Industry news

Major opportunities in the Nordic sourcing sector are there for the taking by any service provider willing and able to positively differentiate themselves from their competitors, according to the findings of EquaTerra's Outsourcing Service Provider Study 2008 being launched today.

The study reveals that customers currently perceive very little difference between Nordic sourcing suppliers, and do not recognise any true leaders in sourcing service provision for the Nordic countries. “In general, customers in the Nordic region think outsourcing service providers are doing an OK job, but not a great one” explained Peter Skarendahl, director of EquaTerra Sweden. “This, combined with a relatively fragmented supplier market and a lack of distinction between local and global firms, strongly suggests that the time is ripe for proactive service providers to make a real impact in this region” he continued. The findings also very clearly indicate that the use of outsourcing by Nordic organisations is continuing to rise significantly with 82 percent of study participants intending to maintain their level of outsourcing, including 48 percent who are looking to increase it. In contrast, only 8 percent intend to outsource less. Global sourcing is also on the rise in the Nordic region, with the proportion of respondents using global sourcing increasing from 23 percent in 2007 up to 41 percent in 2008. A further 9 percent of study participants are considering using global sourcing in the future. This increase could be attributed to the threat of an IT skills crunch with over half of those organisations increasing their outsourcing activity doing so to get better access to skills. Of these skills, applications management is the area of most concern, with the average satisfaction level for this service slumping from 61 percent in 2007 to 55 per ent in 2008, well below the average satisfaction scores of 59 per cent for end user management and the 61 per cent for infrastructure management. Cost savings and quality improvements are also seen as important considerations, with quality of work emerging as a higher priority for companies based in the Nordic region, in comparison to elsewhere in Europe.

Keep it in, or outsource it? That’s the question many telcos and operators are asking themselves. Outsourcing is still sometimes seen as a controversial option in any business sector, and doubly so in telecoms, especially when it comes to outsourcing core capabilities such as network building and maintenance. After all, isn’t building and managing networks what telecoms companies are supposed to do?

However, a number of factors have combined to put telecoms outsourcing firmly in the spotlight. First, there’s increased scrutiny and pressure from shareholders, investors and customers to perform. It’s all about targets – target dates for network deployment, target dates for go-live, targets for uptime and service levels. And that’s across all types of network and service, from fibre to cellular, to WiMax and radio.

Second, there’s the increasing business focus on sales, marketing and customer service, with the drive to boost efficiency by stripping out extraneous parts of the business and focusing on revenue-generating activities. This move towards leaner operations, combined with job cuts, has changed the telecoms supply chain, with far fewer resources available in-house for services and support.

Third, there’s the telecoms skills gap to overcome. In the early part of this decade, the comms engineers that were building ISP infrastructure simply moved on to other sectors because suddenly, their services were no longer in demand. As a result, a chunk of the telecoms engineering skills base has migrated to other business sectors – just as the telecoms market is entering a major growth phase with next-generation networks.

These three factors have made outsourcing a high priority for key telecoms players, if they are to deliver on their commitments to building, deploying and maintaining next-generation networks.

There are added attractions too: as well as plugging the skills gaps and supplying vital engineering staff on the ground, outsourcing can also deliver cost savings in areas such as procurement, logistics and maintenance, by taking these costs outside of the telecoms company.

However, when outsourcing you still need to choose the right partners – one that delivers value at all points in the relationship, not just manpower to help in a tight squeeze.

So how do telecoms companies go about choosing the right outsourcing partner? Here’s a checklist of the right questions to ask the prospective partner, to help you make the right decision.

Outsourcing success relies on people as much as technology, but where technology is relatively reliable and predictable, people are not. An important factor to bear in mind is that the individuals who set up the telecoms deals are different from those who then run the actual services.

Entrepreneurial minds are responsible for the first six to 18 months, designing and building the network infrastructure, identifying benefits and fine tuning operations. But following roll-out, a new team will be brought in to manage the outsourced service, and there is a risk that they may lack the experience and skills that lay behind the original success of the project.

So ask the prospective partner for their customer credentials, which is the best evidence of their engineering services and understanding of technologies. Look for long experience and blue-chip customer references: if they’ve succeeded on other high-profile networks, there’s a good chance they will succeed for you.

While opting for in-house telecoms maintenance may, on the surface, save you the cost of outsourcing to a third party, make sure you do the maths and work out the true cost of both approaches.

If you go down the in-house route, you’ll have to factor in staffing and equipment costs, as well and the ongoing time and cost overheads associated with continuous training for your engineers. Add in the necessary accreditations to guarantee your staff are up to speed on the latest skills, and you may well find that the economics add up in favour of outsourcing.

Can the partner manage every phase and aspect of the infrastructure project, from consultation and planning right through to building and maintenance of the network? It’s worth checking that they can substantiate their claims when it comes to the scope and scale of their engineering expertise and industry experience.

If the partner has the project management experience you require, then outsourcing becomes even more cost-effective, as you’ll be able to work together to get the best use of existing resources.

Not all outsourcing partners are equal. While some may provide a perfectly acceptable reactive service and be able to demonstrate and back up their credentials, isn’t your business worth a bit more than 'reactive'?

Choose a partner who will look to actively improve your business, and you’ll add real value to the partnership and ultimately get better service.

Can the prospective partner also work with equipment vendors in logistics, inventory supply, integration and commissioning equipment? If so, this can help solve a procurement headache – especially for companies that operate internationally, which may need the same outsourced services for large-scale, multi-country networks.

Dealing with multiple vendors can be a hugely demanding task, but by ensuring your outsourcing partner has the right strategic vendor relationships, you’ll be able to take advantage of a single point of ownership, and reduce the burden on your organisation’s time and resources.

The contract between the telecoms company and the partner will contain multiple SLAs. To help both parties get satisfaction from this, proper lines of communication should be established to ensure that both parties are working towards the same targets and goals.

A precise brief that defines the aims and technical aspects of the installation is key to matching and fulfilling expectations. Irrespective of what services you outsource to a partner, the relationship is based on trust – and trust starts with defined targets and goals. You also need to know that your outsourcing partner, and the agreement you have in place, will give you the equipment, the engineering skills and the right response, so that you can deliver on your business commitments.

In conclusion, outsourcing shouldn’t just be seen as a way to reduce costs, or to plug personnel gaps – it can replace expertise that has drained away from the telecoms sector, and put dynamism back into the business. It’s a partnership that should help telecoms companies achieve their strategic and operational targets. Now that’s worth going out for.

Document management may not immediately excite everyone’s interest, but there’s nothing more effective at focusing the mind than survival. Make no mistake, today’s compliance landscape is harsh and getting harsher – and the key to business continuity is the ability to manage risk, maintain resilience and ensure recovery. With regulatory regimes and the penalties they can levy expanding to meet the explosive growth in information flow, neglecting document management can be a very expensive and damaging oversight.

There are four factors that combine to threaten business continuity for the unwary in document management. The first is the exponential growth of information in modern enterprise, generated and required by businesses, by customers and by regulators. The second is the regulation of information itself, which in recent years has become ever-more wide ranging and ever-more aggressive. The third is that as information flows between various electronic and physical formats, it is increasingly vulnerable, difficult to manage and protect. Finally, information has to be easily accessible (for business and regulatory needs) while also robustly protected.

It’s an enormously complex and often contradictory equation: better management of more information that has to be totally secure while at the same time being immediately accessible. Regulation is the key component in this equation and the impetus for the need for effective document management. With the raft of legislation currently on the books and just around the corner, this is hardly surprising.

There are key regulatory regimes that impact upon a company’s ability to survive, including Basel II and the Safe Harbor Act. To take some specific examples, the EU’s Markets in Financial Instruments Directive (MiFID) requires the reconstruction of the complex variables of market conditions on any given transaction – to satisfy what is known as ‘best execution’ companies need to gather together the incredibly complex strands of electronic and paper data, including email, as part of the formal business record.

Sarbanes-Oxley in the US is one of the most important pieces of legislation affecting corporate governance, financial disclosure and public accounting – important because it makes corporate executives far more accountable for their companies’ financial affairs. The buck now stops with individuals as well as with companies. Also US based but with global implications is Rule 26 of the Federal Rules of Civil Procedure. This covers ‘Electronic Discovery’, whereby electronically stored information relevant to litigation should be available to US courts at a very early stage, wherever in the world it is held. This means that companies must know where their data is kept, how it is stored and how the retention schedule applies to them – or be in breach of the rule.

Government organisations are sharing in the strain of the regulation revolution too. The UK’s Data Protection and Freedom of Information Acts demand that public bodies square the circle of heightened information security with significantly increased rights of access to that information, within stringent timescales.

The UK’s Financial Services Authority (FSA), the independent regulator of the financial services sector, has an extensive arsenal of powers that can be ranged against any companies that don’t meet its standards. Once again, the time limit given to companies to provide their secure information for scrutiny is exacting, with the FSA classifying ‘readily accessible’ as being a mere 48 hours. The FSA levied over £68 million in fines for compliance breaches between 2002 and 2006. Failures in effective record keeping accounted for over £12 million of this total and 44 per cent of fines over £750,000 related to records management lapses.

It is safe to say that compliance is very much on government, board room and media agendas. The regularity of breaches from organisations large and small shows how easily reputable organisations can inadvertently fall foul of information legislation. So what can they do?

The complexity involved at this level of document management is understandably daunting for companies, simply because it isn’t a core part of the business. Intelligent document management is a highly specialised discipline and not something that can simply be appended to an existing employee’s job description. Businesses need a strategic partnership with a company with extensive expertise. Use of the word ‘partnership’ is deliberate, because a document storage solution simply isn’t enough – enterprises need a partner that truly understands their business and tailors solutions to specific needs.

Records management should be seen as a component of a comprehensive corporate compliance strategy, which will help to reduce legal and financial risk and, importantly, safeguard a business’s reputation. A record management programme must include effective policies and procedures, retention schedules, disposal routines, communications, proof of training and enforcement. Attack is the best form of defence.

With over 50 years of document management leadership experience, Iron Mountain knows that companies need a 360⁰ perspective to deploy a comprehensive and integrated roadmap for compliance. To put it simply, aggressive regulation calls for aggressive compliance:

• Organise a solid infrastructure that will encompass determining the scale of the programme, the creation of effective programme governance, business area specific task groups and sufficient administrative resources.

• Assess and plan with a thorough records inventory, evaluation of existing document management systems, risk assessments, analysis of legal access and retention requirements and the development of a strategic plan.

• Develop key components and metrics which will include a realistic retention schedule and company-wide policies to provide the foundation for a credible, consistent and compliant programme.

• Implementation is critical – the success of the programme will be based on delivery, not its design. As with any project, implementation needs to be applied as a formal exercise containing tailored communication and training components.

• Manage the programme because, no matter how successful the implementation, if it isn’t enforced it will fail.

• Audit and accountability are essential to ensure that everything is working well and the business is consistently compliant.

Let’s go back to the complex equation mentioned earlier to see how a strategic partner can resolve the contradictions that regulation imposes. Electronic information can be stored in a safe online digital records centre – quickly retrievable only by authorised staff from any internet enabled computer – so that it is both secure and rapidly accessible. Physical documents can be held offsite in secure data storage facilities, freeing up expensive office space, data security resources and archive staff – increasing the capacity to manage, store and exploit growing information resources. These documents can then be scanned cost effectively, as they are needed, and accessed with the speed and accuracy of electronic documents – delivering true integration of varying storage formats.

Today, more than ever before, records management compliance is a strategic priority. Document management is often seen as a necessary evil but the expertise of a strategic partner can take away the pain by reducing costs, simplifying business practice and ensuring continued compliance. Enter this environment unprepared and companies will pay the price, but if they enter with a strategic partner with the right expertise they will not only survive, they will thrive.

Software as a service (SaaS) business suite vendor NetSuite Inc. has announced operating results for its first quarter ended March 31, 2008.

The San Mateo-based company has announced Q1 revenue of $34.1 million – a 47% year-on-year increase over the first quarter of 2007, and an eight percent increase over Q4 2007. The company says this is the 34th consecutive quarter of growth. Despite this, Net loss on a non-GAAP basis for the first quarter of 2008 was $(420,000), or $(0.01) per share.

For the full year 2008, NetSuite has issued guidance of revenues in the range of $154 million to $157 million. Non-GAAP net loss, which excludes the impact of stock-based compensation expense, is expected to be in the range of $(2.5 million) to $(0.5 million).

PricewaterhouseCoopers LLP, the world’s largest professional services firm, has outsourced its bureau payroll service to Logica. The deal will see Logica provide a pay-as-you-go BPO (Business Process Outsourcing) service for 18,000 of Logica’s employees and pensioners.

The deal, to begin in December this year, marks the first win of this kind for Logica since it announced its partnership with Oracle to offer Oracle Human Capital Management (HCM) as part of its own outsourced HR & payroll service. Logica’s pay-as-you-go model negates the need for PricewaterhouseCoopers to pay the traditional upfront software licence fee.

Patricia Taylor, Director of HR and Payroll BPO Services at Logica said: “We’re seeing a real demand for BPO pay-as-you-go services from current and potential customers. This type of offering means that premium services based on a market leading product like Oracle HCM are no longer just available to large enterprises – they are accessible to all. Many organisations will now find that they can positively change the way they deliver HR and payroll services to their employees”.

Zurich Financial Services Group, the global financial services company, has signed off on IT services contract extension with the Computer Sciences Corporation (CSC). The deal, worth approximately £200 million to CSC, will see the companies continue their partnership for a further six years.

CSC will assume responsibility for the provision of Zurich’s desktop services to its businesses in the UK, United States, Canada, Switzerland, Germany, Italy and Spain. CSC’s remit will cover remote and on-site IT support and software packaging and distribution to around 51,000 users.

Michael Paravicini, Chief Information Technology Officer at Zurich Financial Services Group, said: “CSC already provides support for the development and maintenance of our application software, and our expanded relationship will allow us to provide a more integrated holistic solution for our application support needs.”

CSC’s relationship with Zurich began in July 2004 when they signed a landmark seven-year global IT applications outsourcing contract.

Microsoft and HCL have announced a strategic alliance to co-create a new sourcing proposition, 'Structured Technology Transformation' (STT) that enables enterprises to adopt and deploy the latest technology innovation at no additional costs, while at the same time retaining greater control over their outsourcing relationships, say the two companies.

Computer Sciences Corporation (CSC) has announced that its newly established consulting practice dedicated to serving the UK wealth management market has released findings from its recent industry study.

As the market sits on the verge of a six-fold increase in growth over the next two years, according to analystis at Datamonitor, CSC’s study of banks, insurers and advisory firms found a significant shortfall in many organisations’ ability to manage the emerging demand for bundled propositions, tailored to specific customer segments. According to the study, 60 percent of those surveyed admitted their organisation structure is a hindrance.

“Many organisations providing wealth management products and services today are woefully lacking when it comes to responding to the future needs of customers,” said Joanna Hall, leader of the new practice and consulting partner for CSC’s Financial Services Sector in Europe, the Middle East and Africa. “To best serve customers, organisations will need to incorporate many more partner and affiliate arrangements into their overall wealth management offerings, and ensure their organisational structures, both culturally and technologically, are fit for purpose.”

The aim of the study was to establish how organisations felt they measured up to serve the the requirement for a wider range of products and services, and provide a more holistic approach for customers seeking to manage their financial investments. According to those surveyed, the findings revealed a lack of integration between the systems and processes needed to provide such services, with less than 10 percent of those surveyed believing their current technology performance will suffice.

“This is of particular concern since the study also predicts a significant rise in the role of the Internet as both a distribution channel and guidance or advisory component within the wealth management sector,” added Hall. “Wealth providers need to review their business growth strategies, carefully identify their client targets and tailor propositions. The strategy then needs to be translated into a robust and cost-effective technology environment.”

ArcelorMittal, the world’s largest steel company, has shaken up its outsourcing arrangements in a move towards a more global IT supply model.

After an in-depth assessment of its supply model, the company has formalised its framework agreements with Satyam and Mindtree which will be valid until 2011. The specifics of the agreements will be fleshed out after consultation with ArcelorMittal’s key stakeholders.

ArcelorMittal hopes the agreements will improve the cost-effectiveness and flexibility of the organisation whilst allowing “internal ArcelorMittal IT employees to focus on high value adding activities”. No jobs are being cut at the company to make way for the arrangements.

Subu D Subramanian, Director and Senior VP at Satyam Computer Services Ltd, said “This large deal provides Satyam a very significant opportunity to serve ArcelorMittal with integrated process and technology solutions leveraging our industry domain expertise and solution architecting capabilities”.

The British public would rather pay more and buy British, than get cheaper goods and services produced offshore, according to new research published by sourcingfocus.com today. Despite the credit crunch, only one in four consumers are happy for goods and services to be handled outside the UK, even if it makes them cheaper for consumers.

The online survey, conducted by ICM amongst consumers, aimed to establish changing consumer attitudes to outsourcing and offshoring at a time of economic downturn. Consumers responded on a scale of one to ten how happy they would be for various services to be offshored if it saved them money; the results were unanimously anti-offshoring. Consumers are most adamant that call centres should be kept in the UK – 59 percent of respondents were the most unhappy that they could be (a ten rating) at call centres being offshored, whilst a massive 79 percent were unhappy (rating 8-10) with call centres being handled outside of the UK. Only 6 percent were happy (3 percent very happy) to have call centres handled offshore.

Even functions that have routinely been completed outside of Britain for years – processes that are seemingly invisible to the UK public - are not safe from the backlash. Only 15 percent of respondents were very happy for electronic goods to be manufactured offshore, even if it made them cheaper, whilst just 13 percent were very happy for clothes to be made offshore.

Other interesting findings from the research are:

• Young people are most happy with services being offshored, with 52 percent of the 18-24 age range happy to accept offshoring services if it saves them money.

• Offshore call centres are exceptionally unpopular, with only 6 percent happy to see call centres offshored, even if it saved costs. The Scots are particularly adamant in this area, with only 1 percent happy to have call centres offshored, even if it saves them money.

• Women are more anti-offshoring than men. 64 percent of women would prefer to pay more for goods and services and keep them based in the UK as opposed to 55 percent of men. Only 22 percent of women would be happy for services to be handled outside of the UK, even if it lowers cost.

• Only 20 percent of those from the lowest social class are happy to pay for services to be handled outside the UK, even if it makes it cheaper for them. This is the lowest of any social class.

Chris Middleton, editor of sourcingfocus.com, commented: “It’s official: consumers – that’s men and women from across all walks of life, within all age groups, and in every part of the UK – hate offshoring. And the more information-based the offshore service is, particularly call centres, the more they dislike it. Businesses spend millions of pounds every year researching customer attitudes in an effort to prove that the offshore call centre experience somehow adds value to the brand; our research suggests this is questionable.”

Martyn Hart, Chairman of the National Outsourcing Association (NOA), the trade association for the outsourcing industry, commented: “This research makes unhappy reading for those within the outsourcing industry and particularly those with an interest in offshoring. The lack of consumer acceptance of offshoring – a process that is good for British business – is worrying and further education is obviously needed.

Offshoring is growing and diversifying. Many large companies will outsource a variety of processes to several offshore locations and consumers seem to tar all of these with one negative brush. Many of our members are suppliers delivering an excellent service to clients – it is about time these gained proper recognition.”