Outsourcing by Lyonsdown

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The René Carayol column

Smooth operator

As always, the future will favour the brave and innovative | Page 2

Susie West on how to avoid the culture clash | Pages 12–13

OUTSOURCING

July 2013 | business-reporter.co.uk

Mr Nice Guy comes out on top Paul Pindar interview: Page 5 Bonnie Gardiner reports on the current industry trends that can preserve UK jobs

REGIONAL BRITAIN FIGHTS BACK

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Opening shots René Carayol IT was late on a cold, dark and long Thursday evening and I was surrounded by my top management and top technicians, but we were making no headway with the outage on the network. I was on the board of IPC Magazines, the largest consumer magazines business in Europe. We had 23,500 freelance contributors sending in their copy or photos from around the world over the network. Thursday night was the deadline to get copies out to meet the high sales demand of the weekend. The network was out and we were approaching crunch time. As I looked around the room at my team members, we were frantic and clueless. Having come from Pepsi, where we had outsourced the network to Siemens, I called my previous account director in desperation. Within a couple of hours the cavalry had arrived. They were armed with expensive equipment and analytical tools that we could not afford, but far more tellingly, we had never seen before. The magazines went out on time – just. This was a heart-stopping moment we were not keen to repeat. This was far more about business leadership than it was about incremental improvement and efficiency. The media industry was transforming itself. IPC’s relentless competitor, EMAP, was struggling with the transition. This was all about a clear commercial competitive advantage; access to the necessary talent and strategic thinking that would propel IPC into the digital world. Some four weeks later, we attended Siemens offices and the deal was struck to outsource all the network management and operations. This was circa 1996/97 and, while it appeared to be predicated on achieving operational efficiency, it turned out to be a transformational transaction. It

It’s no longer a question of in or out, it’s about the appetite for growth brought a powerful new strategic focus. We were inherently first class at publishing great magazines, but nowhere near as capable at designing and running a mission-critical network. My apocryphal story sets an appropriate context for where the outsourcing dilemma still remains. A recent survey tells us that some 15 years later most enterprises are still focused on achieving operational efficiency when looking to outsource; cost reduction (87 per cent), greater scalability of operations (82 per cent) and process standardisation (74 per cent). In the main, outsourcing buyers are getting what they pay for – cost reduction and efficient delivery. To date, outsourcing customers have not demanded innovation from suppliers. Smart firms are adopting a strategic view and want access to better talent, better technology and improving analytical capabilities. These organisations have realised they cannot be first class at everything. At long last we are seeing a bold focus on what remains in-house and what is better the responsibility of experts. Most have realised that this will be a “cost plus” proposition that can deliver significant business impact. This challenges the “out”

sourcing concept, as in actual fact the desire is to “in” source new capabilities and thinking. In 2000, IPC Magazines transformed itself into IPC Media. In a world that was increasingly driven by the internet, in many respects the network became the central spine and lifeblood of the business. The only question ever debated at board level was whether to move to a new provider, but it was never suggested that the network be moved back in-house. It was no longer a question of in or out, but far more about the appetite and ambition for growth. The future will favour the brave and innovative, and outsourcing will no longer be just about cutting costs, it will be much more about insourcing transformation, innovation and perhaps providing the “game changer” through access to industryleading expertise that enables business growth.

Stone Circles, Beaghmore, Northern Ireland

distinctive & distinctions

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. Hard-working, resourceful and determined, our bright young people help make Northern Ireland’s workforce one of the smartest around. Our smart workforce is why companies such as Allen & Overy, Capita, Concentrix, Caterpillar, Terex and the Allstate Corporation have chosen Northern Ireland to set up and grow their shared services or outsourcing operations. 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

www.investni.com/invest

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Outsourcing

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Outsourcing has come a long way since bartering of the Stone Age By Bonnie Gardiner THROUGHOUT his 2012 presidential campaign, Barack Obama dismissed outsourcing as economically bad for America, arguing that it increased unemployment and encouraged corporate greed. “I want to close those loopholes that are giving incentives for companies that are shipping jobs overseas. I want to provide tax breaks for companies that are investing here in the United States,” he said, during a debate with his republican opponent Mitt Romney. Of course, Obama was actually referring to offshoring, not outsourcing. A slight miscommunication which, though picked up on in the business community, is not well understood by consumers. In the UK, the same confusion prevails, casting a dark cloud over outsourcing in austerity Britain. Meanwhile, the industry is responsible for almost 8 per cent of the UK’s total turnover, making it the second biggest contributor to UK GDP. On top of that, outsourcing contributes £14bn in business taxes, and outsourcers hand over £21bn in income tax. The practice is not new either, particularly in the UK where we have a fairly mature market, however some would argue it goes back much further. “Outsourcing is a relatively ancient business tool,” says Deborah Kops, industry commentator and founder of Sourcing Change. “If you look back to the Stone Age, somebody was killing the chickens and somebody else made the food and there were barters of goods and services. As long as there’s been barters there’s been outsourcing.” Since its introduction by the Conservative party in the early 1980s, outsourcing has grown into a widespread industry with two main drivers – business processing and IT, both of which saw considerable growth up until the financial crisis, after which a lack of upfront capital made procurement challenging. The story of 2008-2012 was about renegotiations, extensions and trade-offs; accepting fewer services for greater savings, and offering cheaper labour to score contracts. A flavour of this still remains – 2013 has seen a boost in business confidence. “We punch above our weight in the UK in terms of the number of deals and our importance in the field, particularly in the European outsourcing, because we were an early adopter and therefore reaching maturity in the second and third wave of outsourcing,” says Alistair Maughan, chair of IAOP’s UK & Ireland chapter. “Now companies in continental Europe are looking to the UK, seeking to adopt some of the approaches and models of outsourcing that first applied here.” Outsourcing is also doing its part to redesign the way business processes are delivered. Some companies decide to make it, some decide to buy it, while some prefer a bit of everything.

HOW PROCESS CAN AFFECT CUSTOMER SATISFACTION 57

HOW SSOs RANK CUSTOMER SATISFACTION LEVELS

THOSE PROVIDING GOOD CUSTOMER SERVICE ARE..

63%

GOOD

58%

OF RESPONDENTS ANSWERED NO

34%

FAIR

28%

DO, BUT THE KPI’s ARE NOT USED DAY-TO-DAY BY MANY

EXCELLENT

14%

PERCENTAGE THAT CURRENTLY HAVE POOR CUSTOMER SATISFACTION AND ARE FOCUSED ON IMPROVING IT

PRIORITY OF BUSINESS GOALS

4x MORE LIKELY TO BE FOCUSED ON CONTINUOUS IMPROVEMENT

DO, AND THE KPI’s ARE WIDELY USED, TRUSTED AND ACTED ON

POOR

TOP TAKEAWAYS

GOOD/ EXCELLENT

70 PROCESS +STANDARDISATION VARIATION

60 50 40

ARE THE TWO ELEMENTS MOST LIKELY TO UNDERMINE CUSTOMER SATISFACTION

30 20 10

0 IMPROVE CUSTOMER SATISFACTION

FURTHER STANDARDISE PROCESSES

IMPROVE TRANSPARENCY OF PERFORMANCE

IMPROVE GOVERNANCE OF CHANGE

IMPROVE BUSINESS CONTROLS/ LESSEN BURDEN OF COMPLIANCE

IMPROVE OUR CAPABILITY OF CONTINUOUS IMPROVEMENT

IMPROVE TALENT WITHIN SSO

81%

PUT CONTINUOUS PROCESS CHANGE AS A CHALLENGE

Data provided by TIBCO Nimbus. Graphic: Jordan O’Brien

The industry is responsible for almost 8 per cent of the UK’s total turnover

More and more frequently, offshoring is being blended into an overall business model that has been aided by the introduction of cloud computing, where clients realised they could pick and choose the services and products required, rather than a standard outsourcing delivery package. No longer is it a matter of either or, but what and how. However, the struggle for industry innovation continues, as the onus remains on the client and their attitude and tolerance towards risks. Whether it be different strategies entirely, or process improvement, Kops says if it involves the client missing a phone call, or paying another bill, attempts at innovation often get thrown out the window. “Most clients want the same; they want comfort, and that’s natural,” says Kops. “Should they demand process improvement and excellence from your provider? Yes. But do you expect big bang changes? Most clients won’t.”

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Business Reporter · July 2013

Outsourcing

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Looking at how rightsourcing can put you in control Record-to-report lifecycle is crucial for greater business value INDUSTRY VIEW

nterprise-level outsourcing is a relatively recent business strategy. It is only in the last 15 years or so that technology has been capable of offering the real-time communication networks that enable scalable IT infrastructure management or business process outsourcing. The initial approach was a laser-like focus on cost containment. But, as the technologies and processes have matured, so have the businesses and individuals using them. Many companies are discovering that a focus on costcontainment – which can lead to a lack of insight and control – was the wrong approach. Some CFOs are even bringing previously outsourced functions back in-house, “backsourcing” businesscritical processes (including the crucial record-to-report lifecycle) in a bid for more control and transparency.

Savings aren’t enough Outsourcing is not going away but smart companies are evolving with the technologies that enable it. While the promise of savings might get you started with business process outsourcing, it will not be enough to keep you going. A new model is needed, one that prizes value and efficiency as enablers of a more strategic, comprehensive internal transformation. Businesses who are currently backsourcing processes are frustrated with a lack of innovation in services being offered by BPOs. But, with the right technology framework in place, organisations can utilise a hybrid model where they continue to capitalise on the cost savings from outsource suppliers but maintain control and visibility of the process in-house. Rightsourcing means understanding your core competencies and integrating them into your outsourcing strategy, orchestrating technology, processes, and people required to maximise the value from any BPO or SSC framework. Recently, Allergan began a six-sigma project to drive process improvement with the end-game of the project being the automation and improvement of the quality and controls within account reconciliations. The team wanted the Allergan internal customers to eventually

rely upon the finance SSC as a strategic business partner that delivered timely, accurate, easily accessed data that added value by completing this work faster and in a standardised manner to reduce risk. The team used the six-sigma DMAIC (define, measure, analyse, improve and control) methodology to discover the true cost of the balance sheet reconciliations and audit files process. They discovered that the preparation of more than 35 ten-inch lever arch files and reconciliation of 1,600 accounts, manually in Excel, was taking at least 10 to 15 days merely to prepare the file for management review. Add to this the management turnaround time, the risk of error from missing signatures, lost files, improper formats and unresolved

Rightsourcing means understanding your core competencies and integrating them into your outsourcing strategy, orchestrating technology, processes, and people queries, they realised this was a process that could be automated to remove risks from the process and provide measurable cost savings. It was ripe for improvement. “By emphasising how technology could facilitate standardisation, teamwork, and collaboration, we were able to realise immediate and ongoing business value from the six-sigma work,” explains Kevin McHugh, European accounting manager for Allergan Pharmaceuticals Ireland. “Standardising finance processes by applying our findings to our SSC business model helped Allergan reduce the time spent on the period end process significantly while simultaneously improving customer service, quality, and accuracy for internal Allergan customers.” McHugh says a “measure

There are many ways that Trintech’s Cadency system can benefit businesses and improve” approach is key to a project’s success. A dedicated team looked at measurable improvements in quality, driving optimisation over time. The evolution to best-of-breed was the project’s goal all along. The Allergan SSC assumes all transactional support processes in Europe and ensures compliant, transparent results in usage, costs, and performance. This allows internal stakeholders to focus on their core competencies and, interestingly enough, departments end up relying more upon the data being produced by the SSC than in the old framework. “We’re in the second phase of the project now,” says McHugh. “Initially, we were concerned with reducing time spent in the processes. But now that we’ve educated the business – now that they’re sold on the added value we can offer – we’ve pivoted to focus much more heavily on improving the quality of our data and our processes. We’re integrating the SSC model more and more into our customers’ daily activities. Soon we’ll begin expanding the use of automation technologies, really leapfrogging to a strategic, transformative business model.”

Cadency can help The right automation technology can help your business achieve a Rhythm of Finance. But even under an SSC model like Allergan’s it will require agility on the part of key decisionmakers. Trintech’s Cadency was developed to help finance departments find that rhythm and to help decision-makers achieve agility. By standardising disparate and complicated

mechanics of the close, certification, compliance, journal entry, and reporting functions, Cadency compresses and optimises record-to-report processes, freeing up resources to focus on more value-added activities. Imagine providing your managers with a single console that enables the re-routing of all finance workloads, identification of potential bottlenecks, and enforcement of new standards across all SSCs in your organisation. With embedded controls enforced by Cadency, governance is improved and transparency is increased. Repetitive tasks can be outsourced, while strategic initiatives can be managed in-house. Cadency allows management to route work to groups of users, not just individuals, dramatically altering the power dynamic between the finance function and the SSC. Features such as dynamic risk rating rules and the ability to create journal entries directly from the reconciliation compress the time spent managing an account and ensure material differences are automatically routed through the appropriate approval channels – either at the head office or remotely. An online console facilitates collaboration between various geographic locations, time zones, and job functions, embedding internal and regulatory controls into the record-to-report lifecycle for optimum governance. As the technology to support outsourcing evolves, so do the ways in which it adds value to your business. “Rightsourcing” with a strategy to support your business ensures compliance, control and – ultimately – success. 020 7628 5235 Download a complimentary executive report, left, featuring Gartner research at: www.trintech.com/telegraph

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“I

don’t like talking about me. Can we talk about the company?” asks the surprisingly modest chief executive of one of Britain’s largest outsourcing firms. Heading Capita Group Plc since its start-up in 1989, and growing the share price to 4,000 times what it was when he arrived, Paul Pindar has never believed the success of his company should be tied to his profile alone. Though I must confess that if it were, Capita would come out as quite likeable. Greeting me at reception with a cordiality he maintained throughout the interview, Pindar was far less intimidating than most leading UK chief executives. A demeanour no doubt helpful when working in an industry reliant on trust and mutual respect with clients and workforce alike. “Three quarters of our staff have been TUPE transferred to us rather than opting to join Capita themselves, therefore the natural reaction is people are inevitably anxious,” explains Pindar. “One of the things we’re really good at is removing that anxiety as quickly as possible and turning it into excitement. We have a team of people whose sole job is to make sure we can bring outside people into Capita in a way that is smooth, professional and with empathy.” No blame culture Pindar believes that one of the key reasons for Capita’s success is company culture, listing things such as treating customers with respect, making sure people enjoy what they do, of fe r i ng r o om for e mploye e development, open and honest communication, and having a no blame culture, so that “if people make mistakes, they don’t get shot for it.” The emphasis on the people can’t be misplaced, as during 25 years and several hundred outsourcing partnerships, Capita has only failed to renew contracts on four occasions. “We’ve had some very strong, stable and enduring relationships with our clients, and that’s one of the things that we would be most proud of,” says Pindar. He also believes that a good outsourcing company must be able to innovate, whether it be in their internal systems and processes, or by persuading clients to take on new structures. “We have people within Capita that will look at all the processes involved in running an operation and then will dismantle those processes and work on making them better.” Meanwhile, the organisation is embarking on new and creative deals, such as joint ventures with Staffordshire Count y Council,

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Capita chief executive, Paul Pindar

The big interview Paul Pindar

Being Mr Nice Guy has given me 25 years at the top By Bonnie Gardiner Birmingham City Council and the Cabinet Office. “I think that ’s an attractive development because it means you have everybody sitting around a table with a common objective that they want the enterprise to be a success, as opposed to the slightly older fashioned customer-contractor relationship where you might not have the same dynamic,” says Pindar. “We were also the first company in the country to persuade a local authority that they could outsource their revenue collection function, or housing benefit function, so the

nature of our activities has been quite innovative.” Despite some bad coverage in the past, Capita certainly serves as a good example of outsourcing’s impact on the UK economy. Having started with just 33 employees, Capita has grown to 52,500 strong. “In terms of job creation, I think we get a tick,” beams Pindar. Savings for the taxpayer And in terms of tangible savings, the numbers are also huge. This year, two contracts held by Capita with central government have, in both cases, saved the taxpayer more than 50 per cent, while delivering a higher standard of service. Despite being the 60th largest public company in the country, Capita’s

contribution in tax is 30th largest, handing over in excess of £750m last year alone – a decent growth margin since the £2m it contributed in the late 1980s. Pindar believes another great benefit of outsourcing is keeping service provision sharper, more honest and less complacent. “The reality is the country has got a national debt approaching a trillion pounds, and a deficit of £110bn, so we’ve got a long, long way to go to get the economy back into balance, and I think outsourcing has a huge contribution to make toward that,” he says. “When we take over public sector operations, often there is no measure of an outcome. The mere fact that we go in and we put some objective measures in place and then we

monitor them automatically raises performance.” In regards to tips for other firms who want to mimic Capita’s capacity for strong long-term relationships, Pindar advises readers to “deliver what you promise – don’t overcommit beyond your capability” and “never, ever take financial advantage of a client.” But in the end, it comes back down to people, and that likeable cordiality he demonstrates so well. “Focus on maintaining as good a personal relationship with your client as possible, because at the end of the day all of these things are about the way that human beings interact,” says Pindar. “If you do those three things, life is really simple.”

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Outsourcing

‘Put more focus on exnovation’

ExpertInsight

AN academic who specialises in outsourcing says more focus is needed to drop old habits that hinder the innovative process. During the recent Outsourcing Symposium, hosted by the National Outsourcing Association, Professor Leslie Willcocks, above, of the London School of Economics asserted that there is not enough focus on the exnovation process. Professor Willcocks noted: “Innovation is important, but even more important is exnovation, which is helping companies to drop old habits that get in the way of innovation. I would like to see more sessions on that.” Exnovation is at the end of the innovation lifecycle where it discards existing practices, rules, processes and thought patterns, or improves on them.

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Industry chiefs working to change negative perception By Bonnie Gardiner OUTSOURCING providers and clients are being called on to help tackle the negative public perception of the industry. “We’re such an important industry, and we’ve got to create some kind of change,” says Kerry Hallard, director for the National Outsourcing Association (NOA). “There’s a concern that while the government and the media are dealing out this anti-outsourcing frenzy, the big FTSE 500 companies are cautious about admitting to outsourcing, because they understand that public perception is negative and confused,” says Hallard. Research by the NOA in 2012 revealed that 22 per cent of the public dislikes outsourcing as a profession, while a huge 80 per cent of the general public does not think the industry is helping UK PLC. D evelopi ng b e st prac t ice a nd accreditation for the industry may be one way to regain public faith; however, this has proven challenging with the extensive nature of outsourcing. “Outsourcing is so broad and it needs to be bespoke with each individual company, therefore the standards need to be pretty open, which can lead to

Your T map to finding the holy grail

them being quite vague,” says Hallard. “It’s trying to grapple between actually having a standard, but not making them too constrictive to the industry, yet making it enough to give people peace of mind.” The NOA is also working on an employee satisfaction index to demonstrate that outsourcing doesn’t mean unhappy workers. “It’s the people that make all the difference, and if people are happy working within a service provider and they feel they are making a difference for their client, that speaks absolute volumes,” says Hallard. An Olympic effort The G4S fiasco at the London Olympics is a perfect example of skewed perceptions, demonstrating the outsourcing industry as unreliable, despite the hundreds of successful outsourced services being carried out around it. “The Olympics is the biggest case study for outsourcing in the world. Everything was outsourced; it was a big outsourced mission, but only the G4S story hit the headlines,” says Hallard. “It must seem like every outsourcing project that ever happens fails and wastes tax payers’ money, and yet all the positive ones don’t get any attention.” The NOA published a paper after

INDUSTRY VIEW

MooD is developing a benchmark for the outsourcing world, says Jim Bennett

he major outsourcing players are facing pressure from every angle. There is a growing belief that the mega contracts haven’t worked for clients seeking greater value, service improvement and innovation. New technology that wasn’t available when contracts were signed years ago is now changing the way companies do business. The old model of delivering the same “mess for less” isn’t addressing the real issues, and “lift and shift” isn’t generating the innovations clients are seeking. The market is now demanding a multi-supplier and service integration and management (SIAM) approach both in the private and public sector. They want to introduce smaller, specialist players into the mix in the drive for services that deliver real change in their business. How do the major players react? Their financial models often don’t have the inherent flexibility to deal with multisupplier deals. They’re used to controlling client relationships and dictating the way in which contracts are run. How can they respond to this changing landscape in a way that addresses client needs as well as their own profit targets? The key in outsourcing now is for the relationship to be a partnership. Clients cannot simply hand over a job and leave the supplier to get on with it. To drive innovation in the business and optimise

G4S Olympics fiasco skewed opinions

consultation with five economists from Henley, Ashridge, Loughborough, Kingston Business Schools, and Deutsche Bank. In the research paper, all agreed that outsourcing is both a strong contributor to GDP and tax, while it was considered a shrewd business decision to concentrate on core activities and particular competitive advantages.

the outcomes, clients must treat the supplier as a strategic partner and have an open, honest and two-way relationship. MooD International’s role is to act as the catalyst for change. It helps the big players develop a benchmark as to where they are now in this new outsourcing world. It helps them set goals for where they need to be and shows them how to start the journey.

Delivering client benefits MooD’s role is to focus the outsourcing relationship on delivering the benefits that the client is seeking. An important factor in stimulating that change is to illustrate the new ways in which outsourcing suppliers can deliver real business insights to their clients. By tying metrics to business outcomes and strategic business objectives suppliers are able to show clients where they are bringing real value to the business. It allows outsourcers to demonstrate to clients that their investment is paying dividends and that it is enabling real change, other than just cost savings. It also provides the catalyst for a different kind of dialogue with the customer. MooD believes its approach can both stimulate and support the

Find your way with MooD

IT outsourcers can help the less experienced QUALITY talent for technology solutions often requires an understanding of outdated systems and infrastructures, according to one IT provider. As many organisations late to the digital scene seek help with their IT solutions, skills and knowledge in both new and old technologies can help providers secure a contract. “With one client, they had a system which had been written in 1972, and they were looking to maintain it and manage it in the 70s and 80s but the people who had written that had long left the organisation and they didn’t have any documentation,” says Sanjiv Gossain, managing director of Cognizant UK & Ireland. “With our broad skills we were able to go in and study the system, and reverse engineer and write the documentation and then be able to manage that for them.” The growing digital landscape often leaves behind the less experienced. According to Gossain, IT outsourcers should look to fill those gaps.

next generation of outsourcing. The business-driven insights that MooD can provide will help outsourcers demonstrate that they are viewing life from the client’s perspective and delivering against their needs. Such thinking will help them operate in the mega contract and multi-supplier environment. It will enable a sea change in big-player cultures as well as address the holy grail of return on investment in outsourcing relationships. In short, it can help them win and retain business in a market demanding change. If you’re interested in discussing any of the challenges raised above, please contact us. Jim Bennett is director at MooD International 01904 717 300 info@mood international.com

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Firms are being forced to take greater risks with security in order to stay competitive

Snowden puts outsourcing data security in spotlight By Bonnie Gardiner WHISTLE-BLOWER Edward Snowden may have left the US government in the lurch when leaking sensitive data from the National Security Agency (NSA), but he has also highlighted the risks of outsourcing data security to intelligence agencies. “There has been a reticence around data and cloud deals from large enterprises because they are solutions held offsite by a third-party vendor,” says Dominic Dryden, partner at Olswang LLP. “So a big part of the reluctance toward those kinds of deals has been security driven.” Personal data With the growing digital shift, even traditional brick and mortar companies are realising that IT solutions are the way forward, but as incidents like Snowden remind us, it’s not just commercial data that people are worried about, but also personal company data. “The reputational impact of leaks is making people think about data, in particular personal data, in a way that they didn’t before,” says Dryden. This evolution is forcing firms to take great risks to remain competitive, rather than lock sensitive information

away in an ivory tower. “The traditional way people looked at security are you build a big wall and dig a deep moat and keep everybody out,” says Gavan Egan, director of security services at Verizon EMEA. “As companies and governments look to become more agile and flexible, they really have to open up more. That includes giving access to systems, applications and data, and therefore having to take a much more risk management approach to security.” Now, as the sensitive data flame is pa ssed f rom h igh ly reg u lated environments to outsourcers and third party vendors, transparency and the alignment of structures and procedures are cr ucial for t he relationship to bloom. Contractual protections are in place to ensure the risk is shared with both outsourcer and client, but what happens if one contractor decides to go rogue – and how can this be prevented? “Sometimes you’ve got some clever people, and they see other opportunities out there. They think the grass is greener and all of a sudden you’ll find them in another place and they will have taken their intellectual capital with them,” explains Dryden, who has been asked by clients to set up controls to protect against this. “Trust is not only from employment

Masks of Edward Snowden are held up by activists at a demonstration in Paris

contracts and intellectual property and confidentiality protections, but also how you treat individuals, how you m a ke t he m fe e l pa r t of you r organisations, how you remunerate them, how you retain them – it’s a complex mix.” Specialist protection Despite the growing number of data breaches and the high risk scenarios, clients can be assured that, statistically, they are far less likely to suffer leaks by taking on specialists.

“I n [ Ver i zon’s] dat a breac h investigation reports, which study thousands of investigations into different organisations, you don’t t y pically see a huge amount of breaches just because someone asked a different company to handle their data,” assures Egan. Of course, not ever y dataset will contain the same activity as the NSA, but as long as breaches are prolific, outsourcers must find new ways to provide their clients with peace of mind.

One fifth of firms risking customer data Growth predicted for FAO MANY organisations looking to outsource data security are not adequately protecting their customer information. Research by technology performance company, Compuware Corporation, has shown that this process of data handover is not without its challenges. The Compuware Mainframe survey revealed that one fifth of companies risk customer data by passing it unprotected to outsourcers in order to produce better quality results. When testing new applications, the easiest way

to achieve accuracy is to use real customer data in a simulated environment. However, data protection regulation prevents firms from sharing customer data externally. This has led many companies to use datamasking, whereby sensitive information is blanked out before it is handed to outsourcers, which negatively impacts on quality. Those 82 per cent who did mask customer data said it was a difficult process, while more than two fifths of respondents that share customer data with

outsourcers are not wellbriefed on data protection laws and regulations. “[Masking data] presents a challenge to companies working with third parties,” says Kris Manery, senior vice president and general manager, Mainframe Solutions, Compuware. “Providing third parties with unprotected customer data not only increases the potential for data to be misused or stolen, but can also put companies in danger of violating data protection regulations.”

RESEARCH by analyst firm HfS Research and KPMG estimated that outsourcing of finance and accounting (FAO) will grow 8 per cent in 2013. The research also found that four out of 10 client firms plan to start or expand their FAO scope during the year, and that 43 per cent of businesses with revenues of more than $5bn (£3.3bn) plan to increase FAO activity. The expected large growth is attributed to the shift toward cloud services,

hybridisation of processes, and the verticalisation of industry capabilities. ACCA, the global accountancy body, has expressed concern about the talent in the finance industry following the adoption of shared services and outsourcing models. Finance leaders from IBM, Accenture and Deloitte have argued the search for talent in the sector will evolve with the emergence of finance “super hubs”.

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How shared service staff are your biggest asset

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DEPARTURE LOUNGE

BOARDI

INDUSTRY VIEW

hared service centres serve numerous processes from finance to IT, and have already demonstrated significant cost savings. But customer service often suffers. A survey of shared service directors taken on behalf of business process experts TIBCO Nimbus found that, while 80 per cent of respondents listed customer satisfaction as one of their priorities for the future, just 3 per cent paid attention to talent management. Nigel Kilpatrick, below, chief sales officer at TIBCO Nimbus, believes this exposes industry weaknesses. He argues that, though shared service is based around systems and human interaction, the personal touch can be neglected. Kilpatrick says: “People responding to the survey were saying that not enough people had business acumen or empathy with the customer. “Many processes are too complicated, and in a format that is not easily understood or even accessible.” But he says directors can boost customer satisfaction by making processes simpler for staff and customers to follow with all the right information right at their fingertips. “It’s a question of not only focusing on the ‘transactions’ but also the ‘interactions’, so that shared services is about turning customers into fans,” he says. “We focus on having processes explained in business terms and end-toend, with links to the right systems, documents, training, metrics and anything else that is relevant to the activity. “Turning customers into fans is a daily activity and driven by how well staff have the right information, in context, at the right time. “Focusing on staff being able to more people-focused, makes shared services a major business asset.” 02392 410 350 www.tibco.com/nimbus

Global businesses including Santander and Symington’s are flying back to the UK By Bonnie Gardiner THE growing trend of working smarter in Britain is producing greater benefits than traditional offshoring. With the cost of transport, a lack of quality employees and rising wages overseas, along with high levels of unemployment in the UK, regional Britain is becoming economically attractive in the world markets again, for industries such as finance and manufacturing. “If you’re smart and you combine the use of technology with your own home-grown staff you can actually be more effective than an offshore site,” says Tim Woodhouse, software and e-commerce sales professional. “This way we can preserve UK jobs as there is no need to export these tasks offshore.” A typical transactional-based finance process for an average business services centre will include half a million annual transactions offshore, requiring 50 full- time workers, and a total cost of £700,000. With the help of specialised technology tools worth £100,000 per year, onshore UK financial companies require an average of only 17 full-time workers, worth £425,000, giving total cost more than half a million pounds (£525,000). The figures, produced by IT solutions provider Top Image Systems, show that reshoring can save companies £180,000 each year. Since the initial offshoring boom, the cost of labour in emerging markets has steadily increased. Over the past four years, Chinese labour costs alone have risen 20 per cent annually, yet wages in western economies remain stagnant, stunting the benefits of global arbitrage. “If you use regional locations, then the rates for full-time equivalents are now within shooting distance of Eastern Europe, and then if you combine the use of specialist technology on top of that you’ll see that we’re actually pretty good in this country,” says Woodhouse. “We’ve got great skills, we’ve got relatively modest salaries, and if you combine that with technology

Below: Maughan says places such as Northern Ireland would be ideal for nearshore services

platforms, the savings are just remarkable.” For finance and accounting, the cost of people and low quality performance means UK jobs moved offshore require back-up quality checkers and management teams in the UK, forcing finance companies to employ more UK workers regardless. For customer-based services, there has been a loss of business because of language and cultural barriers, growing the appeal of outsourced services closer to home. “Call centres tend to go down well in the North East and Wales because people like their accents,” says Alistair Maughan, partner at Morrison & Foerster, and chair of the International Association of Outsourcing Professional’s (IAOP’s) UK & Ireland Chapter. “It’s hard to make broad generalisations because certain services lend themselves to a particular geography and skillset. But no one’s going set up nearshore services in London and the Home Counties – you would do it regionally, in places like Northern Ireland or Scotland,” adds Maughan. This provides a great opportunity for UK-based outsourcing providers, as well as UK workers. Deutsche Bank’s operations in Birmingham started with 30 staff in 2006, growing today to 1,300 people working in back and middle-office functions. Santander UK in 2011 also moved all its call-centre jobs from India to Liverpool, Glasgow and Leicester after customers’ complaints about quality of service. The main distributor of the Raspberry Pi computer recently shifted its

production back from China to Wales to help reboot the UK economy. Meanwhile, British food producer, Symington’s, maker of Ragu pasta sauce and Golden Wonder’s noodles, is transplanting noodle-making from Guangzhou to Leeds to meet quicker response times, cancelling its Chinese contracts and cooking up about 50 jobs in the process. “Those companies are some of the biggest pillars of British industry and are preserving and promoting jobs in regions that haven’t had the best time,” says Woodhouse. “By use of that thought process, you surpass the savings that you would have by offshoring in Eastern Europe.” Woodhouse cites Scottish Enterprise, The Welsh Development Agency and MIDAS, Manchester’s inward investment agency as great examples of home-grown services that have attracted big household names. Law firms are starting to set up nearshore units in the north of England, Scotland and Northern Ireland, while surveys have demonstrated how manufacturers are also showing propensity for nearshoring. The results of a study of 150 UK manufacturers by YouGov for Business Birmingham revealed that a third of manufacturers using overseas suppliers expect to buy more British-made components over the next few years, with most citing rising costs overseas and simpler transport and logistics as contributing factors. Major brands including General Electric, Apple and Google have returned some of their production back to the US, yet for some

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If you’re smart and you combine the use of technology with your own home-grown staff you can actually be more effective than an offshore site – Tim Woodhouse

ING NOW

multinationals, the line has been blurred. Chief executive of Siemens, Peter Löscher, has said following years of offshoring, the “home shore” for Siemens is now as much China and India as it is Germany and America. As long as they are close to their biggest markets, and they are concentrating on responding quickly to local demand

ExpertInsight

Right: the global companies who have moved their operations back to Britain

rather than just the cost saving elements, the same effect is expected. Growth in the UK is not just reliant on nearshoring however, as more western economies serve as an attractive option for emerging markets that can invest in UK workers and brands. The advancement of automation in UK manufacturing in

particular is expected to entice foreign companies, such as the Mumbai-based Tata Group, which makes Range Rover cars near Liverpool. Deborah Kops, founder of Sourcing Change, says she does not predict a wholesale movement of operations back to the UK, but the beginning of a more

refined system. “What I see is UK locations getting another look. It’s also to do with the sophistication of the clients. Clients are becoming much more thoughtful now, they’re not just signing contracts,” explains Kops. “It’s an exciting time; the decision process for outsourcing is far more nuanced than it’s ever been.”

Employees in the sky How the cloud can help cut costs INDUSTRY VIEW

fter connecting the world, the internet is now increasingly making redundant the need for physically tangible products. For instance, thanks to cloud computing, one no longer needs a physical server to back up data securely. And that’s not all. Just like “on demand” software and hardware, fully-fledged offices with real-life employees are also available in the “cloud”. This is what we at VirtualEmployee.com call PaaS,

otherwise known as People as a Service. Rather than taking on a high cost employee locally, clients can hire the same individual via VirtualEmployee.com. This individual physically works from VirtualEmployee.com’s offices but follows only the client’s instructions, dealing directly with the client via the internet. Additionally, VirtualEmployee.com’s managers, HR, IT support and accounts staff physically supervise and manage the client’s employee in accordance with the client’s instructions. PaaS works on the same

principle as the rest of the “as a Service” (aaS) family. By piggybacking on the cloud provider’s economies of scale, the client can avoid setup or operational costs without compromising the quality of the service.

Robust structure What distinguishes PaaS from others in the “aaS” family is that it has a far larger and more robust back-up structure. Outsourcing infrastructure (IaaS), for instance, clearly reduces only one facet of a company’s operational costs. PaaS, however, reduces all operational costs, from recruitment to hardware, payroll, IT support, and HR as well as infrastructure. As VirtualEmployee.com’s offices are based in India, PaaS actually makes a

two-fold cost saving. First, the benefit of the “cloud” and, second, India’s low offshore costs. With VirtualEmployee.com’s Indian Cloud, clients can hire full-time skilled professionals in any field such as programmers and engineers for as low as £995 per month. With VirtualEmployee.com’s People as a Service (PaaS), a client hires an employee and leases an entire office, enjoying significantly more control and thus higher efficiency than freelancing. 0203 478 5941 www.virtualemployee.com

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A winning combination The role that BPOs can play has shifted INDUSTRY VIEW

here are targets aplenty for CFOs to hit. Firstly, they must manage a controlled environment, with no fiscal anomalies that might provoke enquiry. Then, they have to run their huge finance operation at a cost of closer to 0.5 per cent than 4 per cent of sales. On top of that, they are tasked with running finance in an elegant, innovative fashion, which supports the ambitions of the company. Five years ago a CFO may have looked to a BPO (business process outsourcing) to assist in hitting the cost-reduction target, largely through the labour arbitrage component. But in recent years, businesses have been evaluating the nuances of the BPO industry, and the sense of the contribution a BPO might make has shifted. This shift is evident in the slow-down in demand for traditional outsourcing, leading to a shortage of multi-process outsourcing deals. Large nine-figure deals of the past have gradually fallen away, the trend turning now to smaller eight-figure deals. BPOs will struggle to grow if they continue to offer traditional

outsourcing services in isolation. So, the question is what are the current opportunities for BPOs in the mid- and enterprise markets now that the demands have shifted? At sharedserviceslink we’ve calculated that only 20 per cent of the largest 15,000 companies in the world have outsourced multifinancial processes. This leaves at least 12,000 companies with which BPOs can potentially forge new relationships, perhaps combining traditional offerings with other, higher value services. Clearly, the BPOs have been eager to mine this potential as they examine their role in the shifting market. Outsourcers such as EXL, Xchanging and Serco have been developing value-adding services including consulting, analytics, and working-capital expertise. And pipelines are fattening. These higher-value services are lower-risk investments. And, with their broader applicability, they connect neatly with a wider range of targets. Everybody wins. Susie West is chief executive of sharedserviceslink www.sharedservices link.com

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Sales through service leads the way How is the customer relations industry responding to the new economy? INDUSTRY VIEW

ell beyond traditional outbound telemarketing campaigns, 2013 will see many businesses transforming core support processes to optimise them for creating revenue. Each positive contact resolution will be linked to a value-add offering for additional services, warranties, refills, peripherals and enhancements. In a recent Customer Relations Trends to Watch report, 69 per cent of business-toconsumer organisations surveyed consider contact centres to be critical to revenue generation. Consumers have amazing options at their fingertips: information, services and the ability to shop from anywhere via any number of personal technology devices. According to Forrester Research, more than 40 per cent of Western Europeans purchase goods online. In the US, this figure rises to 67 per cent. Executives across the enterprise are recognising that every customer touchpoint must first retain a customer and then turn positive experiences into improvements to

the bottom line. In recent research, it was noted that companies need to become far more innovative, rebooting their strategy to emphasise quality and customer experience, not pricing. In a fast-moving and ultracompetitive marketplace, the customer service agents who are listening and engaging are the heart of the business, creating meaningful value at moments of truth that matter. Connecting all the dots via omnichannel strategies and getting socially connected with your customers optimises revenues, customer satisfaction and operational efficiency. Sales chat solutions are also delivering the lowest costs of acquisition often with the highest levels of customer satisfaction/net promoter score. Savvy companies, particularly in the consumer electronics field, are employing premium technical support solutions, which offer customers a solution when they are out of warranty or cannot find qualified support elsewhere. This not only creates completely new revenue streams, by turning cost centres into profit centres, but does so while also improving customer satisfaction and retention. Joe Doyle is vice president of global marketing at Sitel 0800 444 221 www.sitel.com

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ajor global events will leave an impression on the outsourcing industry India remains the key player in offshoring, but other attractive alternative locations are springing up with entirely different landscapes and structures. South Africa has developing interest due to language and time zone benefits, while Canada has been making some interesting pitches. But the location that serves as most enlightening is Egypt. Before its current political troubles,

Bonnie Gardiner

Egypt stood as a highly educated population, and was felt to be politically stable. This illustrates that when selecting an offshoring location, particularly in the emerging markets, political stability is something to take into account and monitor. If we then cast our gaze to an unsettling sight in Bangladesh – the wreckage of a collapsed garment factory still

Online courses to threaten universities Twelve British universities are taking a leap toward accessible tertiary education by the development of FutureLearn, the UK version of MOOCs (massive open online courses) in the US. These low cost or free university courses, conducted online and available to anyone who wants to participate, are being hailed as the next step in

British higher education. After all, space in lecture halls is limited, and university tuition not easily affordable, but it’s easy enough to broadcast lectures online to tens of thousands, as a supplement to their standard curriculum. This is great for struggling students, but not so great for academics. Will these offerings potentially replace valued university professors in the flesh?

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making headlines – UK companies are working hard to clean their slate. Primark has begun the process of paying compensation to thousands of workers and their families who were involved in the disaster, after its supplier Simple Approach occupied the second floor of the building. Supporting the victims is a good start, but social responsibility calls for earlier action and consideration. Hundreds of survivors will be funded to help with devastating injuries, while more than 1,000 did not live to benefit from any goodwill.

Word on the grapevine is that outsourcing is not only growing figures, it’s taking over them. The Office for National Statistics (ONS) is preparing to outsource the compilation of its figures that show new orders in construction, marking the first time that numbers from an outside body will find their way into the national accounts. The deal was awarded to construction data firm Barbour ABI. Some will express woe as the public sector is bowing to the mercy of privatisation, while others feel it as a key indicator for the health of the UK economy for the built environment industry.

Man outsources his job to Chinese firm Outsourcing for a profit is a widely accepted process, but companies take note – some employees are a little too enthusiastic. A US computer programmer, known only as Bob (not pictured), was discovered by Verizon investigators to be outsourcing his own role to a Chinese consulting firm and paying them one fifth of his salary. The discovery was perhaps a relief to the company, after frequent VPN log-ins from China were originally thought to be hackers. However, their top programmer had fooled them into paying him a six-figure salary to surf the web all day. Well, what do you expect? Cat videos are pretty addictive.

By Matt Smith, web administrator u Editor’s pick Outsourcing Insider blog.infinit-o.com Run by Infinit Outsourcing, Outsourcing Insider offers advice and commentary on all aspects of contracting work. The site covers several industries, including accounting, healthcare, and marketing, and has a wealth of articles to browse from as far back as 2009.

The Savvis Blog

Outsourcing Blog

With a focus on the outsourcing of IT services, The Savvis Blog is full of insights on everything from cloud providers to security, with a back catalogue spanning more than two years to explore.

This relatively new Australian blog is frequently updated with articles that aim to educate and inform readers on the subject of riskreward outsourcing, from a company with more than four years’ experience in the field.

Microsourcing Blog

Payroll Outsourcing Blog

Expect to find pieces on this blog covering a range of subjects including how to decide which business functions could be outsourced, reports from within the industry, and how to get the most from outsourcing providers.

With clear content and a design to match, the Payroll Outsourcing Blog is updated nearly every day with articles on the benefits of subcontracting your company’s payroll, from the lack of software costs to the expertise offered.

blog.savvis.com/strategic-it-outsourcing

microsourcing.com/blog

coolpixels.com.au/outsourcing-blog

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How culture clash can Outsourcing for Business

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By Bonnie Gardiner EXPERT consultants say firms should put as much focus on their people as they do on skills and systems, in order to avoid culture clash. “Nine times out of ten, most culture clashes start off being people based,” says Susie West, founder and chief executive of Sharedserviceslink.com. Not dealing with culture often poses a risk to the huge investment r e qu i r e d f or out s ou r c i n g relationships. “Because of the significant upfront investments, you want to make sure that when the CFO signs that cheque, they are handing their business functions over to somebody that could do it better, not just cheaper,” adds West. Put simply, if outsourcers have to fight the culture to get anything out of it, they simply won’t be as efficient, potentially meaning a prematurely terminated contract. “You really have to have the

right mind-set right from the start, because you are entering into a ten-year contract, and it can really scar the relationship if there are mistakes made from the offset,” she adds Understanding the background of the organisation, where they’re from, what their values are, and how they communicate will ensure that hurdles are overcome early on. “We won’t always just take what clients are saying on face value,” says Anita Bain, senior partner at Sagacity Solutions. “Things are lost in translation; sometimes the client says one t hing and it means something completely different to us.” Another area that should be considered, according to Bain, is the dynamics of the company, to ensure you involve the right West: critical part is communication

mix of people. “It might be a bit controversial, but if you have a 60-year-old in a pin-striped suit and a strict environment, there’s no point putting a 20-year-old in there that’s going to run wild,” explains Bain. She cites examples such as adapting to dress codes, adhering to gender mixes, and considering compatible personalities as helpful approaches. “You will sometimes have a stakeholder who is extremely aggressive, or you’ll have the other extreme where they are very blasé about it, so we try to ensure the consultants we place actually work to the client’s needs,” explains Bain. Wo r k i n g w i t h a n aggressive company can be difficult, but West suggests communication tactics such as regular meet i ng w it h sen ior people. This will make sure that channels are always open

Steps to outsourcing success A partnership with communication and quality will stand the test of time INDUSTRY VIEW

utsourcing often gets a bad press. Stories only hit the news when it has gone wrong. Examples of where it works well are often held close, in case there’s some real competitive advantage that might be given away. So, what do you need to do to have a long and fruitful relationship for both sides of an outsourcing arrangement?

and SLA’s, but if that’s all you do, you are not looking forward enough.

Choose suppliers well Some company processes are so tightly linked together that splitting them apart by a contractual relationship makes no sense, for example, HR and payroll. Others are so far apart that you have to question why one party would be good at them all, for example, purchasing and IT.

Develop trust

Don’t outsource for cost

Any outsourced service is complex, otherwise you would not have outsourced it. Complex things go wrong from time to time. So when it does, how do you engage with each other? Confrontation, blame, KPI’s and service credits? Or joint taskforce, honest communication, one-team approach? The further apart your relationship is, the slower any real progress is made. Talking about how both businesses are developing in the future is important. If you cannot share the direction you are going, how can the other party work with that and guide a complex relationship to a more fruitful place? Review meetings clearly need to review short terms KPI’s

This approach is often favoured by inexpert purchasing teams, who know how to ask for a price, but don’t really understand the services they are buying; or the implications of the business on the quality of what is delivered. Often an end-to-end process is not outsourced, but merely a middle part of it. By buying the cheapest price, you are almost certainly buying a lower quality. For example, by saving £1 on the external costs, we often see buyers driving an additional £3 or £4 in upstream and downstream internal costs. This makes no sense for the business in totality, but does make the

buyer’s job more difficult to see beyond the simple quote in front of them.

Getting it right Ceridian is a specialist in outsourcing HR administration processes. One of its customers is a major retailer. When their staff became ours we added management, training and expertise to the existing processes and every KPI improved. Then we moved from their older technology to our newer one and KPI’s went up again. So, people matter in outsourcing as much as technology; without a good blend of both, results will not be good, or continue to improve over time. The major benefit was an improvement in quality which meant less cost, less noise for the retail operations teams, more engaged employees, more focus on the real job and thereby a revenue improvement. Outsourcing done well, with a focus on partnership, quality and developing over time can be a marriage that lasts, one where both parties win, and both parties develop with each other. Nick Laird, left, is chief commercial officer at Ceridian 0800 733 337 www.ceridian.co.uk

Solid partnerships lead to business growth

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kill your outsourcing contract

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between the outsourcer and the client, and the conversations relating to the relationship aren’t bogged down by the politics. “You might hide behind claims of a systems problem, but it’s usually because you’re missing the communication that is so massively required at every touch point throughout the relationship,” says West. Specifically, West refers to asking challenging questions, such as what people are expecting from the outsourcing relationship, what it means to various stakeholders in the company, and how the company will react when having an outsourcing component within that delivery infrastructure. “From that embryonic thought, right the way through to the sorting process, selecting a partner, contract delivery, and all these various milestones, the absolute critical component of it is communication.” Another critical element on the client side for securing a smooth

INDUSTRY VIEW

hris Scoggins, chief executive of National Rail Enquiries, favours an innovative approach to management, employing only 24 direct staff and contracting 30 suppliers to oversee the biggest travel and transport website and business service provider in the UK. The successful combination of in-house support and outsourcing has resulted in various accolades, including the doubling of sales from £120m to £250m in two years and more than 28 awards along the way. National Rail Enquiries (NRE) was a pioneer of the intelligent use of multi-sourcing in 2006 and is unique in having built a large-scale customer-centric brand with a totally multi-sourced approach. NRE contracts experts in every area to ensure a high standard of service, as opposed to training in-house staff, while ensuring that risk and cost are effectively managed. Multi-sourcing, where NRE contracts directly with a provider for each element of its service – as opposed to appointing one contractor to oversee an entire activity – such as the website, enables NRE to minimise cost and risk while tapping into the best expertise in each specific area. Multi-sourcing also allows NRE to react quickly and remain flexible to technological advancements, maintaining its presence at the forefront of technical developments to improve the traveller’s experience. This allows Scoggins and his team to focus on NRE’s customers’ needs, business goals and strategic direction. “In drawing together a raft of specialist third parties in a cohesive way to provide services for us, we ensure that the quality of our customer service to the traveller remains high,

Chris Scoggins: our strength lies in getting the best from our team

‘Things are lost in translation; sometimes the client says one thing and it means something completely different to us’ – Bain transition is governance.West emphasises the importance of mapping out everything that’s going to be transitioned, the expectations that are expected of the outsourcer, who is responsible for what, and where they need to be [onsite or offsite]. Other important considerations are at what point will the processes or activities be handed over, is there going to be a shadowing that takes place – and most importantly, who i s accou nt able when something goes wrong? “I can’t overstress this because

I believe when outsourcing has failed in the past, it’s because companies have outsourced a whole tonne of responsibility to an outsourcer, who actually hasn’t taken on that responsibility, they’ve just taken on tasks,” says West. “It’s that ownership, transition and governance piece – so if you can get all that wrapped up, agreed on, and signed off you’ll be in good shape.” Bain cautions outsourcing companies who expect a standard “lift and shift” model, where there w i l l be no i mpac t on t he organisation. “That’s absolutely not the case… You need to make the right alignments.” The best tactic is to be realistic and honest about what you need to deliver the best outcomes, rather than skirt around the issues. “I think outsourcers think it means they won’t get the business,” says Bain. “But it’s never done us any harm.”

A company with more awards than staff National Rail Enquiries proves that intelligent outsourcing can reap rewards, says Chris Scoggins Outsourcing relevant services is central to our success, and provides the foundation for our strategy long and short term

National Rail Enquiries is made possible by outsourcing while reducing operational costs,” says Scoggins. “Using an integrated service model allows us to spend additional time to strengthen our core business process and, with clever decisions being made in our partners, we also enjoy significantly lower risk than if all processes were carried out under one roof.” In the period since Scoggins took over NRE he has reduced costs by approximately 75 per cent, while over the same period total business volume has

increased five-fold; clearly demonstrating the advantages available through successful multi-sourcing, even on a scale as large as NRE. “Our strength lies in our ability to draw the best out of our team, both through in-house investment and intelligent multi-sourcing, to ensure that the team is skilled and responsive to satisfy the constantly changing requirements of the traveller,” Scoggins continues. “Working within a smaller team facilitates free and meaningful communication, while still having the capacity through multi-sourcing to deal effectively with more than a million enquires per day. “Outsourcing relevant services is central to our success, and provides the foundation for our strategy long and short term.” www.nationalrail.co.uk

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Outsourcing – Industry view

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The future Smarter receivables

Smarter sourcing IT sourcing has evolved, with most large businesses now adopting a multi-sourcing strategy. This approach, together with changes in technology, makes an organisation’s IT function more critical than ever.

MoretonSmith’s software can revolutionise accounts receivable

Service integration

hat happens when you take the sophistication of the sales and marketing process and apply those principles to your accounts receivable? CRM for debt, if you will? Richard Moreton calls this “smarter receivables” and it’s this approach that his company MoretonSmith is pioneering with its groundbreaking technology, ero57. Receivables management has always been a very process-driven area. This has led to a focus on efficiency and the associated costs. However, 20 years ago MoretonSmith decided – not for the last time – to swim against the tide. The goal was to deliver ROI to clients, rather than cost saving alone; “It quickly became apparent though, that to deliver on our ROI promise, we needed high-quality near-shore resource but that also meant we needed to secure massive efficiencies to offset our higher costs.” This was the birth of smarter receivables. The software was originally developed to help MoretonSmith manage its team of credit controllers, debt recovery professionals and legal representatives more efficiently. However, after a period of rapid growth, it became apparent that clients could benefit from the software to run their

Richard Moreton, managing director of MoretonSmith, with the development team own in-house invoice-to-cash processes. By measuring every action of every customer, credit controller and transaction, ero57 generates a vast database of information upon which to base decisions. This data also allows it to provide flexible and granular reporting to quickly see how processes and people are performing. Next, behavioural analysis and predictive analytics are applied to the data; sophisticated descriptive modelling, predictive modelling and decision modelling allow for a forensic understanding upon which to base strategy. It will also forecast the effect that collections strategies and actions will have on customer behaviour, collectors’ productivity and, ultimately, the company’s cash position.

Finally, the software is built with efficiency at its core; much of any process can be automated in the system, including both determining and actually sending the best communication, at the best time, to the right customer. In addition, usability experts have produced a groundbreaking interface, taking inspiration from the biggest consumer software products in the world, to deliver an intuitive and visually appealing interface that allows for quick and easy use. Clever “nudge theory” mechanisms are also integrated, ensuring highly motivated users and maximum productivity. Smarter receivables is more than a process. 0207 490 9010 www.moretonsmith.com

In focus: the evolution of BPO Tom Peters, management guru

“

Do what you do best and outsource the rest

NelsonHall recently interviewed 500 sourcing managers on the future of BPO (business process outsourcing) and found that the current economic environment continues to have a strong net impact on driving increased use of BPO. For example, in the banking sector, 53 per cent of organisations expect to increase their use of BPO, while 18 per cent expect to decrease their use of BPO. While organisations continue to be constrained by the climate of business uncertainty, lack of management bandwidth, and low appetite for capital spend, they have a considerable increase in appetite for greater organisational agility,

Fifty three per cent of the banking sector expect to use more BPO standardised processes, and a variable cost structure. So what does this mean for the future of BPO? Essentially it means that long-term, high-investment activity is out and incremental, short-term quick wins are in. It also means a more joined-up approach to delivery and governance. So

organisations are increasingly moving towards mixed economy models combining in-house and third-party services within a global business services (GBS) structure, governed by client single-process owners. This creates incremental opportunities for BPO to move

along the value chain in a relatively plug-and-play manner driven by capability, the need for standardisation, and the need for new “edge” process roll-out. The GBS structure is perceived to deliver improved control and change management, as well as improved communication and more collaborative working. In this more collaborative structure, innovation is a team game, with suppliers increasingly bringing senior personnel, external perspectives and sometimes even innovation funds to the table. 01344 393 036 www.nelson-hall.com

To cope with a multi-sourcing approach, many IT organisations have created a service integration function or, in some cases, outsourced this to a supplier. At the same time suppliers have created specialised delivery models of hubs, factories and centres of excellence to remain competitive. However, the customer doesn’t want to buy these specialised services so supplier delivery teams combine the raw components to create the service required. This happens across suppliers in a multi-sourced environment. This can result in an unco-ordinated duplication of effort, with multiple layers of service integration within suppliers, across suppliers and within the customer. Alternatively, the customer can buy unintegrated raw components from suppliers and internally manage the service integration, but this will require strong internal teams.

The cloud Cloud services (IaaS) are also increasingly being used in outsourced solutions. For example, the Commonwealth Bank of Australia recently moved non-core infrastructure to Amazon Web Services’ IaaS. While being cost effective because of standardisation, these services require careful management within IT architecture. SaaS (software as a service) presents different challenges for IT organisations, as it is increasingly being sold to non-IT functions, raising both issues and opportunities. In particular, IT specialists need to assist with the specifics of SaaS procurement and to help integrate solutions into the environment. This creates opportunities, but requires different skills to those used in managing large IT suppliers. www.olswang.com

Business Reporter · July 2013

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Outsourcing – Industry view

The debate

Outsourcing or shared services? Susie West Founder and chief executive sharedserviceslink

Joe Doyle Vice president of global marketing Sitel

Kerry Hallard Director National Outsourcing Association

Mike Whitchurch Senior vice president and UK commercial sector lead, CGI

George Davies Chief executive MooD International

Today, it is less an either/or proposition, and more about finding a custom blend. The trick is to educate yourself on the expanded offerings of BPOs (business process outsourcing) and determine the optimum time to partner with them. The traditional outsourcing arrangement has been that your company engages a BPO to take on a significant portion of your work for less cost. That model is changing. Several factors are affecting the decrease in demand for the old model: shared services organisations are becoming more independently resourceful; automation solutions are winning against traditional BPO set-ups; and wages in BPO heartlands such as India are rising. This means that traditional BPO is taking a hit. BPOs are evolving. Smaller deals in higher numbers are becoming the norm, and, increasingly, there’s little or no outsourcing in the deal. BPOs now offer consulting, implementation of technology, analytics and working capital services. It is also lower-risk to customise a set-up in which BPO services and shared services converge.

People have been debating the pros and cons of shared services versus traditional outsourcing for many years and in reality, there’s a case for both; outsource and you have service expertise, fewer personnel, use less resource, and in turn reduce costs and improve customer experience; internally develop a ‘shared services centre’ and you benefit from efficiencies that follow from specialisation and standardisation – resulting in the creation of front and back offices. Ultimately, the quality of customer interaction is a top reason for recommending a company. The new role of the contact centre is connecting the dots to deliver customers the experience they want, when they want it, in the channel of their choosing. Outsourcing and shared services transform an organisation with advantages including all-year-round availability, flexible cost models, and multi-lingual capabilities across a variety of sectors, resulting in the delivery of services to clients and their customers at a cost, quality and timeliness that no other alternative can compete with.

The debate has moved on. We now throw global business services into the ring where shared services and outsourcing are complimentary, governed by a global framework. The right model depends on the vision, culture and business imperative of the company at the time. A company should keep what’s core, but can outsource the rest. Outsourcing was previously about big change and quick cost cutting. But collaboration, innovation, analytics, transformation, business agility and process excellence are some of today’s buzzwords. Marry strategic alignment with standard processes, superior technologies and expert talent, add a hunger to succeed as the provider also has skin in the game, then your outsourcing will deliver results far beyond cost savings into real business improvements. Outsourcing works – when it’s done right. Regardless of model, a disciplined balanced governance approach is required to improve strategic and operational efficiencies. And finally, it’s all about the people – good relationships are central to outsourcing success.

The future of outsourcing and shared services is as partners, not competitors. For decades outsourcing has been an established model, with common motives regardless of scope. BPO, infrastructure or application management/development have all essentially passed the traditional tests of reducing costs, improving service and creating scalability. The maturity of buyers has also increased dramatically and the challenge to vendors now is how to create flexibility to deliver commercial advantage to their customer base, but still pass the traditional tests. Leveraging shared services is an obvious way of demonstrating new economies of scale, but this creates new dynamics for buyers and vendors. Buyers want to retain control and feel safe sharing their processes and infrastructure with competitors. Vendors need to deliver long-term annuity revenues but offer customers flexibility. A combined model is possible. Strategy must be owned by the customer with execution delivered by the partner. Create trust and both models will thrive.

Outsourcing and shared services have many differences, but also much in common. While outsourcing involves multiple suppliers to one customer and shared services has one supplier servicing multiple customers, both face the same issues around risk management and flows of information. And neither outsourcing nor shared services work in isolation from clients and the rest of the business. A change in one part of the supply chain or business can impact upon other areas. What is needed is a holistic approach that ties inputs to the business outcomes. The flight deck of an aeroplane has an overarching view of what’s happening in the aircraft, which is what businesses using outsourcing or shared services also need. Like a pilot, they can respond to changing conditions to ensure that the best business outcome is achieved. In fact, truly innovative businesses are moving from what is happening now into causal modelling, allowing predictions of what is likely to occur in the future and how the business can best respond.

020 3176 2622 www.sharedserviceslink.com

0800 444 221 www.sitel.com

0207 292 8686 www.noa.co.uk

0845 860 3244 mike.whitchurch@cgi.com

01904 717 300 www.moodinternational.com

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