Industry news

It's official: consumers – that's men, women and teenagers 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 (yes, I'm talking about call centres), the more they dislike it.

sourcingfocus.com has commissioned exclusive research from ICM into consumers' attitude to offshoring, which will be published on this site tomorrow. The results suggest not so much a gauntlet being thrown down to the outsourcing industry as a full-bloodied slap in the face.

Just three percent of all respondents are happy with the concept of offshore call centres, while only five percent are happy with offshore loan application handling – the same percentage as for payroll processing.

The picture was only slightly better for manufacturing: 15% of all consumers are happy with the offshore manufacturing of electronic goods; and 13% with the offshoring of clothes-making.

Looking through the other end of the telescope, as it were, 59% of all consumers describe themselves as “very unhappy” with call centre work being done overseas; and 47% and 49% are unhappy with offshore loan application handling and payroll processing, respectively.

However, only 11% of consumers say they are unhappy with electronic goods being made overseas, while just 12% are unhappy with the offshore manufacture of clothes.

The hidden message there is the real challenge to companies that offshore key services, especially call centres and business processes: despite the negative publicity about sweatshops in the clothing industry, far fewer people are unhappy about having such goods made overseas than they are with offshore call centres.

That said, 60 percent of consumers say they would pay more for goods and services generally to keep them in the UK, while just over one quarter (27%) would happily let services be handled outside the UK if it was cheaper.

The results hold true across every sector, age group and region of society, with women tending to hold the most trenchant and negative views on communication-based services being located outside the UK.

It's grim reading up North too: in Scotland, only one percent of respondents are happy with overseas call centres, while 73% describe themselves as “very unhappy” with them.

Sixty-four percent of low-skilled workers dislike overseas call centres, versus an unhappy 48% of people in the 'AB' group. Don't relax too much, however: only four percent of AB respondents describe themselves as “very happy” with offshore centres.

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, which is broken down into the most granular detail over some 26 pages, suggests this is rubbish.

Your customer is on the phone, UK Business plc; and he or she – whether young, middle aged or old, educated or low-skilled, wealthy or struggling to reach above the poverty line – is not happy.

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 surrounding 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.

Let’s 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?

Scottish Water has inked three outsourcing deals worth over £120 million. The company aims to slash its operating costs by £1 million a year over the next eight years.

Fujitsu Services has secured an eight-year, £28 million contract with Scottish Water to supply service desk support and infrastructure services as well as desktop managed services. The project will support over 4,000 employees based all over Scotland, including its HQ in Dunfermline and its offices in Edinburgh, Glasgow, Dundee, Inverness and Livingston, plus engineers and support staff working remotely.

The utility has also signed a £41.5 million communications deal with BT, covering mobile, voice, data and networking.

A third deal with Indian outsourcer Tata Consultancy Services (TCS) is the largest, worth some £60 million, and will provide appliations management and support.

David Brown, Scottish Water general manager for IT, said: "This is the culmination of a great deal of hard work from suppliers and Scottish Water.

"It delivers significant cost savings, an enhanced service and the opportunity to exploit the extensive development capabilities of some of the most innovative companies in the business."

In 2002, three separate water authorities, East, West and North of Scotland merged to form Scottish Water, the UK’s fourth largest water utility serving around five million customers. Each company had its own IT system and support staff, which was not cost effective or easy to manage. Scottish Water pulled this together into one business, and now wants to move its IT function onto the next level by moving to a managed service.

• ScottishPower has also been on the outsourcing radar this week, extending its communications infrastructure contract with Thus for an unspecified period.

The Financial Services Authority has fined Liberata, a key BPO provider to the public and financial sectors, more than £500,000 for failure to ‘control its affairs responsibly and effectively’ and lack of ‘due skill, care and diligence’ in its business activities.

The fine was incurred when staff at the company failed to cope with the high volume of messages generated by its computer system resulting in pension policyholders losing money on their investments.

The ruling, the first imposed on an outsourcing company by the FSA, sets a precedent which could lead to other outsourcers being held accountable for technical failures.

The FSA’s report detailed Liberata’s failings stating that: “30,000 policyholders did not receive documents containing important information about their savings…of these policyholders, 161 suffered financial loss”. The FSA calculated that the losses incurred as a result of these failings amounted to £17,584.

The fine for Liberata’s failings was initially set at £750,000 but was reduced by the FSA for early settlement.

Capgemini has today sealed an £83 million deal that will see it continue to provide IT services to Croydon Council for the next five years. The contract will form a key part of an ongoing programme of transformation at the local authority.

Capgemini’s remit will cover telecommunications infrastructure and networks, the management of some 4,000 desktop computers and the Council’s key business applications including finance, procurement and customer service. The IT outsourcer will also provide consultancy expertise to support the wider transformation of local services.

Nathan Elvery, Director of Finance and Resources at Croydon Council, said: ‘Capgemini has already proved key in helping Croydon to achieve a step change in our IT effectiveness and overall business efficiency. They have demonstrated that they understand our needs and have been able to deliver innovative IT services on time and within budget.’

The Council hopes the contract will enable it to accelerate its programme of service transformation, investment in new technologies such as a new wireless network infrastructure, the upgrade of systems and hardware and a new Council-wide Geographic Information System. 

The two organisations have worked together since 2003 under a Private Finance Initiative (PFI) contract, and the extension to 2013 will make the contract one of the biggest and longest-running in UK local government.

Microsoft is expected to report fiscal third quarter earnings of 44 cents a share with sales of $14.5 billion. Analysts expect Microsoft to increase those numbers and raise its outlook for fiscal 2009.

The International Association of Outsourcing Professionals (IAOP) has compiled the initial alphabetical list for the third annual ranking of the world’s best outsourcing service providers - The Global Outsourcing 100.

The lists include companies from around the world providing the full spectrum of outsourcing services – not just information technology and business process outsourcing, but areas such as facility services, real estate and capital asset management, manufacturing, and logistics.

The complete ranking and sublists will be published in Fortune magazine next month, and discussed here. The IAOP says that the evaluation process mirrors that employed by many top customers and considers four key criteria: 1. Size and growth in revenue, employees, centers, and countries served. 2. Customer experience as demonstrated through the value being created at the company's top customers. 3. Depth and breadth of competencies as demonstrated through industry recognition, relevant certifications, and investment in the development of people, processes, and technologies. 4. Management capabilities as reflected in the experience and accomplishments of the business's top leaders and its investment in management systems that ensure outsourcing success.

The complete alphabetical listing of the top 100 companies (101, due to a tie score) is as follows: 24/7 CUSTOMER Accenture Achievo Corporation ACS Aditya Birla Minacs ADP Amdocs ARAMARK ATS Auriga Beyondsoft Bleum Cambridge Capgemini Cartus CBRE Ceridian CGI Group Ci&T Software Cognizant Colliers International Comprehensive Health Services CompuPacific Convergys Cross-Tab Marketing Services CSC Cushman & Wakefield Cybage DataArt Datrose Diebold Donlen Eclipsys EDS EMCOR Emerio EPAM Systems ExcellerateHRO EXLService Firstsource Freeborders Genpact HCL Technologies Headstrong Hewitt Hewlett-Packard Hexaware HiSoft HOV Services Hundsun Global IBA Group IBM ICG Commerce Infosys Innodata Isogen Inspur Intetics IPT ISS A/S IST ITC Infotech Johnson Controls KPIT Cummins KPN/Getronics LawScribe LogicaCMG Luxoft Mastek MERA NN Mindcrest MindTree Consulting MphasiS NCR Corporation NCS Neusoft Objectiva Software Solutions Oce Business Services Ocwen Financial Outsource Partners International Patni Pitney Bowes QuEST SITEL Smart Sourcing SNC-Lavalin Profac Sodexho Alliance SPi Stream Summit HR Worldwide Sutherland Global Services Symphony House Berhad Syntel Tata Consultancy Services Tech Mahindra Unisys vCustomer Vertex Wipro Technologies WNS Xerox Zensar Technologies

Logica's restructuring announcement has been slammed by analysts as being less a strategy and more a plan, and follows in the wake of a fumbled outsourcing strategy announced earlier this year. CEO Andy Green's honeymoon period would seem to be over, and further tough decisions lie ahead.

The services company has announced that it will invest £110 million in a restructuring programme to save £80 million annually from 2010. In the short term, this involves the loss of some 1,300 jobs in Europe – about two percent of the European workforce overall, including 500 UK workers.

Globally, Logica aims to double its offshore and nearshore headcount by 2009, with India being the greatest beneficiary.

CEO Andy Green, who took charge in January this year, has said he wants to reduce costs and minimise job duplication, and then move forward with an improved concentration on outsourcing – which he aims to shunt towards a 35% group revenue share – and offshoring.

Logica says the ongoing savings will be reinvested to boost sales and marketing capability.

Despite this, analysts at Ovum have greeted the announcement with the response that it is “a plan, not a strategy”, while acknowledging that Logica has set targets for revenue growth and margin improvement in 2009 and beyond.

The analyst firm believes that while the CEO's diagnosis of the company's ailments is correct, his response lacks the essential strategic vision a leader should supply – especially in a chilly economic climate.

Ovum analyst Phil Codling said: “The focus on growth is a no-brainer; Logica needs growth, particularly in two key European markets, UK Commercial and Germany, and it has to become more proactive and more sales-led if it's going to achieve that.

“A cost-cutting plan is another no-brainer; Logica will cut non-billable back-office staff, shift headcount to offshore, and rationalise buildings (40% reduction in deskspace).

“So having got the diagnosis largely right, what Green has unveiled is more of a plan than a strategy: it's about execution not vision, it's largely a continuation of the existing direction rather than anything radically new.”

Ovum's analysis is that what was missing from Green's forward-looking announcement was a sense of renewed vision and strategy to lift Logica out of its troubles – something the company sorely needs after losing one CEO last year and fumbling its recent outsourcing announcement, as reported in News Analysis earlier this year.

By creating an Outsourcing division shortly after Green's accession to the Logica throne, the company indeed singled that out as a strategic priority. However, the establishment of the new division under former acting CEO Jim McKenna was rather undermined by news that McKenna will leave the company later this year: a classic case of office politics getting in the way of business change.

That said, if outsourcing becomes a horizontal layer in the organisational matrix – to use Ovum's analysis – then it can share skills across the organisation and feed up into local territories for local selling.

Ovum's view is robust: “We'd now like to see similar clarity of purpose around prioritising the markets and opportunities that Logica intends to pursue. It can't be equally determined to go after each and every opportunity. Even IBM doesn't attempt to do that, and Logica is nowhere near the scale of IBM, even in Europe.

“Andy Green has shown himself to be a good analyst – now let's see the vision and focus to take Logica to the next level.”

Indian services giant Satyam Computer Services has followed disappointing financial results with the announcement of two prominent acquisitions. Satyam has acquired Caterpillar’s MR&CA intellectual property and assets for $60 million. Satyam will also launch a business unit to provide MR&CA solutions and services globally to Caterpillar and to its other customers in various industries.

The acquisition will strengthen Satyam’s relationship with Caterpillar. Satyam will now support Caterpillar in segmentation, promotions, forecasting, new product development, service, validation, and customer survey execution, among other areas.

“We were honored to be named one of Caterpillar’s few strategic partners in 2005, and this acquisition further demonstrates the trust both organizations have in each other,” said Satyam chairman B. Ramalinga Raju. “It also accelerates development of our business transformation capabilities and further enhances our end-to-end business solutions, from strategy on through to BPO [business process outsourcing]. It is a significant step in our march toward becoming true business transformation partners with our customers.”

Caterpillar’s MR&CA IP and assets will complement Satyam’s business consulting capabilities, industry knowledge, and market research processes, says Satyam, enabling it to establish itself at the forefront of a substantial knowledge process outsourcing (KPO) market.

According to a NASSCOM study, the KPO industry worldwide will reach $17 billion by 2010, with India accounting for about $12 billion of that total. Market research and analytics – tools and processes inherent in organisations’ strategic planning – will constitute about 25 percent of that sum. Satyam is well positioned, thanks to the acquisition, to offer these strategic services to the greater marketplace.

To accommodate Caterpillar’s MR&CA requirements, as well as those of other organisations, Satyam will launch innovation centers in India, Europe, North America, Latin America and Asia Pacific. It currently operates centres in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia.

Satyam has also announced the acquisition of S&V Management Consultants, the Ghent, Belgium-based supply chain management (SCM) consulting firm. The $35.5 million, all-cash purchase reinforces Satyam’s supply chain strategy capabilities. “We are excited to acquire an established SCM firm that is respected for its innovative, high-quality, and high-end supply chain strategy services,” said Satyam chairman B. Ramalinga Raju. “S&V’s entire team is renowned for its exceptional capabilities and we look forward to having our customers to benefit from that expertise.”

S&V was founded in 1992, and has offices in Belgium and the Netherlands. The $15 million firm develops supply chain strategy and performance, and supply chain process excellence solutions, largely for manufacturing and pharmaceutical companies and public entities. S&V features 60 consultants, all of whom are Six Sigma-trained and APICS-certified, and fluent in English, Dutch, and French.

As a part of this transaction, Satyam also acquires business decision support software Equazion, a supply chain performance management suite.

“We are pleased to become part of the Satyam family, and to leverage its world-class business process and technology skills, global resources, and relationships with high-profile customers,” said S&V co-founder and partner Peter Verstraeten. “At the same time, we look forward to making our expertise and assets, including our robust software, available to our new colleagues and their customers.”

Several factors make the agreement ideal for Satyam, said Raju. Acquisitions work best when the absorbing organization gains leadership capabilities, customer relationships, higher value services, brand enhancement, and new competencies.

S&V will operate as a fully owned subsidiary of Satyam for the near future, maintaining its name and brand. However, it will become a part of Satyam’s Consulting and Enterprise Solutions team.

• Satyam does not appear in this year's Global Outsourcing 100, published by the International Association of Outsourcing Professionals.

Homeworking is still not in the top five options being used to create flexibility in contact centres, says new research, despite the widespread availability of high-speed broadband and advances in technology that make so-called 'homeshoring' (working from home as part of a distributed, virtual call centre) viable.

The 2008 Flexible Working Survey shows that improving efficiency is still the main reason for flexible working, but delivering an improved work/life balance to employees is now rated nearly as important.

The benchmark survey analysed responses from all industry sectors and was conducted earlier this year by the Professional Planning Forum, an independent industry body that supports effective resourcing, planning and information analysis in the contact centre industry.

The survey finds that over 50% of centres have not considered homeworking as a viable option, or have discounted it entirely. It also shows that part-time staff remains the principle option for many call centres to deliver staffing flexibility, with 63% of centres having between 20-40% part-time employees.

However, while part-time workers deliver flexibility they also present challenges, suggest many respondents to the survey, which includes comments such as “Spans of control for team managers are lower so cost is higher”; “Often people accept part time hours and then ask to change them in the first 6 months”; and “Requests for hours within the school run, poor evening cover delivered”.

"This research forms part of the Flexible Working stream we are developing, to support the demands of employees, businesses and government legislation on flexibility,” explained Steve Woosey, membership director of The Professional Planning Forum. The Forum, established in 2000, is an independent industry body that supports effective resourcing, planning and information analysis within the contact centre industry.

Looking at homeworking more closely, the research revealed a number of differences between expected and realised benefits. For example, those implementing homeworking expect to see most benefit in employee work/life balance and reduced absence. However, centres already using homeworkers have also seen big improvements in coverage of opening hours and improved service to customers. Enabling homeworking, therefore, has many more benefits than most centre managers might expect. IT infrastructure, however, remains the top challenge for both.

Dave Vernon from the Professional Planning Forum sums up the findings, “Homeworking is on the cusp of moving from the fringes of flexibility options to the mainstream. While the perceived main benefits of improved attrition and better work/life balance are being delivered, associated benefits such as improved coverage of hours and improved customer satisfaction are also being realised by those companies at the forefront of this working solution.

"The main blockage still remains around IT Infrastructure and is a stumbling block for many. However, with technology progressing all the time and the number of companies moving down this road, this final blockage is all but remedied."