its procurement operations in France with the acquisition of 100% of the share capital of Mercuris, a procurement service provider based in Paris.

    Mercuris provides procurement outsourcing and advisory services to the Banking and Insurance sectors in France and has gross assets of €1.7m. Mercuris was founded in 2000 by its management team and in 2003 Groupe Caisse d’Epargne, one of the major universal banks in France, and the principal customer of Mercuris, acquired a majority stake in the business. Groupe Caisse d’Epargne has agreed to extend their outsourcing contract with Mercuris to 2011 representing a cumulative spend value of €1.5bn over the life of the contract. This acquisition further strengthens Xchanging’s position as the European market leader in procurement outsourcing and provides a strong platform to target the opportunities in this exciting growth area in France. David Andrews, Xchanging CEO commented, “France is an important market for procurement outsourcing for Xchanging. We are delighted to be able to welcome such a highly experienced management team and look forward to growing Mercuris further. Moreover, we are pleased to be entering into a long term relationship with such a prestigious financial institution.” Amaury Fournial, Managing Director, Mercuris said, “We are excited about joining Xchanging and being part of an organisation that has so much experience in procurement outsourcing and which can provide a wealth of opportunities for our employees.”

  • 18 Jan 2008 12:00 AM | Anonymous

    Xchanging, the pure-play business process outsourcing company, has announced that it has extended its procurement operations in France with the acquisition of 100% of the share capital of Mercuris, a procurement service provider based in Paris.

    Mercuris provides procurement outsourcing and advisory services to the Banking and Insurance sectors in France and has gross assets of €1.7m. Mercuris was founded in 2000 by its management team and in 2003 Groupe Caisse d’Epargne, one of the major universal banks in France, and the principal customer of Mercuris, acquired a majority stake in the business. Groupe Caisse d’Epargne has agreed to extend their outsourcing contract with Mercuris to 2011 representing a cumulative spend value of €1.5bn over the life of the contract.

    This acquisition further strengthens Xchanging’s position as the European market leader in procurement outsourcing and provides a strong platform to target the opportunities in this exciting growth area in France.

    David Andrews, Xchanging CEO commented, “France is an important market for procurement outsourcing for Xchanging. We are delighted to be able to welcome such a highly experienced management team and look forward to growing Mercuris further. Moreover, we are pleased to be entering into a long term relationship with such a prestigious financial institution.”

    Amaury Fournial, Managing Director, Mercuris said, “We are excited about joining Xchanging and being part of an organisation that has so much experience in procurement outsourcing and which can provide a wealth of opportunities for our employees.”

  • 17 Jan 2008 12:00 AM | Anonymous
    Europe has seen its first ever year as the world’s most active outsourcing market, according to the latest Quarterly Index from sourcing advisors TPI. In 2007, Europe surpassed the Americas in both the number of contracts awarded in the region and in total value. The year saw 220 contracts signed in Europe, yielding a total value of €32.7 billion. In the Americas, 194 contracts were signed worth a total value of €21.3 billion.

    Europe also showed impressive growth in contracts entirely new to the market (which excludes transactions that are restructurings of existing outsourcing arrangements). In 2007, the annualised value of new contracts awarded in Europe was up almost 31 percent on 2006 levels, compared with an increase of 13 percent globally.

    “Companies across Europe are outsourcing in ever greater numbers. In addition to the established UK market, we are seeing increased outsourcing activity across Northern Europe especially in Germany, The Netherlands, Sweden, Switzerland andFrance. As a result, average contract values for those deals entirely new to the market in EMEA increased by a very healthy 40%,” commented Duncan Aitchison, partner and president, TPI EMEA.

    2007 also yielded the highest total contract value ever for Business Process Outsourcing (BPO) in Europe. It was also the first year in which Europe accounted for more than half of the total value of all major global BPO contracts. The financial services sector dominated demand for BPO in Europe, representing over 38 percent of the total value of outsourcing contracts signed. Meanwhile, the worldwide market for Financial Service Operations (FSO) outsourcing has grown by 22.5 per cent since 2003.

    The picture of outsourcing worldwide is also positive. The more than €12bn of Annualised Contract Value (ACV) awarded in 2007 matched the five-year global average. New scope ACV was up globally year on year by a healthy 13 percent. The fourth quarter was actually the best quarter on an ACV basis in eleven years. At year end, active contracts globally were delivering over €63 billion in revenue to service providers, which signifies a global growth rate of over seven percent – well above the 5.3 percent five year compound annual growth rate.

    “After a relatively slow start to the year, 2007 witnessed a very strong final quarter. Given the sustained growth rate we are currently witnessing and the level of activity, particularly in Europe and Asia Pacific, we have every reason to expect similar strength in the market going forward,” said Aitchison.

    The India-based providers’ share of global contracts continued to expand in 2007, up by 42 percent on last year’s share and 114 percent on the three-year average 2004-2006. By contrast, despite Europe’s overall growth as an outsourcing market and a significant increase in market share for BT, the European Big Five (Atos Origin, BT, Capgemini, Siemens and T-Systems) saw their collective share of outsourcing contracts signed globally decline by 17 percent since last year, and by over 50 percent over the previous three years. Indeed, the India-based providers have, for the first time, equalised their share with the European Big Five.

    “The India-based providers have increased their foothold in the past year in terms of market share. They are succeeding in expanding their share of the growing European market and continue to establish themselves as an attractive alternative to the more traditional outsourcing players,” commented Aitchison.

    India’s wider economic success is also driving an expansion of domestic demand for outsourcing. The total value of contracts signed by buyers in the region has grown from €2.2 billion in 2006 to €3.9 billion in 2007. China has also seen a greater level of activity, albeit from a small base. In 2006, China-based buyers generated €0.4 billion in terms of the total value of contracts let. In 2007, this has risen to €1.52 billion. Accenture, HP, IBM, and Wipro are winning much of the Asia-Pacific deals.

    “It will be interesting to track this development in which the very countries that have been known for their provision of outsourcing to others are now becoming buyers in their own right. We expect that companies across the globe will continue to seek the benefits of outsourcing as the market becomes increasingly global over the coming months and years,” added Aitchison.

  • 17 Jan 2008 12:00 AM | Anonymous
    Despite the economic chill and customers turning toward best-of-breed deals and multisourcing, reports of the mega-deal's death are exaggerated, said top industry legal advisor Tim Wright. "There is currently a trend towards shorter and smaller 'best of breed' arrangements," he said to Sourcingfocus. "However, one look at the insurance sector and it is clear that the 'mega-deal' is not dead. In the second half of 2007, Resolution announced a 12-year, £580 million strategic partnership, which saw around 2,000 UK-based staff transfer to Capita and a phased outsourcing of back-office customer services to India."

    Wright, a partner specialising in Global Sourcing with legal giant Pillsbury Winthrop Shaw Pittman LLP, also singled out Co-operative Financial Services' undertaking of a 10-year technology and BPO project worth £277 million, and Prudential's announcement of a 15-year deal worth over £750 million.

    However, the underlying picture is not all rosy for the big-deal players. Wright added: "These life and pensions administration deals have relatively unique drivers. Declining business volumes coupled with static or growing fixed costs, coupled with the problems of running multiple administration platforms, continue to generate longer than typical deals due to the particular economics of the sector."

    Wright said that in may cases the mega-deal can be a sign of inexperience on the part of the customer, coupled with the promise of poor management once the contract has been signed: "Outside of life and pensions administration, organisations with less outsourcing experience often look for the mega-deal as they don't necessarily have a complete understanding of the governance and other challenges of dealing with multiple service providers," he warned. "[Whereas] those organisations with more experience – often tempered by problems they'’ve experienced in the past – have instead adopted a “best-of-breed” approach, with many different providers engaged to provide smaller packages of services."

    The trade-off of this leaves the customer seeking to manage the hand-offs and interactions between all of the different suppliers. He said, "[This] sees increasing management overheads and an ever-growing retained organisation, which does not necessarily have the requisite skills, as well as the transfer of risk back to the customer and the erosion of the promised economic benefits."

    This, in turn, may drive buyers to rationalise providers over time and drive a less complex delivery model, he concluded.

    For more from this interview, turn to The Big Questions: January 2008.

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