Outsourcing

YOUR AWARDWINNING SUPPLEMENT

The René Carayol column Time to move on from the lift and shift approach | Page 2

Are you being served?

How personal outsourcing is catching on | Pages 8-9

OUTSOURCING

May 2014

Homeward bound Dave Baxter reports on the jobs that are returning to Britain | Page 5

DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH, PRODUCED AND PUBLISHED

BY LYONSDOWN WHICH TAKES SOLE RESPONSIBILITY FOR THE CONTENTS

Business Reporter · May 2014

2

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Outsourcing

Opening shots René Carayol

T

ECHNOLOGY is forcing rapid change and, for many organisations, it is all too new and all too complex to be embarked upon on their own.

Many wisely look to partner in order to gain access to new platforms and technologies, usually through an outsourcing relationship.

However, the traditional approach to Business Process Outsourcing (BPO) is less and less appropriate in today’s ultracompetitive and unforgiving marketplaces.

More than 50 per cent of today’s BPO agreements are still totally fixated on cost reduction. And most contracts still deploy the “lift and shift” approach, basically moving the business process to an environment providing a lower labour cost. However, as many have already gained the benefits of cost reduction, coupled with rising labour costs in many preferred locations, it is time to think very differently.

Many large, complex and disparate organisations are compelled to face up to the challenge of the latest platforms and deploying new technology including social media, mobility, analytics, the cloud and that old chestnut, automation. When implemented they can provide new business insights that enable the organisation.

It can appear intimidating when considering the significant investment

Find us online: business-reporter.co.uk

Follow us on twitter: @biznessreporter

Why the traditional approach to outsourcing is not suited to today’s unforgiving market necessary and the know-how required to implement from scratch. This presents exciting and countless opportunities for the BPO industry.

December 2013 data from HfS Research informs us that half of today’s clients will transform their processes in order to capitalise on the greater use of technology.

Some courageous clients who have taken the leap, via technology-enabled BPO, are reaping the benefits of faster introduction and execution. This is a move away from “lift and shift” and promises better innovative capability and much sought-after analytical insight.

Many companies who have explored digitisation and further automation have soon realised that while technology facilitates cost reduction, the real benefits are more about reduced errors, speed and agility. The elimination of repetitive and

mind-numbing tasks will eventually enable teams to be redeployed on more fulfilling work which will raise spirits and morale.

This places a new onus on the BPO provider, as it’s now no longer about just delivering to the agreed service level, but providing insights that fuel future business opportunities. As analytical insights become core to corporate decision making, more will be demanded, making the BPO provider integral to the future of the business.

The research shows that while many get the power of mobility and social media platforms, there is a danger in having these just bolted on to existing ageing processes.

In order to reap the full benefits, it is essential that these technologies are embedded into the business as a whole, as there are many examples of expensive half-baked solutions that fail to deliver.

It is essential that the BPO game changes, and both buyers and service providers need to be far more technologically savvy.

The likes of Comet, Jessops and Blockbuster failed to cope with new multic han nel operat ions, yet t he over 150-year-old retailers, John Lewis and Burberry, have demonstrated just what can be achieved. Many years of expertise and experience with shops on the high street does not preclude them from running successful big online and mobile retail operations.

It is not just about the technology – it says much more about the prevailing culture. It is so much better to get it right first time by having access to the appropriate BPO expertise, rather than the costly trialand-error approach that is all too prevalent on the UK retail high street today.

Stone Circles, Beaghmore, Northern Ireland

Northern Ireland gets the best GCSE and A-level results in the UK. Northern Ireland is steeped in history and mystery, but there’s no mystery around our smart workforce.

distinctive & distinctions

Hard-working, resourceful and determined, our bright and talented people help make Northern Ireland’s workforce one of the smartest around. That’s why companies like Allen & Overy, Allstate, Capita and Caterpillar choose us to provide their business and professional services.

We also offer competitive operating costs, an advanced business infrastructure, and generous financial assistance and support.

To learn more about what makes Northern Ireland the smart choice, visit www.investni.com/invest

investni.com/invest

Business Reporter · May 2014

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Like us: www.facebook.com/biznessreporter

Outsourcing

Find us online: business-reporter.co.uk

Ukraine IT start-ups ride wave of conflict

By Dave Baxter A FTER months of bloody conflict and high diplomatic tension, the future of Ukraine remains uncertain. But one group is hoping it could work to the benefit of one of the country’s most important industries.

The Support Ukraine group, which has been r unning since the start of April, is encouraging those keen to help the embattled nation in an unconventional way – by m a k i ng u s e of t he i r I T outsourcing services.

I h o r P i d r u c h n y, a n entrepreneur who founded the group, says it has involved businesses, politicians and academics, though it is not an “official” national scheme.

He believes that companies keen to help Ukraine could choose a “win-win” option by using the country’s services.

“I think it’s the most forceful way the developed world can collaborate with Ukraine,” he says. “It’s one thing when the government asks for some loan or grant, but there’s a m or e e c on om i c w a y to collaborate, which is a win-win situation.

“It [IT outsourcing] is quite important, because it’s one of a couple of industries that can ensure the economic success of Ukraine.

“We have an agricultural sector and metallurgy, but these are sectors that are in decline.

“IT is a global factor. We need to make sure it’s a major export for Ukraine. We have good engineers, but we have to leg i sl ate to si mpl i f y t he bureauc rac y a round establishing businesses.”

With Ukraine rocked by diplomatic uncertainty over r e ce nt mont h s, E a s te r n Europe has suf fered t he f i na nc ia l con sequence s.

Shares in Russian companies – particularly bigger names such as energy giant Gazprom – have tumbled.

Pidruchny, who runs his own IT company, Lezgro, believes that there has been some impact for his industry, particularly among larger clients.

“I heard that the bigger companies have had issues,” he says. “Their outlook is very risk-averse, so people will not want to do anything here.

“Also, the big companies have some plans for having the back-up teams in other countries.

“They did respond to that.

But as far as small companies are concerned there is industry growth. The question is how much they will grow.

“I spoke a month ago at an outsourcing forum. I asked the audience how many people would claim damages after the latest events, and only two out of about 200 people put their hands up.”

The group has gained some support so far. Pidruchny notes that he has received “some emails” with people offering their ideas.

He also hopes to develop more of a technology scene, citing Israel’s as a role model.

“I think Ukraine is the greatest hub,” he says. “It has a similar situation to Israel, where the internal market is very similar. It’s important for launching a globally oriented company.

“We will be working on start-ups, and encouraging

The Support Ukraine group is suggesting overseas firms outsource to Ukraine to aid the beleaguered nation’s economy

experienced people wanting to come to Ukraine to build products and giving them the opportunity to earn money by giving lectures.

“This programme might be in autumn this year or later.

Star t-ups are one of t he priorities.”

There is currently little certainty around Ukraine’s situation. The status of any peace deals and the actions of Russia, Ukraine itself and other nations embroiled in the crisis all remain hard to predict.

This could deal a blow to many of Ukraine’s industries,

as risk-averse investors and partners opt for countries with greater stability.

But Pidruchny is among those hoping to make the most of the country’s changes.

“We have a lot of feeling that things are changing for t he bet ter, w it h a more responsive government that is trying to care about the way of doing business in Ukraine,” he says.

“We are looking at the future with a great optimism a nd a possibi l it y where ever y b ody i s w i l l i ng to contribute something. We are very much open to that.”

With thanks to...

Publisher Bradley Scheffer...............................info@lyonsdown.co.uk Editor Daniel Evans.............................................dan@lyonsdown.co.uk Production Editor Dan Geary .................d.geary@lyonsdown.co.uk Reporters...........................................Dave Baxter and Joanne Frearson Client Manager Alexis Trinh........................alexis@lyonsdown.co.uk Project Manager Grant Scheffer.......g.scheffer@lyonsdown.co.uk

For more information contact us on 020 8349 4363 or email info@lyonsdown.co.uk

3

Business Reporter · May 2014

Outsourcing

ExpertInsight

ExpertInsight

4

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Find us online: business-reporter.co.uk

Follow us on twitter: @biznessreporter

A step-change in the outsourcing sector Collaboration, innovation and global business services INDUSTRY VIEW

W

hile companies looked to reduce costs, outsourcing was heralded as a way to do things cheaper and better with increased efficiency. As the outsourcing relationship between the client and supplier matures, so do clients’ expectations of that relationship. The trend is now towards collaboration, innovation and value creation.

EY’s Outsourcing in Europe survey notes that respondent’s top reasons for outsourcing are still primarily about cost reduction (42 per cent) and efficiency improvements (33 per cent). However, it also notes that, as an organisation matures through outsourcing, it begins to look for additional ways to create more value and drive the business, such as access to specialist tools and expertise.

Marek Sujecki, an IT advisory senior manager at EY, believes that outsourcing is already in a state of evolution as the industry looks to keep pace with client demands.

“Businesses at first are enticed to outsourcing, largely for cost reduction,” he says. “But after that, what’s next? Future outsourcing requirements are already changing as clients look to leverage the

specialist skills, the enabling technologies, or specific sector knowledge an outsourcing partner can bring.

It is now more about collaboration, partnership and value-add than just a straight cost-reduction exercise.”

Sujecki adds: “Outsourcers are realising this and responding. Rather than being a ‘jack of all trades’ as they often used to be, outsourcers are now providing deep sector or service knowledge; knowing this is what a client wants. For a client to realise this additional value, the next step for an organisation will be to defragment their services. Global business services and multi-functional services will become the norm, with integrated end-to-end services across the whole value chain and closer partnering with

Top four trends in the outsourcing market* 36% cloud computing

23% combined outsourcing of IT and business processes

21% big data

22% specialist knowledge

*Source: EY Outsourcing in Europe survey

outsourcers. Through collaboration, specific client value-adds – that are potentially core to the client – may well be developed. This is a mindset change to previously just non-core processes or activities being considered for outsourcing. Trust between the outsourcer and client is crucial for this to work.

Outsourcing is only limited by your imagination.”

Sujecki continues: “Future trends in EY’s Outsourcing in Europe survey tell us that enabling technologies will play a big part. Businesses are telling us that cloud and big data as enabling technologies will be significant for them. With cloud, businesses are essentially turning fixed costs into variable costs.

Using the front end without having to worry about the back end also lowers capital expenditure spend on server costs, maintenance, licensing costs, and so on. This now begins to open up more possibilities to the small and medium-sized enterprises who can start to leverage best of breed technology at much lower costs.”

Data analysis, he notes, will also play an important role across different industries. From retailers wanting to better understand successful product placement, to pharmaceutical companies looking to “slice and dice” global market data.

Sujecki says, “Access to data and data analysis will become market changing in so many ways.

Companies have access to terabytes of data and do not always know how to analyse it.”

This could open up exciting business opportunities. But it also means big changes – for outsourcers and their clients.

020 7951 7917 www.ey.com/outsourcingineurope

Why you should expect more from BPO INDUSTRY VIEW

B

usiness Process Outsourcing is one of those rare unsung yet essential industries. We work with household names all over the world, but many people have only the sketchiest idea of what it is that we do.

We’ve come a long way In the late 90s, BPO was pretty rudimentary. We moved back office functions to locations with lower labour costs and the exercise was often called “lift and shift”. Times have changed, though.

Organisations still want to save money and improve service levels, but some of the biggest BPO business benefits I’m seeing these days are driven by process transformation, supported by technology to deliver improved controls and business value.

Many experienced organisations now expect to move into a more dynamic partnering environment when they enter a BPO deal. But there are still plenty of

companies that see BPO as “lift and shift” – and they are missing out.

Why should you expect more?

Those who don’t realise how sophisticated BPO has become often start out on the wrong foot. They might, for instance, hand a bad process to a BPO provider – and then pay, unnecessarily, for external consultants to fix it. The legacy view of BPO also leads to choosing providers on cost alone. A mature BPO provider will help you understand and realise the wider business value that could be achieved.

Raising the bar Take, for example, all of the pressures that large organisations face around compliance, regulation, risk management and information security (typically bundled up as governance, risk and compliance).

There have been some high-profile failures where companies have struggled to keep track of all the moving parts.

The right BPO service could really change the game here. It would bring together world-class compliance processes with the right business experts and technology platform to take complete responsibility for compliance. There would be significant cost savings compared with

stitching processes together internally.

What’s more, the real business value would come from having an external partner monitoring and reporting in real time against the various business risks that could otherwise slip through the net.

This is close to my heart as an example of where BPO adds significant value. It’s a service that I helped to design two years ago and it’s already delivering beyond expectations for Capgemini’s clients.

An industry to be proud of There are plenty of other areas where BPO is delivering the kind of business outcomes that wouldn’t have been expected even a few years ago. Areas like tax-efficient accounting, increasing working capital or

developing analytics that change business strategy.

The industry’s growing sophistication and profile is increasingly attracting top talent, and there are incredible opportunities for a rewarding career within BPO. Maybe we’ve been a little too modest in the past. So, when we transform clients’ businesses with our expertise and insight, perhaps we should start shouting about it a little more. Modestly, of course.

Christopher Stancombe (far left) is the CEO of Capgemini’s BPO strategic business unit www.capgemini.com/bpo Twitter: @CJStancombe

Business Reporter · May 2014

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Outsourcing

Like us: www.facebook.com/biznessreporter Find us online: business-reporter.co.uk

5

Back to the source

As business priorities are changed by shifting economic climates, many companies are reshoring their operations closer to home. Dave Baxter reports

N

OTHING is certain, but the optimism in British industry is palpable. Jobs which moved abroad years ago may finally be coming home.

From soft ware production to call centres and manufacturing, there are hints that UK companies could “reshore” jobs back to Britain.

Manufacturing in particular is likely to be affected.

In March, manufacturers’ organisation the EEF released a survey showing that one in six companies had reshored production over the last three years, compared with one in seven in 2009.

It noted that companies had moved back from China and Eastern Europe in particular, citing concerns around product delivery and quality as the reasons for moving.

Madeleine Scott, a senior policy researcher at the EEF, believes the figures show where manufacturers’ priorities lie, as it becomes more important to make sure a product reaches its market quickly.

“I think it’s about companies and what they are competing on,” she says. “Manufacturers see the ability to respond to their customers quickly as extremely important.

“The price of the product is becoming less important and that has gone down the priorities. Quality is also a big aspect, particularly in the UK.” Nick Golding, of the Manufacturing Advisory Service, is equally optimistic about the prospect of reshoring. “It’s happening and it’s strong,” he says. “We do see this starting to happen. Some of the anecdotal evidence shows that the focus was largely around shortening lead time to market.

“There was also more flexibility for those based in the UK. And some of it is around British heritage and the idea of the ‘Made in Britain’ brand.”

Above: David Cameron tours the Sussex facility of VentAxia, which is engaged in a reshoring programme; below: Madeleine Scott of the EEF

With names including the Raspberry Pi Foundation and Hornby moving some work back to the UK, reshoring is gaining a higher profile.

In a speech earlier this year, Prime Minister David Cameron even talked of plans to turn Britain into a “reshore nation”.

But others are yet to be completely convinced.

Dr Jagjit Singh Srai, head of the Centre for International Manufacturing at the University of Cambridge, is working on data from the UK and other countries to decipher how solid the trend actually is.

While he believes firms are interested in, for example, ensuring short lead times, he is less optimistic than others that there is a definite move back to the UK. “Reshoring isn’t anything new or significant, which is an amazing statement when you read the popular press,” he says. “There’s a bit of a political agenda, and it’s what developed countries want to hear.

“The data’s really unclear, but anecdotal evidence says reshoring is now a very hot issue. Firms are talking about it and considering more carefully whether it’s good to be at home or offshore.”

Location, he argues, could now be something companies look at more closely than before.

“People who have had a good experience [of moving operations abroad] are those who have thought it through and understood the transitions required,” he says. “Many firms in the 90s and early 2000s will have offshored as part of a bandwagon effect.

“But people who have offshored have come up with the issues of long supply chains, extended lead time to customers and risks taken in terms of product quality and other issues.

“There have been transparency problems in supply chains, as with the horse meat scandal.”

One certainty, though, is that any reshoring would mean more work in the UK. As Golding notes, “It’s difficult to say to what extent it’s happening, but what reshoring does it create jobs.”

It could also have wider implications for sectors such as manufacturing. A sudden increase in manufacturing activity could, for example, lead to short-term issues around skills.

At the same time, it could cause the industry to up its game.

Scott says: “We have got a bit of a crunch around skills, and there may be a short-term skills gap.

“It would put pressure on the industry, but it might raise the profile of the issue and start building the appetite [to focus on skills].

“If we have more manufacturing in the UK, you would expect a virtuous circle of more investment, less reliance on imports and more capacity. This is what we need to rebalance the economy.”

Similarly, it could lead to a greater focus on highly skilled work in the UK, particularly in manufacturing.

Singh says: “Many products are increasingly less and less labour intensive, so to get to a country with low labour costs may have a big effect or may have no effect.

“The reshoring phenomenon should be bringing back highly skilled jobs – it’s not traditional manufacturing jobs.

“A number of reports have suggested that there are as many white collar jobs as non-white collar jobs. This means you will get a focus on high value in the UK.” With studies ongoing, there is little conclusive evidence that jobs are coming back home. But any that do return are likely to get a warm reception.

Business Reporter · May 2014

6

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Outstanding

Find us online: business-reporter.co.uk

Follow us on twitter: @biznessreporter

Report points to cautious SME uptake in outsourcing

By Dave Baxter

ExpertInsight

AS A WAY of cutting costs on big projects and operations, outsourcing is often associated with councils, governments and larger companies.

But one study claims that, in their own way, SMEs may also be getting in on the act. A report looking at employment trends over recent years argues that smaller companies are using outsourcing in certain forms – though it claims this is often done domestically rather than overseas.

An edition last year of the Open University Business School’s Quarterly Survey of Small Business looked at the issue of whether SMEs were hiring more, but also whether they were engaging in outsourcing. The results, while mixed, had positive elements. It found some were outsourcing, though many still were not.

Of the SME owners surveyed, 79 per cent said they did not contract out services or use any employed agency workers in the two years before being asked.

But larger SMEs were more likely to outsource. Only 14 per cent of firms with less than £100,000 turnover had tried outsourcing. In contrast, 33 per cent of firms with £5million or more in turnover,

had used outsourcing. The study also found that, unlike those organisations looking, for example, at low labour costs in the emerging markets, SMEs were most likely to do their outsourcing locally.

Of those who had used outsourcing, 82 per cent said contractors were based in the same city or region. Similarly, 21 per cent said they used contractors in another part of the UK, and only 5 per cent said they used contractors overseas.

Writing in the report, its editor Dr Richard Blundel notes that SMEs may have reservations when it comes to outsourcing, particularly around the issue of control.

This and other issues may keep some from using contractors – though innovations such as new technologies could make outsourcing much easier for smaller organisations.

Dr Blundel writes: “SME owners and managers have some difficult and important choices to make around employment and outsourcing. Our research has examined some of the isses they are grappling with as they make these decisions.

“For example, four factors seem to be especially important in deciding to keep activities in-house: the need to maintain managerial control over the activity; quality and reputation; organisational culture and staff commitment; and the need to protect proprietary knowledge.

“There’s a very complex mix of factors involved in these decisions and the case is likely to alter over time in response to changing circumstances. However, the scope for outsourcing of certain activities, including many ‘back office’ functions, is likely to increase in the future due to technological innovations such as cloud computing.”

IT service providers need to be more competitive, claims survey A STUDY on the outsourced IT industry suggests providers may have to up their game to keep customers satisfied.

Last year, KPMG studied how satisfied UK organisations were with outsourced IT service providers.

The survey, which looked at around 490 outsourcing contracts held by more than 200 organisations, argues that while customer satisfaction is high, scores have dropped from the previous year.

It notes that this may be because of the challenges which arise as IT services become more complex and difficult to manage.

It reads: “This year’s study respondents continued to express a relatively high level

of satisfaction with the service they are receiving from service providers.

“79 per cent stated they are satisfied (responding either ‘somewhat satisfied’, ‘satisfied’ or ‘very satisfied’).

“However, this represents a fall of 8 per cent from last year’s study and the majority of service providers evaluated experienced single-digit falls in ‘general satisfaction’ scores.

“Buyers who are otherwise confident managers of service providers are having to adapt to technological change and convergence, driven by the growth of the likes of cloud computing and Bring Your Own Device, which is causing these areas to become ever more complex.”

This time it’s personal: getting close to the customer Creating a great place to work is an absolute necessity INDUSTRY VIEW

T

here is more than one way of getting closer to the customer. Physical distance is important. There are good practical reasons why it’s better to be a two-hour flight away than on the other side of the planet. But once you’re close enough, other things become important.

Objectivity, which provides bespoke software development and support, is driven by four values which help it get as close as possible to the customer: focusing on people, integrity, excellence and agility.

Those in charge recognise that the way they do business cannot suit every possible customer. If the supplier and the client believe the same things, it will be much easier to achieve “win-win”.

This is Objectivity’s key philosophy, supported by the four values.

These four areas are among the first

that group MD Peter Brookes-Smith (inset below) will discuss with potential clients, and he does not swerve. By laying out how he drives the company, he knows some clients will walk away.

He believes that the companies who are attracted by the way Objectivity operates will get the best work out their people. He says: “A company that has no software product lives or dies by the quality of its people: all it has is smart employees solving critical business problems for clients.

Creating a great place to work isn’t some altruistic dream. It’s an absolute necessity.”

The values are also important, and these are made very clear to all applicants.

As Brookes-Smith notes: “The people who are like us, like us. When they join our business, it makes us even stronger.”

He believes his business cannot act with integrity by trying to appeal to everyone. By laying out the firm’s stall clearly to potential clients and employees, by not trying to be attractive to everyone, Objectivity’s staff believe they get closer to the customer.

“All of our delivery people have a master’s

degree and at least three years of commercial experience,” BrookesSmith says.

This is important for a number of reasons. Clients know they will be able to deliver excellence, and potential employees know that they will be working with really good colleagues and not spending their time supervising inexperienced people who still make naive mistakes.

“Building really experienced teams is just as important for our clients as our people,” Brookes-Smith says. “Our people are really motivated by solving tough business problems and they encourage their friends to come and join us. In fact, employee recommendation is the most

important method of recruitment with over 45 per cent of joiners coming by this route.”

Objectivity’s focus on agility – its fourth value – applies to its software solutions but also goes beyond this. The business operates using lean and agile principles inspired by the theory of constraints.

Being closer to the customer is always a good thing but Objectivity’s staff believe that physical distance is just one factor.

Making sure not just the current staff but clients and future employees are on the same page gives a firm the greatest chance of achieving its potential. jszmit@objectivity.co.uk www.objectivity.co.uk

Business Reporter · May 2014

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Outsourcing

Like us: www.facebook.com/biznessreporter facebook.com/business-reporter FindFind us online: us online: business-reporter.co.uk business-reporter.co.uk

Companies will benefit by farming out work to wealthier countries, say industry experts COMPANIES could benefit from abandoning places like China and outsourcing to wealthy countries instead, according to a new study.

A study carried out by the Tuborg Research Centre for Globalisation and Firms, at Aarhus University, found that Danish companies had enjoyed increased exports, productivity and product development after working with high-income countries.

The research, based on registry data from Statistics Denmark, looked at Danish firms in the manufacturing industry with outsourcing activities from 1995 to 2006.

It found that companies who chose to outsource to

high-income nations rather than, for example, parts of Asia, experienced productivity increases of 2 per cent, 20 per cent more export intensity and a 15 per cent boost in product development.

Associate professor Roger Bandick, who is heading the project, believes that outsourced projects develop differently in high-income countries compared with mid or low-level incomes.

A release accompanying the study notes: “The pattern is clear: if a Danish company moves its production from a low-income economy such as China, the company’s low-paid workers are gradually laid off.

“If, on the other hand, the company chooses to outsource to a high-income economy, it is the highly paid workers who are gradually made redundant.”

Bandick says: “The message is that [firms] will emerge from any outsourcing process in better financial shape if they make effective adjustments to the composition of their workforce – either before the outsourcing process gets underway or as soon as the need arises.

“Outsourcing is a complex area that crucially affects the competitiveness of Danish companies. Companies need free rein and scope for manoeuvre so they can fully exploit market opportunities.”

Major firms rebuild after outsourcing scandals

By Dave Baxter

SOME of the world’s biggest outsourcers are fighting for their reputations and finances after a series of scandals.

G4S and Serco, both international outsourcing fi rms, were embroiled in controversy last year after it emerged that they had been involved in charging the UK government too much for the electronic tagging of criminals.

The companies agreed to pay large sums to the Ministry of Justice as reimbursement for any overcharging and to cover any costs incurred when the government investigated the matter.

Late last year, the Serious Fraud Office was told to investigate whether the companies should face criminal charges.

A n equa l ly ser ious issue is reputational. G4S, which was heavily criticised for failing to provide enough security staff during the 2012 Olympic Games, gained some relief recently when a ban on it bidding for government contracts was lifted.

T he compa ny ’s C EO A sh ley Almanza said: “We are pleased that the government has given a positive assessment of the steps we have taken to rebuild their confidence in our services.

“As part of our overall programme to strengthen the governance, management and performance of our UK government business, we have consolidated central

government contracts into a single business unit under new leadership.

“Our UK renewal programme forms part of a wider programme of change to strengthen the governance and performance of the group as a whole and, while significant progress has been made, much remains to be done.”

More broadly, both the government and the major fi rms it outsources to were criticised in a recent report by the Public Accounts Committee, a powerful group of MPs. The publication, based on hearings with staff from Atos, Capita, G4S and Serco and a number of government departments, claims more must be done to ensure transparency when the government contracts out services.

The report notes the government spends £187million on goods and services with third parties each year, and states: “Government retains responsibility for ensuring value for money and we, on behalf of the taxpayer, need to be able to follow the taxpayers’ pound, wherever it is spent.”

It claims that, in the fi nancial year 2012/13, the four major suppliers held government contracts worth around £4billion. The report attacks both the government’s attempts to ensure value for money on behalf of taxpayers and the fact that a number of mishaps have damaged trust in the outsourcing industry.

G4S, criticised for its role in the 2012 Olympics, is under investigation by the Serious Fraud Office

It reads: “Government is clearly failing to manage performance across the board, and to achieve the best for citizens out of the contracts into which they have entered. Government needs a far more professional and skilled approach to managing contracts and contractors, and contractors need to demonstrate the high standards of ethics expected in the conduct of public business, and be more transparent about their performance and costs.

“The public’s trust in outsourcing has been undermined recently by the poor performance of G4S in supply security guards for the Olympics, Capita’s failure to deliver court translation services, issues with Atos’s work capability assessments, misreporting of out-ofhours GP services by Serco, and most recently, the astonishing news that G4S and Serco had overcharged for years on electronic tagging contracts.”

The report argues that a number of steps can be taken, from allowing Freedom of Information provisions to apply to public sector contracts, to making sure information around contractors’ performance is not measured in an overcomplicated way by government.

Some of the bigger names are attempting a commercial turnaround.

Serco’s new CEO Rupert Soames only took up his post at the start of this month, but will quickly have to get to grips with a firm that has been issuing profit warnings. His fi rst day in the job saw him detail plans to raise £170million in new funds by issuing extra shares.

And G4S boss Almanza, who has been in his job for less than a year, is also on a mission to improve the giant’s stretched balance sheets. In September, he announced plans for £250million of asset disposals and a £348million share placing.

7

Outsourcing Adviser.com: the Wikipedia of outsourcing INDUSTRY VIEW Today, SME (Small and Medium Enterprise) outsourcing is a multibillion dollar industry. The irony is that there is a lack of authentic information on outsourcing, on the internet or elsewhere. What there is is rudimentary at best and most of it from the client’s perspective.

Incorrect information or just the lack of it, and biased feedback, means SMEs are often outsourcing in the dark. The result? SMEs have a huge fail rate when they outsource and the ones that do succeed often do so through trial and error.

But it doesn’t have to be like this; all SMEs can leverage the enormous benefits of outsourcing – if they know how to outsource.

Outsourcingadviser.com is a newly launched website that seeks to fill this vacuum of knowledge. Founded by Shaunvir Mahil, an industry expert and the MD of VirtualEmployee.com, a leading remote staffing company that has worked with more than 750 companies, the website aims to be the foremost guide on outsourcing.

What is unique about the site is that it strives to remain impartial and not indirectly promotional. And instead of projecting customer experience, this site will also give viewers a first-hand insight from the other side of the fence – from the perspective of an outsourcing company.

Among many other things, readers will learn: • How to differentiate between a rogue and reputed outsourcing company • What are the different outsourcing business models, and which fits your needs • Why outsourcing can be much more than just a cost saving strategy If you are considering outsourcing, check out OutsourcingAdviser.com for an A-Z guide on outsourcing. www.outsourcingadviser. com

Business Reporter · May 2014

8

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Outsourcing

Find us online: business-reporter.co.uk

Follow us on twitter: @biznessreporter

Among the increasingly time-poor and cash-rich, personal outsourcing seems to be becoming a viable – and more acceptable – solution to the changing pace of life

By Dave Baxter

I

T BEGAN with a newspaper article and a pack of Marks & Spencer underpants. But nearly a decade later, John-Paul Flintoff has joined the personal outsourcing revolution.

Flintoff, a journalist and author, is among the growing number of people who use ”personal outsourcing” – where companies and individuals are paid to carry out tasks – as a way of decluttering their busy lives.

Flintoff first encountered personal outsourcing in 2005, when he looked for the most unusual tasks to outsource for a newspaper article.

This started with some fairly standard chores. Flintoff asked Asha Sarella, an agent working with Bangalore-based service Get Friday, to buy cricket match tickets and book the venue for his daughter’s birthday party.

This moved on to research about where to find cheap handmade shirts and fi nding a place to get a health check. Then came the underwear.

“I tested them on a variety of things because it was

absolutely stupid,” he says. “Working as a journalist, I would come up with something for the sake of a story for the request.

“I asked Asha to buy me some underpants from M&S, and only with hindsight did I realise that was slightly humiliating to do.”

Flintoff covered his experiences in a book as well as the article. But it wasn’t until last year that he came back to the idea of using personal assistance – this time as part of his everyday life.

“Last year, I started to expand into lots of types of work that are not related to journalism, and I do have an awful lot on my plate,” he says. “I never had that help as a journalist – I’m a lone wolf.”

He began using different helpers in the UK to deal with his expanded workload, which now included coaching and public speaking. But as these engagements ran out, Flintoff found himself turning back to his old assistant.

“I found myself saying to someone, ‘I need someone like Asha’. It’s a closed loop story,” he says.

Flintoff is part of a wider story. From Ta sk rabbit , wher e individuals offer to carry out errands for a price, to Quintessentially,

which offers ‘luxury lifestyle concierge’ services such as booking seats at an upmarket restaurant, the ways to outsource one’s life are numerous.

Alex Cheatle set up Ten, another ‘lifestyle concierge’, in the late 90s with his brother, and is upbeat about the industry’s progress. “We have grown every year through the financial crisis,” he says. “People come to us either as private members or because their bank has provided the service to them.

“People come to us to save time, to use our expertise or to save money.”

Cheatle argues that while personal outsourcing may once have been seen as a frivolous luxury, firms like his are making the case that it can be cheaper to use their services than carry out a task alone.

“People will ask you to organise their holiday, and our organiser will have visited the specific region before and know the hoteliers,” he says. “They can find the best deals and advise on the best things to do, where to hang out before moving into your hotel room and so on.

Business Reporter · May 2014

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Outsourcing

Find us online: business-reporter.co.uk

ExpertInsight

Like us: www.facebook.com/biznessreporter

9

Northern Ireland: close and competitive for business services The UK option which provides the best of both worlds INDUSTRY VIEW

N “It’s the same with big tours. When Adele announces a tour, our members will want lots of tickets. We know where and when to buy at retail price.

“I think it has become more culturally accepted for busy people who are affluent to outsource. It has become normalised.”

He also believes personal outsourcing is becoming more convenient, as new technology makes contact across distances much easier to sustain. “ Tec h nolog y ma kes a massive difference,” he says. “Partly and very importantly, it allows our members to stay in contact with us, whether it’s by phone, by text, or instant messaing.

“We also use technology to integrate with our suppliers to get that service.

And for our customers, so much stuff is done by mobile. It has gone ballistic.”

O ne of t he m ajor appeals of personal outsourcing is that it ca n l iberate individuals from some of the burdens of their lives.

Flintoff notes that outsourcing tasks has made a “huge” difference to his life.

But there may be downsides. Flintoff, for example, finds that getting the most out of personal outsourcing becomes a task in itself. “I wanted Asha to be a second me and need no oversight,” he says. “Asha has been delightfully patient. That in itself is lovely. But it’s not always necessarily what you want.”

Flintoff says that working together in an effective way – whether this is using systems such as Basecamp or communicating with Skype because he likes to see people when he talks to them – depends greatly on the relationship.

Technology is making a big difference, and not just in the way that people communicate about errands.

Evan Selinger, a professor at the Rochester Institute of Technology,

John-Paul Flintoff started outsourcing his life as part of an article – and hasn’t looked back

believes that apps and other forms of technology are providing individuals with new ways of outsourcing tasks and responsibilities.

“One way to make things easier is to reduce the amount of effort – physical or mental – that’s required for accomplishing a task,” he says.

“Processes need to be delegated to technology.

This transfer of labour is a for m of outsourcing, and a major goal of outsou rc i ng is enhanced efficiency.”

The examples are wide-ranging.

Selinger believes that Siri, for example, performs “the work of a basic assistant”, while Facebook recommends potential friends, Amazon suggests wise purchases

and fitness apps help people to exercise effectively.

But he warns that relying too heavily on apps could have dark consequences. On the one hand, he believes outsourcing too many responsibilities could mean “giving up on developing classic virtues like discipline and self-control”.

A nd he a lso fe a r s t h at , b y relying on tools such as recommendations, people could be giving up “crucial opportunities to think for yourself and exercise independent judgement”.

With new technologies and a range of different companies rushing to help us, outsourcing life’s burdens is easier and seen as more acceptable as before. But giving up life’s obligations could bring its own responsibilities, as well as risks.

orthern Ireland is proving that close to home is competitive for knowledgeintensive business services operations, delivering high-value solutions provided by educated people in a cost-effective manner.

Because the expertise, experience and resources on offer are so extensive, companies such as Allen & Overy, the Allstate Corp, Deloitte, Citi and Mercer easily find the ideal fit, get up and running quickly and, crucially, do it all within the UK. Northern Ireland also enjoys costs among the most attractive in the western world. Operating costs in Belfast are up to 40 per cent lower than other UK locations, property averages around £12.50/sq ft and, considering the calibre of the workforce and low turnover, salaries are modest.

The business services portfolio encompasses accountancy and finance, legal services, human resources, IT, marketing, design and advertising and customer care. Clusters of excellence and innovation have developed around asset management, data analytics, software development, security and capital markets.

Multinationals are choosing Northern Ireland for a wide variety of services – for example, PwC employs 800 staff and has global centres of excellence in technology, forensic services and training. Its International Survey Unit in Northern Ireland produces the annual Global CEO Survey for the World Economic Forum.

The availability of the right people is key to setting up quickly and expanding easily. The region is an educational high-flyer, with GCSE and A-level results outclassing the rest of the UK and its two universities producing almost 7,000 graduates annually in business-relevant disciplines.

Firms that once considered venturing further afield are exploring nearshore options, taking a closer look at Northern Ireland and liking what they see. Bro McFerran, MD of Allstate Northern Ireland, says: “Northern Ireland has the best combination of talent, cultural alignment, work ethic attitude and cost to be found anywhere.” investni.com/invest

Business Reporter · May 2014

Outsourcing

ExpertInsight

10

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Find us online: business-reporter.co.uk

Follow us on twitter: @biznessreporter

Ukraine: the brain basket of Europe How Ukraine can offer specialist services to firms interested in expanding their IT operations INDUSTRY VIEW

T

he spotlight has focused on Ukraine in recent months, with the country fighting to overcome the unrest making both investors and the diplomatic community uneasy.

The situation, while challenging and unresolved, is unlikely to diminish Ukraine’s bright future as a strong economy and the powerhouse of Europe’s IT industry.

The Ukrainian IT sector is expected to have total revenue of more than $10billion by 2020, and to become the country’s top exporting industry by 2024. This is down to a number of factors. Ukraine has lower wage rates than western Europe, as well as IT talent that can be used to meet demand abroad, and a location near to customers in the UK. A number of initiatives are also working to build up this skill set.

The Brain Basket Foundation, for example, is bringing together politicians and entrepreneurs to raise funds for IT education, with the aim of training 100,000 new software engineers by 2020.

There are good reasons for Ukraine’s attraction as a near-shoring destination for software development. “Ukraine is a unique country for this,” says Torben Majgaard (below), one of the organisation’s backers. “When things go wrong in outsourcing it is usually to do with culture.

The cultural difference between the UK and Ukraine is not big. It’s a very British and northernEuropean mentality, and the work discipline is very strong.” The time zone is another advantage, he says, with Ukrainians tending to work late, meaning they operate similar hours to the UK and other European markets.

The Ukrainian market also has the added benefits of lower wage rates than many surrounding economies, and a highly skilled talent pool. “You don’t find that anywhere else,” says Majgaard. “You have some quality people in Belarus, but it’s a smaller talent pool. Russia also has a good talent pool, but they have huge internal demand. If you go inside the EU, to Romania or Poland, the cost goes up by £1,000 per person per month and there is no country with the size of the talent pool we have.

“We have come up with a new slogan, ‘the brain basket of Europe’, instead of the bread basket.”

Majgaard’s own business is a case in point, having established itself as one of the largest operators in the software development sector,

despite having only been in existence for 12 years.

“We don’t see ourselves as outsourcers,” he says.

“We see ourselves as facilities managers and partners for customers who wish to establish a presence here in Ukraine.”

The business helps with all aspects of starting up, he says, including facilities and recruitment, where it offers a unique model, although legally staff are employed by Ciklum and the customer is simply invoiced from inside the EU. “We go to the labour market on behalf of customers and we then interview and present candidates to the customer,” he says. “So the customers choose the employees rather than being assigned them from a pool, but what is even better is that the employees choose the customer. Here is an employee who has left their job somewhere to come and work for this customer.”

This relationship also means Ciklum cannot raise the salary of employees without the authorisation of the customer, Majgaard adds, and encourages a direct relationship where employees are willing to go the extra mile for customers in a way that would not happen in a traditional outsourced model.

“There are elements here which create a high level of loyalty directly between the employee and the customer,” he says. “So if there is a need to work Friday night, they will do it for you. We sit on the sideline of everything and take responsibility for guiding the customer, as well as coaching, training and ensuring productivity and communication.”

The company’s business model also reflects this arrangement with customers. “We don’t invoice a customer at a price per hour, per month or even per project,” says Mr Majgaard. “We invoice the customer at the actual salary that is being paid to the employee and then we invoice a fixed fee on top of that. If it were a percentage, we would have an interest in the customer hiring expensive staff and

awarding big salary increases. We need to be independent advisers for the customer.”

To this aim, Ciklum started its own consulting service in 2007, born out of introducing customers to learn from each other’s experiences. A core part of this is advising around agile working – a method of software programming where customers and developers work together to develop programmes, rather than customers creating a specific brief and asking developers to go off and design a package.

“Often if there are problems, it’s not that the programmers wrong-code, it’s that they just code what the customer wanted,” says Majgaard. “The more modern way is that you develop the idea and the planning while you’re programming, so you do these things in parallel.” The company is already training programmers in organisations in the UK, Sweden and Switzerland, he adds, and has recently become the first company in Europe approved to certificate agile trainers.

It is this kind of innovation, as well as the other advantages such as culture, time zone, quality and availability of staff, which Mr Majgaard believes makes Ukraine a strong proposition for organisations looking for software development support, and why he believes the Ukrainian economy will ultimately flourish.

“Ukraine will become the powerhouse of Europe for IT, if it’s not already,” he says. “With 100,000 new programmers coming in over the next six years and a very small domestic demand, there will be a huge amount of resources for any UK-based companies.

Even though there has been all this trouble, in the first quarter of this year we have added more than 100 to our headcount here and we will grow by an additional 600 this year. I’m very confident about Ukraine and the business.” +38 (0)44 545 7745 www.ciklum.com

Business Reporter · May 2014

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Like us: www.facebook.com/biznessreporter

Inspector Dogberry While Dogberry is no fan of unnecessary jargon, he understands the need for proper terminology.

When it comes to outsourcing, a term which has a number of different interpretations, this is rather important.

“Reshoring”, for example, is usually used to describe when a

business operation is returned from abroad to its country of origin. So far, so good. But what, then, does “insourcing” mean?

It is, simply, the decision to use one’s own staff and resources to run a business operation.

Whether this is a widespread or growing practice is uncertain.

But Dogberry was interested to see the London Metal Exchange (LME) welcome its previously outsourced technology team inhouse at the start of this month.

Garry Jones, the LME CEO, described the move as “an indication not only of the growth of the busi-

Batman fans like Dogberry are well acquainted with Gotham City. This is the gritty metropolis which hero Bruce Wayne fights, by day but mostly by night, to protect from nefarious villains.

And like many others, the Inspector was somewhat taken aback to see the same name cause a few waves in the outsourcing world last month, when markets were surprised to see shares in Quindell Portfolio, an Aim-listed legal outsourcing company, suddenly plummet in value one afternoon..

The reason? A Twitter account, enigmatically called Gotham City Research, had tweeted the link to a scathing report dissecting the company’s progress. Quindell managed to regain lost ground by branding the claims “highly defamatory”. But the incident could make outsourcers slightly wary of attacks online.

ness over the last few years, but of our future development as we strengthen and enhance our technology offering”.

The new technology team could be closely watched by some.

As innovations make outsourcing easier and more widespread, particularly in IT, will they fare better in-house? Is this the start of something bigger?

Dogberry is not sure. But, if in-house work proves easier to be consistent and stay in control, more people may have to grab a dictionary and look up the word “inshoring”.

As technology becomes more sophisticated, cashstrapped areas such as healthcare could offer big opportunities for the outsourcing industry.

Exlservice Holdings, an IT outsourcing vendor, recently pointed to healthcare and other areas when explaining its positive financial results for the first quarter.

Rohit Kapoor, the firm’s CEO, praised “industry verticals” including life insurance, healthcare and banking.

With healthcare and other industries looking to cut already high costs, they may see IT outsourcing as part of the solution, with technologies like cloud computing appearing to offer a more cost-effective way of handling certain organisational functions.

While outsourcing can prove a good way to cut costs, add flexibility to business operations or even boost efficiency, there are some areas where it may SELL, SELL, prove controversial.

SELL! The Department for Education may soon see what people are willing to outsource. It recently launched a consultation on “proposed regulations that will enable local authorities to delegate additional children’s social care functions to third-party providers”.

The consultation, which closes at the end of May, aims to get views from the likes of councils and their representative bodies, organisations such as adoption agencies, social workers and children in care. The plans could prove highly popular, but they could also provoke something of a backlash.

11

By Matt Smith, web editor

u Editor’s pick The Outsourcing Blog www.theoutsourceblog.com As the name suggests, this site covers all things outsourcing, from the best nations to which to send work to the effects of the reduced workload back at home. The blog also serves as an outsourcing and offshoring community for the exchange of ideas and discussion of issues facing industry professionals.

National Outsourcing Association

How far does outsourcing go?

Twitter: @dogberryTweets

ExpertInsight

Outsourcing

Find us online: business-reporter.co.uk

Forrester Outsourcing

www.noa.co.uk/blog

blogs.forrester.com/category/ outsourcing

The UK’s National Outsourcing Association’s blog features posts from prominent members, including a weekly contribution from CEO Kerry Hallard. Her articles tackle key issues facing the nation’s outsourcers, including developments in policy and technology and international events affecting offshoring and nearshoring.

Read the thoughts of Forrester experts on outsourcing news on the market research specialist’s blog. Articles cover everything from moving IT services out to an external company to outsourcing customer service to free up internal resources, with archives stretching all the way back to March 2010 to explore.

Experiments in Lifestyle Design fourhourworkweek.com/ outsourcing-life

Quintessentially (FREE – Android)

Outsource Translation (£0.69 – iOS)

Outsource your life tasks with this luxury concierge service, which assists with everything from gig tickets to dinner invitations.

If your business needs text translated into other languages, this app can find translators you can outsource the work to.

This blog documents the experimentation of Tim Ferriss, who tried outsourcing his life to reduce his workload to four hours per week while still making money. Some of the outsourcingrelated posts are a little dated, but the articles are still thoughtprovoking and could inspire you to change your own lifestyle.

Don’t operate in a vacuum – get informed Clear evidence that external expertise can help you make sourcing decisions INDUSTRY VIEW

W

ith all the talk of staying put, reshoring and a reduction in the migration of services to offshore locations, you might think that outsourcing is at somewhat of a crossroads.

For almost 20 years NelsonHall has been tracking the outsourcing market globally. In that time, we have seen outsourcing develop, grow, mature and consolidate.

By continually talking directly to both the suppliers and their customers, we understand what works and what doesn’t and what you should expect over the lifetime of an outsourced contract. The reality rather than the hype.

This is a complex market where getting to a sourcing decision can be a difficult task and having the very latest

vendor and market information can be crucial to your decision making. For example, our last BPO Index (published in April 2014) identified around 30 mergers and acquisitions in the business process outsourcing market in Q1 2014 alone. Where does that leave those firms who were considering being contracted to those providers?

You shouldn’t expect to wade through it alone.

There’s clear evidence that external expertise can help you to take the pain, time and cost out of sourcing decisions. In a recent NelsonHall survey of 26 international organisations, they told us that access to the right research could save them 51 per cent of the time and cost of managing a contract over its life-cycle.

(See NelsonHall’s section on page 14 for more details on this research.)

The breadth of offerings and sheer number of vendors in outsourcing is such that getting well informed is not always easy. To get you started and help stop you operating in a vacuum, we’ve made our vendor assessment tool (NEAT) free to potential outsourcers.

While outsourcing remains very active, it will inevitably take on new shapes and guises. Is it at a crossroads? As ever, it depends on your perspective, and our insight.

Robert.Dagge@nelson-hall.com http://research.nelson-hall.com/Telegraph

Business Reporter · May 2014

12

Outsourcing

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Find us online: business-reporter.co.uk

Follow us on twitter: @biznessreporter

Are large-scale outsourcing outfits becoming too big to fail? A new FCA report points to an all-toofamiliar danger. By Dave Baxter

T

HE INTERNATIONAL fi nancial crisis which u n folde d i n 20 07 warned us that, if certain financial institutions ffell, ell, they could bring large parts of the economy down with them. With concerns that some banks and other organisations had become ‘too big to fail’, huge efforts were made to stop them going down in a disruptive way.

There are now debates about whether certain outsourcing providers could pose a similar threat.

Industry watchdog the Financial Conduct Authority (FCA) contacted CEOs in late 2012 and released a report late last year, looking at the asset management sector and its use of outsourcing.

The FCA expressed concern, both in the letter to CEOs and the report, that the asset management industry could be putting itself at risk by outsourcing too many of its important functions and lacking a reliable contingency plan. The watchdog worried that, were an outsourcer

responsible for many of these functions to collapse, this could have a huge knock-on effect on the asset management sector.

The report reads: “The asset management industry outsources a growing number of critical activities to a small number of service providers that are usually part of complex international banking groups.

“This has resulted in the asset management industry becoming highly dependent on service providers that, at a group level, will have exposure to activities other than the provision of outsourcing services.

“Asset managers consider outsourcing beneficial for various reasons, but alongside these benefits, outsourcing brings additional risks.

“We carried out the review because we were uncertain whether asset managers generally were effectively managing the risks associated with outsourcing to ensure that customers are not adversely affected.”

The FCA noted that in 2012, a group of asset managers had described

Business Reporter · May 2014

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Like us: www.facebook.com/biznessreporter

Outsourcing

Find us online: business-reporter.co.uk

13

Business W rld Egypt

ExpertInsight

their contingency plans for the possibility that an outsourced service provider could collapse. But the FCA was critical of whether these plans were realistic.

It noted, for example: “The vast majority of asset managers within the sample told us they would move from the failed incumbent to another service provider. However, due to the long, complex process involved in moving service providers, together with the concentration risk in the provider market place, this cannot happen at short notice and be completed quickly.

“These asset managers had not given adequate consideration to how they would continue to service their customers while the transfer was taking place.” Other contingency plans mentioned included asset managers taking over the outsourced activity themselves or handing the work to an in-house team. But the FCA was critical of both of these options.

The report also acknowledged that some asset managers viewed their

service providers as “too big to fail”.

It reads: “Some of the asset managers said they were comfortable with not having a contingency plan in place at all, because their service providers are part of systemically important banking groups that are too big to fail and therefore the respective governments would bail them out.”

Since then, the situation may have improved. The FCA has praised the industry for being receptive to its concerns, but warned that asset managers should enhance their contingency plans and look into how effective they are at overseeing critical activities which have been outsourced.

The watchdog also asked the Outsourcing Working Group (OWG), a body made up of experts from 24 organisations including the Investment Management Association, outsourcing service providers, accountancy fi rms and asset managers, to look into how the industry could do this.

In a report released at the end of last year, the OWG sets out a number of guidelines it believes asset

managers should follow. It instructs them to have “appropriate in-house knowledge and expertise” of any outsourced activities, tells asset managers to “know your outsourcer”, and calls for the industry to standardise its documents and terminology.

It also calls for asset managers to develop an “exit plan” for when a firm changes service provider. But the report warns that these tips will not be a panacea for the risks of outsourcing important functions.

“Asset managers should understand that there is no prescriptive approach to oversight,” it reads. “To establish an effective oversight model for outsourced functions, firms should apply the following key principles in line with the scale, scope, complexity and nature of their business model.”

If the industry reacts and changes are put in place, there is hope that asset managers will be less exposed to the collapse of an outsourcing giant. Whether these are “too big to fail” would only become clear in another crisis.

Analytics that deliver a competitive edge Designing the right messaging for the right channels at the right time INDUSTRY VIEW

T

oday’s consumers are bombarded by information across an everincreasing number of channels such as web, text, TV, social media and email. This plethora of communications and information channels creates a challenge for companies to reach their target audiences and influence their behaviour.

The key to reaching existing and potential customers in this new environment is to understand customers’ behaviour and what influences them, and when and where they are most receptive to influence. These deep customer insights, or customer intelligence (CI), can help companies design the right messaging for the right channels at the right time, giving their message the greatest possible impact and influence.

This analysis of an actual conversation between a customer and a customer service agent can provide valuable

insights about a customer’s true intent.

The problem is that the raw customer data is mostly stored in a variety of corporate repositories including customer relationship management (CRM) systems and sales systems, as well as the wealth of data that comes into the contact centre. Some 80 per cent of this data is unstructured and is therefore difficult to turn into any actionable insights.

This is why Firstsource recently launched First Customer Intelligence (FCI), a solution that measures customer sentiment, emotions and behaviour across an omni-channel environment. It has proven to be one of Firstsource’s most popular solutions, as it reaches across multiple communications channels and provides clients with actionable insights to improve the customer experience, reduce cost-to-serve and improve sales.

For example, Firstsource’s own data shows that analysis of more than 60,000 web chat sessions generated insights that could improve web chat sales by 7 to 8 per

A renewed appetite for outsourcing could pay off in Egypt, according to a business school.

A recent post on the Oxford Business School website, “Egypt builds upon its outsourcing growth”, argues that the country has kept its costs low and its quality of services high, which could bring rewards if Europe turns to more outsourcing.

The post reads: “If demand continues to strengthen in the EU alongside more robust growth in the US and the Arab world, Egypt’s attractive fundamentals as a BPO destination, including its cost competitiveness and skill set, should help the country see a jump in both employment and activity over the medium term.”

Europe, Middle East & Africa

The value of outsourcing work in the Europe, Middle East and Africa (EMEA) has reached its fastest level of growth in four years, according to a recent study.

The annual contract value across the region for the first quarter of 2014 rose by 29 per cent compared to a year before, coming to a total of €2.4billion. The Information Services Group (ISG), which carried out the research, puts the increase in part down to a revival of large deals.

John Keppel, president of ISG North Europe, says: “The EMEA

cent for one of the UK’s largest mobile services providers. They also achieved a £1.3million annual saving for a leading pay TV provider by improving the customer journey across key channels, including voice, email and webchat.

Firstsource believes it is these real and actionable insights that helped First Customer Intelligence win Frost and Sullivan’s 2013 North American New Product Innovation Award in Contact Center Outsourcing.

First Customer Intelligence can also be deployed for product launches, test campaigns and market hypothesis, as well as customer profiling through analysis of

market has had a strong start in 2014.

Activity levels in region remain high and the return of mega-relationship awards in the quarter boosted the market values.

“Although these larger contracts have a strong role to play in the market, the smaller deal size brackets will continue to grow more sharply as enterprises opt for flexibility and more specialised services from a greater number of providers.”

Saudi Arabia

Saudi Arabia could change how a local industry works with an allfemale centre for outsourcing.

The all-female business process services centre, which launched in September, aims to create up to 3,000 jobs for Saudi women and localise a promising industry for the region.

The centre, based in the city of Riyadh, is backed by Saudi Aramco, General Electric (GE) and Tata Consultancy Services.

Tata Group chairman Cyrus Mistry said: “The Tata Group has a long history of encouraging women to achieve their potential and contribute to the community, and we are delighted to work with Saudi Aramco and GE to help provide careers for women in the kingdom and enable them t o c o ntr ib ut e t o it s economic progress.”

trigger-based measurement processes.

Smart businesses will now want a customer care partner that has a 360-degree view of the customer in order to bring together different forms of analytics from across the organisation to derive actionable insights, and leverage them for competitive advantage. This is because huge numbers of customer engagement and retention decisions must be made, and made quickly, to attract and retain the right customers at the right price.

The deep customer insights offered by FCI analysis can help businesses make the right choice time and time again, leading to the reduced costs, increased profit, and better customer retention figures that are crucial in such a hypercompetitive market. marketing @firstsource.com www.firstsource.com

Business Reporter · May 2014

Outsourcing – Industry view

Business Zone

14

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Find us online: business-reporter.co.uk

Follow us on twitter: @biznessreporter

The future

Getting real with robotics I n the past year alone, Robotic Process Automation, or RPA, has flooded media outlets – coined by many as the next shape-shifter of the SS&O industry. Neither a macro code nor a piece of automated software, at its most elemental RPA is about transactional or rules-based processes being managed by a virtual robot that engages with applications through your screen’s interface.

The attention paid to this cognitive capability (and vision) mimics the splash that followed multi-function, big data, and global business services, when they were first popularised five to ten years ago.

As exciting as preliminary results are of RPA’s potential impact on SSOs, its long-term viability and widespread acceptance are still tentative. And while we wait for this next big thing to – well, happen – it is key to take a step back and pay attention to the priorities that SS&O executives are facing now.

According to SSON’s annual State of the Shared Services Industry report, it’s no surprise that talent, technology and efficiency are top of everyone’s list.

Here are five priorities as listed by SSON members globally: 1. 56 per cent say automation for efficiency is their top technology priority, this choice coming ahead of both Data Mining and Analysis (37 per cent) as well as Social Media, Mobile, Analytics and Cloud (26 per cent) 2. 58 per cent of SSOs are moving towards knowledge-based employee teams. This meshes well with the overall trend of offshoring (if not outsourcing) of transactional work and an increased focus on customer-centric, value-add,

knowledge-oriented analytical services.

3. Shared services organisations spend only 1 to 3 per cent of their total budget on training. This shift in skillset will require appropriate training for a predominantly transactional-oriented workforce, calling for a carefully architected change-management plan.

4. 59 per cent characterise future plans for their SSO as being a state of growth. Expansion is expected to come from increasing services scope, supporting new regions or ownership of additional end-to-end processes.

5. 49 per cent of SSOs incorporate

process excellence into employee performance objectives and measures.

An overview of the report’s findings will be shared live by Rochelle Hood, Global Head of Communities and Processes, SSON at the 14th Annual European Shared Services & Outsourcing Week, taking place this week at the Convention Centre, Dublin, Ireland. A full and complimentary copy of the 50-page report is available on www.ssoweek.com and on www. ssonetwork.com.

Kim.vigilia@ssonetwork.com www.ssonetwork.com

In focus: Taking pain

and cost out of a decision

Tom Robbins, Author

“

I’ve decided to take advantage of outsourcing. My next novel will be written by a couple of guys in Bangalore, India

T

here’s something about making sourcing decisions. It just isn’t easy. Even if it isn’t your first, it’s likely to be in a different area to before, or a different process, or a different geography, or a deliberate decision to choose a different provider. While there are similarities between sourcing projects, the differences are what cause the challenges.

Then there’s your own organisation and its decisionmaking process to get through – stakeholder management, the business case, the project team, the IT team, the executive committee. The internal

process. “Do nothing” starts to become an attractive option.

Often overlooked at this stage is the value of independent, objective advice.

Yet the results can be startling.

A recent NelsonHall survey of 26 international organisations identified the proportion of sourcing decision time and cost that could be saved with reliable vendor and market information as: • Identification of peer group use of outsourcing – 51 per cent estimated saving • Identification of benefits achieved by other organisations – 50 per cent

• Identification of supplier capability – 72 per cent • Vendor and outsourcing risk assessment – 56 per cent • Sending and processing requests for information – 19 per cent • Developing a shortlist of potential suppliers – 75 per cent • Developing RFP – 30 per cent • Negotiation and supplier selection – 36 per cent • Lastly (importantly), ongoing monitoring of vendors used – 59 per cent. This means the value continues over the contract’s life-cycle.

Consider what effect these levels of savings in time and effort could do for the dynamics of your own sourcing projects.

In many cases, it could be the difference between doing nothing and achieving something. +44 (0)20 3714 3923 Robert.Dagge @nelson-hall.com

Outsourcing is a choice career with huge and diverse opportunities INDUSTRY VIEW One of the most positive trends for outsourcing is the view that specialist partners can contribute much more than cost savings. Of course, buyers still want it cheaper than they can do it themselves, but they want their investments to deliver more value than ever before. Buyers are now outsourcing for access to stronger skills, process improvements, new technologies, as well as cost savings, to give them an edge over their competition.

For this reason skills are the number one issue in outsourcing today and at the NOA we are seeing this desire to up-skill and offer career progression coming strongly from both buyers and suppliers. Buyers now understand that they can get so much more value from their partners if proactive relationship management is at the fore.

This is more than tools and training on how to govern outsourcing arrangements to best effect, but also how to motivate the supplier’s people to deliver above and beyond.

With shorter term contacts and increasing competition, suppliers need to be ahead of the game and with clear differentiation – qualified, motivated people are the answer. Developing clear career paths that give practitioners at all levels a collective feeling of pride and belonging is key to success – for both themselves and the reputation and growth of the industry overall.

Outsourcing is no longer an accidental profession. It’s a choice career with huge and diverse opportunities.

Qualifications in outsourcing are driving this.

Kerry Hallard is CEO, NOA +44 (0)20 7292 8686 www.noa.co.uk

Business Reporter · May 2014

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

Like us: www.facebook.com/biznessreporter

Outsourcing – Industry view

Find us online: business-reporter.co.uk

15

The debate

Is outsourcing just about cutting costs?

Derwyn Jones Chief executive Parseq

Mary Brandon VP global marketing SoftServe Inc

Susie West CEO sharedserviceslink

Mario Spanicciati Executive director of EMEA and EVP of Operations, BlackLine Systems

No! A CIO once said: “People go to India for the price and stay for the quality.” I think that is too simplistic.

Contrary to a small number of high-profile negative outsourcing news articles, there are many benefits of outsourcing, including: flexibility of resourcing, resource capability and capacity, time to market, risk reduction, service and product standardisation, access to best practice, transformation, improved quality and yes, cost reduction too. Another factor is that, while critical, IT is not often a core business activity, therefore as service offerings change, at the pace they do, outsourcing becomes an attractive means of staying in the game.

Outsourcing can be successful, if scoped, sourced and implemented correctly. However, success is not guaranteed. The starting point can be found on page one of my old outsourcing manual, which states we must understand our drivers for outsourcing, otherwise benefits defined in the business case may not realised – this still holds true today.

Outsourcing is not about cutting costs and it’s a mistake to think businesses that outsource do so on the basis of cost alone. It’s about balancing a number of things: expertise, access to skills, scalability, service delivery and flexibility along with value for money.

Outsourcers are specialists at providing a particular service or function, like accounts receivable, payment services or call centre support.

This means they have the scale and skills to do it better than an in-house equivalent, so businesses that choose to outsource increase their capability without having to invest in people and processes.

It also provides access to a flexible workforce that can maintain service delivery through peaks and troughs in a way which would be difficult to manage internally without adding significant fixed costs to the business.

And outsourcing enables businesses to concentrate resources on a workforce which supports their own core competencies and adds value to their proposition – whether that’s supplying utilities, providing banking services, raising funds for a charity or selling newspaper subscriptions.

When outsourcing first became popular, the main reason was to reduce costs. But, in recent years, typical CIO or CTO challenges have included responsibilities to increase efficiency, deliver quality products, be innovative and competitive as well as address legacy applications, security and so on.

Outsourcing provides skilled resources that may not be available in the local job market. The skillsets required to meet the business needs are so specialised and in such high demand that there are few companies that can supply all of the talent from their own organisation. Companies should focus on core competencies in order to be more competitive and innovative within their industry.

One of the many reasons companies turn to SoftServe is to empower their business through the newest technology advancements such as software development optimisation, SaaS/Cloud, Mobile, UI/UX and BI/Analytics. Outsourcing is not about cutting cost it’s about increasing efficiencies, providing predictable, repeatable results, getting products to market faster to drive business value and scalable growth.

The old “lift and shift” model of passing work to an outsourcer and expecting the same results at a lower cost is a bit passé. The arrangement has evolved, and these days Global 2000 companies expect more.

Companies still seek cost-saving opportunities but now they’re focusing on performance, and that holy grail, the value-add.

Now, outsourcers present customers with a box of delights, filled with one sparkling value-add opportunity after another. These offerings aren’t about simple cost saving. They are geared toward profit margin growth. Some examples are: (1) Slick analytics that crunch numbers and pop out intelligence that actually helps determine decisions; (2) Methodologies that can clean up, control and improve a company’s process foundation (like procurement, finance or HR); (3) Working capital models and tools that greatly enhance a customer’s cashflow position, opening up M&A opportunities that were previously unavailable. In terms of financial impact, these offerings absolutely eclipse the mere cost-cutting proposition.

In addition to reducing costs, firms should consider outsourcing core functions to shift time, money and resources to strategic business activities. It’s vital that organisations assess costs and benefits, potential risks and necessary controls before making any changes.

A good outsourcing partner provides access to a team of specialists. In accountancy/finance, this translates into strong management and control around the processes, allowing management to feel confident about the accuracy of financials the outsourcer prepares.

Smart outsourcers are leveraging technology to help gain efficiencies around traditionally manual accountancy processes. A prime example is account reconciliation.

By implementing a solution such as BlackLine, companies gain critical, real-time visibility while optimising workflow, saving time and ensuring accuracy in their financials. In the end, companies benefit by taking advantage of outsourcers’ expertise to streamline and optimise processes without the overhead.

info@ofsure.com www.ofsure.com

01709 448000 www.parseq.com

020 7544 8414 info@softserveinc.com

ExpertInsight

Richard Cribb Managing director Ofsure

susie.west@sharedserviceslink.com

020 3514 5391 www.blackline.com

Maximising return on your investment How to improve the use of Oracle while minimising costs INDUSTRY VIEW

A

n investment in Oracle E-Business Suite or Oracle technologies is not an insignificant outlay, and a growing number of companies are focusing on maximising the return on that investment. They know significant savings can be achieved by rethinking their use and management of the technology, but releasing those benefits can seem a headache, expensive and hard work.

Such organisations increasingly use managed service providers (MSP) for their Oracle hosting or support. The reasons are simple: they want to improve their use of Oracle while minimising costs, and maintaining comprehensive in-house Oracle skills is rarely cost-effective. However, many MSPs have not

evolved or kept pace with customer expectations.

But a revolution is happening. Organisations such as Claremont use innovative and highly agile approaches and expert staff to deliver the previously elusive combination of high-quality support, proactive service and cost savings.

While this can involve a full outsource, Claremont works in partnership and typically provides the services customers can’t, or don’t want to, deliver. Customers

retain and leverage in-house skills yet gain comprehensive Oracle hosting and support solutions delivered with real expertise.

Jonathan Stuart, Claremont’s managed services director, believes the formula is simple: “The market doesn’t want prescriptive, template solutions; it needs suppliers with attention to detail, agile delivery and who work in partnership with customers. We routinely exceed customers’ expectations and 75 per cent migrated from competitors, so we’re definitely delivering great results.”

For Sarah Flannigan, National Trust’s CIO, selecting a new partner to host and support its mission-critical membership system – which runs on Oracle E-Business Suite – was a big decision. But Flannigan reflects: “Selecting Claremont to support our Oracle CRM system has turned out to be one of the best procurement decisions we have made in recent times. It employs good people and has been completely committed to our mutual success.” www.claremont.co.uk jonathan.stuart@claremont.co.uk