Outsourcing Business - Netpublicationnp.netpublicator.com/np/n34908574/Raconteur-Outsourcing-Business... · Outsourcing Business ... (ITO) is technology-spe-cific work like managing

_ 11th. June. 2012

Outsourcing Business

raconteuronthetimes.co.uk theraconteur.co.uk twitter.com/raconteurmedia 03


Ȗ It is a sign of the relentless march of outsourcing that even the job of looking after Britain’s nuclear weapons has been outsourced.

The contract to design, build, maintain, and eventually decom-mission the Trident warheads was awarded twelve years ago to Serco, Lockheed Martin and Jacobs Engineering Group. It is a happy arrangement and in May the Min-istry of Defence signed a further extension, awarding the trio the contact until 2018.

If this surprises you then I’m afraid you are a little out of touch. Outsourcing is affecting almost every facet of British life.

Take the police. Back in the day of Dixon of Dock Green, every-thing was done in-house from manning the lock-ups to ordering the tea bags. Now the situation is almost reversed.

In Lincolnshire the custody ser-

vices are run by G4S, as are procure-ment and finance. Surrey Police are looking to outsource crime investigation, detaining suspects, victim support and neighbourhood patrols. Translation services in the courts have been outsourced to Applied Language Solutions.

The private sector is even more advanced. When Clarks shoe shops close for the night, it is Mitie’s workers who arrive to clean the windows and polish the floor. When Sky customers ring about upgrading their subscriptions, they talk to the employees of Glasgow firm HeroTSC. The vertical inte-gration model is dead.

So what’s going on? Why is out-sourcing so popular?

The best clue is written on the back of the £20 note, where you’ll find Adam Smith’s quote on the division of labour. Smith noticed that in a pin factory, productivity could be increased if each worker stuck to a single task. This is the logic of outsourcing: you concen-

trate on what you are good at and delegate all other activities to specialists, then costs will fall and quality will rise.

The first thing to do is to get to grips with the vocabulary of the outsourcing industry, in particular, the acronyms which identify each segment.

Information technology out-sourcing (ITO) is technology-spe-cific work like managing networks and developing software. ITO has been around since Ross Perot founded EDS in 1962.

Business process outsourcing (BPO) refers to outsourcing opera-tional functions, such as logistics,

procurement, handling paperwork and human resources. BPO is usu-ally divided into back-office func-tions, such as supply chain or HR, and customer-facing front-office functions, often requiring voice ser-vices. India is the homeland of BPO, where firms such as Genpact, Wipro and Infosys are household names.

Knowledge process outsourcing (KPO) is more technically challeng-ing than BPO. It includes analysis and research, and usually requires graduates capable of working on their own initiative. KPO work tends to encroach more closely on the core activities of the com-missioning firm than BPO, which covers more peripheral duties. Marketing process outsourcing

(MPO) off-loads one or all of the marketing functions from PR, branding, research, search engine optimisation and web analytics.

Legal process outsourcing (LPO) replaces in-house legal counsel with external support, often based overseas, and includes routine cases, such as bankruptcies, and process-driven services, such as research and compliance.

In all these areas there is one common characteristic, in addi-tion to delegation; they are part-nerships. The client and out-sourcer work together to achieve a defined goal. This is what makes outsourcing different to mere pur-chasing. After all, most companies buy their light bulbs and espresso machines, but these functions aren’t “outsourced”.

Outsourcing is about bringing together two parties, both experts in their domain, and combining their talents. Get it right and the potential for productivity gains is mouth-watering.

REBECCA BRACEFinancial and business journalist, she is a former editor of Treasury Today.

MICHAEL DEMPSEYJournalist and media trainer, he has worked for BBC News and the Financial Times.

MARTYN HARTChairman of the National Outsourcing Association, he is a consulting director with Gartner.

JASON HESSEEditor of The Kernel, he was digital editor of Real Business.

NICK MARTINDALEBusiness writer and editor, he regularly contributes to a variety of national publications.

CHARLES ORTON-JONESFormer PPA Business Journalist of the Year, he is editor-at-large of LondonLovesBusiness.com.

SALLY PERCYEditor of The Treasurer magazine, she is a former editor of Accountancy.

JAMES SILVERTechnology specialist, he writes for The Sunday Times, The Observer and Wired magazine.

ELLIOT WILSONBusiness journalist, he writes for The Economist, The Spectator and Euromoney.

Publisher Will Brookes

Editor Charles Orton-Jones

Managing Editor Peter Archer

Design The Surgery

Distributed in In Association with

Distributed at

Contributors

Outsourcing can free up a company to concentrate on what it does best while delegating business functions to partners who are experts in their field, writes Charles Orton-Jones

INTRODUCTION

Successful outsourcing is a partnership of two expert parties

Quality. Productivity. innovation. EndavaPErhaPs it’s timE to think againabout whErE you outsourcEEndava is a leading IT services organisation, with offices in London, New York, and Glasgow, and delivery centres in Romania and Moldova. Utilising our distributed agile delivery model we are able to deliver significant improvements to quality and productivity enabling our clients to deliver better results from their budgets

— ApplicAtion Development — testing — ApplicAtion mAnAgement — DigitAl meDiA — infrAstructure Hosting

AnD support

endava.comlondon nEw york glasgow romania moldova

2012 Finalist

All editorial is without bias. Sponsored features are clearly labelled as such. We value your feedback. Please send any correspondence to [email protected] For information about partnering with Raconteur Media please call +44 (0)20 7033 2100 or email [email protected] www.raconteurmedia.co.uk The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © Raconteur Media

Expert partners can deliver more for less

the world map of outsourcing destinations is

changing with jobs returning to the uK

Outsourcing is affecting almost every facet of British life

estimated value of BPO

market by 2016source: iDC

India’s share of the world’s

information technology BPO

source: nasscom

£130 bn

51%

Jon Feingersh

raconteuronthetimes.co.uk theraconteur.co.uk twitter.com/raconteurmedia04


MiCrosoFt: transForMing a global giant

slough borough CounCil: enabling anD eMpowering FroM the start


From transition to transformation:embracing changeMatthias Mierisch, chief executive and chairman of arvato UK & Ireland, explores the need for flexibility in outsourcing partnerships and offers some examples of best practice

Ȗ In today’s evolving economy, there are very few business lead-ers who know exactly what the future holds for their organisation. While the benefits outsourcing offers are attractive, in this context it can be difficult to imagine a long-term deal, unless it has the flexibility to continue to deliver.

The days of outsourcing just being a quick way to drive down costs in a short timescale are long gone. Money will clearly remain a key driver, but our clients are tell-ing us it’s now more about helping them transform their business so they can better cope with and capi-talise on changes in their industry.

Getting the right deal in place is not just about getting it down on paper. When you’ve found the right

partner, it’s about making the rela-tionship work once the contracts are signed. Establishing an effective governance model, where every-one understands the overall objec-tives and is incentivised to play their part, means that sometimes the contract stays in the drawer to enable the best outcomes.

Once the expectations of a new outsourcing partnership have been set, hitting the ground run-ning is a must. But the transition of a new outsourcing relationship sets the tone for the whole deal, so it ’s important to take people with you on the journey. Not only does this maintain trust but, given the right skills, employees can be empowered to play an active role in improving existing processes. Understanding what insights and knowledge already reside within the workforce, combined with addi-tional expertise from an outsourc-ing partner, can be used to develop the most effective framework for long-term and achievable organi-sational change.

For an outsourcing partnership to continue to deliver value, change shouldn’t stop with the end of the transition. Organisations constantly evolve and outsourcing partner-ships should too. Transformation is about anticipating and prepar-

ing for changes in market dynamics or end-cus-

tomer expectations. The right outsourc-ing partner can help

organisations to get ahead of the curve and stay there.

It’s now more about helping clients transform their business so they can better cope with and capitalise on changes in their industry

Commercial Feature

As the biggest music content com-pany in the world, Universal Music Group (UMG) needed to sustain a viable distribution business, in the face of a challenging and fast-changing music industry. UMG decided to draw on arvato’s global supply chain expertise through an outsourcing partnership.

arvato took over UMG’s Milton Keynes site in 2008 and success-fully completed a complex tran-sition in just three months. This included taking over the distribu-tion and warehousing for more than seven million units, replacing legacy technology and managing a highly sensitive TUPE transfer

of over 160 employees. The partnership has recently

expanded to include e-commerce fulfilment and direct customer ser-vice, as consumers turn to online channels for purchase. This covers distribution of CDs, DVDs and exclu-sive merchandise from more than 70 online artist stores, maximising stock control across multiple channels and improving turnaround times.

“Moving from an in-house to an outsourced distribution solution has realised all the benefits we were seeking and more besides,” says Martyn Saville, vice president logis-tics at UMG. “The transition went without a hitch and arvato made

major investments in new ware-housing and distribution systems from the word go. We’ve lowered our distribution costs and upgraded our delivery service. It’s fair to say we couldn’t have achieved these improvements without our partner-ship with arvato.”

Maintained 100 per cent of employees during TUPE Shipped more than 150 million units with an average 100 per cent completion rate Delivered cost per unit savings of 25 per cent Investment of more than £2 million in the site.

arvato’s innovative public-private partnership with Slough Borough Council was not only set up to drive cost savings, but transform processes for the council. In addi-tion, the partnership has created a vision of a public sector service as a catalyst for bringing new business and employment opportunities into the region.

Despite the guaranteed benefits, public sector employees often have real fears about the changes an out-sourcing deal threatens. The part-nership engaged with employees from the outset, enabling them to understand what would and, more importantly, what wouldn’t change.

Employees from four service areas within the council were suc-cessfully TUPE-transferred [Trans-fer of Undertakings (Protection of Employment)] across to arvato in April this year, on their existing terms and conditions.

Despite being only two months into the relationship, all employ-ees have undergone Lean Six S i g m a t ra i n i n g a n d t h e p a r t-n e r s h i p h a s c o n d u cte d Le a n Reviews across each service. An empowered workforce has already identified more than 100 areas for improvement.

Councillor Rob Anderson, leader of Slough Borough Council, says:

“arvato’s approach to enhancing services and achieving cost sav-ings is based on investment, in infra-structure, technology and people, and a fundamental belief in collab-oration. The joint development of the shared service centre with the council is an important move for-ward in how public sector organi-sations can start to take the lead in delivering service excellence.”

More than 100 staff transferred to arvato Investment of £3.8 million Savings of £26.5 million Creation of 100 apprenticeships.

Microsoft made the decision to outsource contract-to- invoice p ro c e s s e s fo r i ts fo u r m a j o r lines of business to a single part-ner who could deliver best prac-tice and innovation, globally. This involved Microsoft entrusting 90 per cent (US$60 billion in 2011) of the company’s global revenue processing to arvato.

Previously managed by seven vendors in five locations worldwide, processes were fragmented with inconsistencies in quality standards and customer service. This lack of standardisation was adversely impacting operating costs, produc-tivity and customer satisfaction.

To m a n a g e t h e c o m p l ex i t y and r isk , Microsoft and arvato

established a managed services model where arvato is empow-ered to make operational deci-s ions with in the scope of the c o nt ra c t . T h i s m e a n s M i c ro -soft is freed from micro-man-a g i n g d ay-to - d ay o p e rat i o n s and can redeploy its resources to d e l ive r va l u e - a d d e d wo rk . The partnership focuses on out-come-based performance tar-gets, such as revenue growth and improved customer experience, as well as the creation of a more agile business.

"arvato has a truly innovative way of working, a proven abil ity to al ign global processes and a track record in producing real sav-ings and efficiencies,” says Kyle

Christensen, Microsoft ’s senior director of worldwide business process outsourcing (BPO) opera-tions. “Our managed service part-nership is already helping Micro-soft become more efficient and more consistent. It will enable us to deliver a market-leading expe-rience for our partners and cus-tomers around the world."

12 successful transitions in 12 months 1,100 employees speaking 15 languages More than 4,000 processes More than 20 per cent cost savings over the term of the contract.

Ȗ It isn’t easy to pin down N.V. “Tiger” Tyagarajan. For one thing, the president and chief executive of Genpact, the leading informa-tion technology services firm, is rarely in one place for long, dividing his time equally between Europe, China, India and the US.

But Raconteur caught up with him at Genpact’s new London offices near Victoria on a scorching Friday afternoon, squeezed between a 90-minute board meeting and a short family holiday in Turkey.

Well into his mid-fifties yet look-ing a decade younger, Tiger – his nickname bestowed on him at Catholic school in Mumbai by classmates and scholars of Wil-liam Blake’s poetry – does appear almost feline. He prowls around the room, his feet and legs jiggling impatiently when forced to sit. If told he slept with one eye open – or didn’t need to sleep at all – it would come as no surprise.

Genpact is in many ways a corporate anomaly, even in the obscure and often invisible world

of IT services. For one thing, it’s neither an avowedly “Indian” IT firm with global aspirations (think of Infosys or Wipro), nor an “American” institution with global reach (IBM).

Rather, it’s a mix of the two, hav-ing been spun out of a fast-growing division of General Electric in 1997, setting up its first UK office – still one of its most profit-able divisions – the following year. Tiger, one of the founders, ran the company between 1999 and 2002 before being elevated again, from chief operating officer, for another stint last summer.

Genpact’s slightly ephemeral identity extends to its main offices – or lack thereof. Throughout history, corporations have been associated with cities, regions or in the case of, say, Coca-Cola, entire countries. Not so Genpact, which evades such narrow geographical definitions.

Its biggest offices lie just outside Delhi, on the northern Indian plains, and it also has huge opera-tions in Britain, Mexico, Australia,

Hungary, America and China, as well as a listing on the New York Stock Exchange. Yet none of these locales, Tiger stresses, classify as a headquarters. “We don’t have one,” he says, with wry smile. “In the globally connected 21st-century world, headquarters are increas-ingly redundant.”

For a while even Tiger struggles to explain what Genpact does, fall-ing victim to that cursed and shad-owy area of the English language where technology and marketing meets management theory.

Thus, working hard and getting employees to meet customer needs isn’t simply “the right thing

to do in order to get paid”, but something to do with Six Sigma, a business management strategy loved by some, hated by others, and popularised by former GE chief Jack Welch. And convincing an existing customer to recommend your services to a new client isn’t just “word of mouth” but, in Tiger’s terms, “a big metric called ‘net cli-ent delight’”.

The reality is both simpler and far more complex. When a credit card bill is delivered to your door, chances are that Genpact pulled some or all of that information together and delivered it to the right address. Or if, say, a scan-ning machine at a hospital or a jet engine needs to be repaired or ser-viced, a Genpact worker will log in externally, quantify the problem, locate a new part and ship it from source. This makes it a little like The Matrix movie. It’s everywhere and nowhere: hard to see, yet impossible to miss once you know what you’re looking for.

In Tiger's eyes, offshoring has run its course. “We don’t use the word ‘offshoring’ and haven’t done for years as it’s such a narrow defi-nition. We don’t even use ‘onshor-ing’, or ‘BPO’ – we call it ‘business

process management’, given that we work alongside our clients every step of the way. Offshoring and outsourcing have moved on to become a much broader and richer story.”

Genpact opts for regionality, rather than simply shuffling all work willy-nilly to India. Clients in Eastern Europe are served out of its operating offices in Budapest, just as Latin America and South-East Asia are served respectively out of regionally focused offices in Mexico and the Philippines, each

infused with its own local flavour. “You can’t do everything from

India,” says Tiger. “There are some tasks that can be done better closer to a client, just as there are things you can do better from a distance. That is why we have distinct, regional operating offices.”

This allows Genpact to go a step further than more traditional pro-viders of lower-value, higher-bulk outsourcing services. Its employees are encouraged not just to devote themselves to customers, but to think and operate as if they are employed by those corporations.

“We behave like an extension of our clients and we are maniacally focused on them,” says Tiger. That way of thinking is clearly working: last year the firm, which employs 55,000 people worldwide, pulled in $1.6 billion in sales, with profits rising nearly 30 per cent to $142 million.

Yet it isn’t merely about replicat-ing services; if it was that simple, anyone could do it. Genpact profits by pushing its clients in new direc-tions: reading market conditions, consumer behaviour, stock and commodity prices, and entire economies, and helping clients roll out the right product at the right time.

This is vital for no other reason than that at a time of austerity companies need to work smarter. Tiger says: “Clients therefore want more intelligence these days. They want to know more about their products and markets, to know more about the customer.”

And with that he’s off, bounding away to another airport, to yet another flight, on this occasion to spend some deserved downtime with his family. Even his most demanding clients, one feels, wouldn’t begrudge him that.

Tiger prowls theworld of outsourcing

The head of one of the world’s biggest IT services companies tells Elliot Wilson, in an exclusive interview, how he sees outsourcing developing

Offshoring and outsourcing have moved on to become a much broader and richer story

INTERVIEW n.V. "tiger" tyagarajan, president and chief

executive of genpact

‘Offshoring’ is an outmoded term and ‘outsourcing’ is also making way for ‘business process management’, says Tiger Tyagarajan

uniVersal MusiC group: eFFeCtiVe eVolution

raconteuronthetimes.co.uk theraconteur.co.uk twitter.com/raconteurmedia06 raconteuronthetimes.co.uk theraconteur.co.uk twitter.com/raconteurmedia 07

Outsourcing Business Outsourcing Business

06 07

CHANGING GEOGRAPHIES

Emerging destinations for outsourcing, including parts of the UK, are challenging India’s cost-effectiveness, but price isn’t all that matters, as Sally Percy reports

Ȗ For a decade and more, India has reigned as the world’s outsourcing destination. Among its well-pub-licised advantages are a large pool of educated, English-speaking peo-ple, proactive government back-ing and robust infrastructure, tel-ecommunications and technology.

But with wage inflation and rising staff attrition eroding India’s cost-effectiveness, other nations hope to cut a bigger slice of the $370-bil-lion global outsourcing pie.

“Countries will seek to grow their participation in offshore services with each country work-ing out what they can offer that’s different,” says Duncan Aitchison, partner at global outsourcer Infor-mation Services Group (ISG).

India’s declining cost-effective-ness, combined with the financial crisis, has sparked what Rich-ard Jones, chairman of procure-ment outsourcer Proxima Group, describes as a “race for the bot-tom”. Companies are open-minded

about where their outsourcing providers are based as they hunt down destinations that offer the best service for their money.

The emerging destinations share several important attributes, according to R. Chandrasekaran, group chief executive for technol-ogy and operations at US outsourc-ing giant Cognizant. “They offer a rich pool of multi-skilled talent with a high work ethic. They also have cost advantages, sound IT and telecoms infrastructure, good connectivity, ease of travel, govern-ment support, business-friendly policies and cultural compatibility.”

But the journey to find high-qual-ity, cost-effective outsourcing pro-viders doesn’t only end in exotic locations. The UK is set to attract more outsourcing as companies repatriate work to the regions, which are increasingly good value for money. And the Coalition Government’s cost-cutting drive could mean it makes greater use of

outsourcers for public sector work. Mr Jones also predicts a strategic shift towards robotics in business processes, which could benefit the UK given our history of incubating leading-edge technology.

And cost isn’t everything, even in outsourcing. “Companies have been very quick to go down the cost-saving route,” says Debra Maxwell, global business process outsourcing (BPO) director of Arvato. “They need to be focused on quality.”

The UK is set to attract outsourcing as companies repatriate work to regions which are good value for money

the philippines may be less well known in the uK than its great outsourcing rival india, but it’s a favourite with us companies. skilled graduates come cheap and the country has decent infrastructure and technology. outsourcing is predominantly call-centre based although more complex back-office operations are taking off. workers tend to speak fluent english with an american accent. Companies with outsourced operations in the philippines face limited reputational risk due to stringent labour laws.

the philippines

south africa’s advantages include its weak currency, multi-lingual population and convenient time zone, just two hours ahead of greenwich Mean time. besides english speakers, it has a german population, making it an attractive offshore destination for german companies. airline lufthansa has a call centre in Cape town. gartner research found that south africa has a good reputation for data and intellectual property security, which explains why many uK law firms send their document production there.

south africa

For the past six years, the Chilean government has actively promoted the country as an outsourcing centre through generous incentives and investment in infrastructure. Chile has the highest rates of mobile telephony and broadband penetration in latin america, the safest capital city in santiago and employer-friendly labour laws. literacy is high at 96 per cent and the country is on the same time zone as new York. it is politically stable with a low foreign currency risk.

Chile

Vietnam has established itself as an important hub in software development and is home to more than 3,000 it service providers, employing around 15,000 engineers. it is reaping the benefit of rising costs in China and growing Chinese-us trade tensions. in 2010, intel opened a $1-billion chip manufacturing plant in the country. Vietnam is a very cost-effective outsourcing destination thanks to cheap commercial rent, hardworking people, modest entry-level salaries and a low cost of living.

Vietnam

the uK is enjoying an outsourcing renaissance thanks to the competitiveness of its regions. locations, such as south wales, glasgow and belfast, offer skilled people at a reasonable price with glasgow, particularly, known for its work ethic. the regions offer government grant assistance, sound infrastructure and cost-effective commercial property, including purpose-built business parks. they are a low-risk option since it’s easier to manage outsourced operations here than abroad and it’s cheaper to transition the work.

uK

Cited as a destination to watch by analyst gartner, Jamaica is the Caribbean’s leading outsourcing destination. its close proximity to the us, robust telecommunications and developed financial services sector in the Montego bay Free Zone make it attractive to insurers and similar businesses. salaries for outsourcing staff are 40-60 per cent lower than in the us and attrition rates are low. work carried out includes debt collection, finance and accounting, customer services, insurance claims and technical support.

Jamaica

it may not seem an obvious choice, but romania has a reputation as an attractive outsourcing destination. the country is becoming a leader in outsourced it product development, particularly for chip design, embedded software and information security. with more than 100 universities, romania is renowned for its cheap, high-quality labour pool that has language and mathematics skills in abundance. it was ranked 25 on the 2011 global services location index produced by management consultancy a.t. Kearney.

romania

the impressive education system of the former soviet union is behind russia’s emergence as an it outsourcing centre. it has a huge pool of engineering and it talent who are relatively low-cost and expert in technically challenging tasks. russia is geographically well positioned and the government has expanded it infrastructure in the country. siemens, alcatel and the london stock exchange are among more than 250 global companies that use russia for offshore software development.

russia

as an outsourcing provider, poland ticks many boxes. it has a well-educated and loyal workforce, good telecommunications and a convenient location at the heart of europe. government support for outsourcing is high and it has invested heavily in foreign languages, making it a call-centre hub. poland is home to around 500 it service providers that offer network services, analytics and embedded systems. large multinational companies, including Motorola, hp, google and ibM, have development centres there.

poland

ghana is a rising star of business process outsourcing. according to outsourcing group isg, it is the least expensive destination in the world thanks to its low taxes, rent and wages. salaries in ghana are 60-65 per cent lower than south africa and 50-55 per cent lower than egypt. the country has tried to boost its attractiveness to investors through technology parks, and by supporting research and development. an established democracy, it shares a time zone with the uK.

ghana

Race for the bottom as companies cut costs

annual rent for a 1,000sq ft office in Newport, Wales source: rightmove

£6,000 average monthly salary for a bilingual Chilean call centre agent source: nearshores america

$1,000

call centre jobs in the Philippines source: arvato

600k

02

03

04

05

06

07

08

09

1001

| 02

| 06

| 10

| 04

| 08

| 01

| 05

| 09

| 03

| 07



08 09

Ȗ Two pieces of research give two different pictures of outsourcing. The first is a recent study commis-sioned by the Business Services Association (BSA). The research, conducted by Oxford Economics, indicated that Britain’s outsourc-ing industry accounts for £200 billion a year and 8 per cent of the UK’s economic output – slightly less than the financial services sec-tor, which accounts for 8.1 per cent.

The second report was published by the National Outsourcing Asso-ciation (NOA) in May. According to the NOA’s research, which polled more than 2,000 people, only 20 per cent of British adults believe that outsourcing benefits the UK job market or economy, while a mere 19 per cent said outsourcing can help get the UK out of recession.

Putting the two surveys together, it’s clear that there is a signifi-cant gap between the reality of outsourcing and the perceptions surrounding it. Despite mak-ing up a sizeable percentage of this country’s GDP, outsourcing continues to be associated with negative connotations – 22 per cent of people cite outsourcing as a profession they dislike, according to the NOA’s survey.

Indeed, this reputation was pre-cisely the trigger for conducting the research, says Glenn Hickling, the NOA’s communications man-ager. “I monitor the news on a daily basis and there’s a lot of negativity about outsourcing,” he says. “We suspected as much and wanted to prove it.”

So what is the source of this negativity? In today’s economic climate, it’s no surprise that it boils down to fears around job losses and the prospect of moving work overseas. In particular, the terms “outsourcing” and “offshoring” are often used interchangeably.

However, they do not mean the same thing: outsourcing means contracting work out to a third party – not necessarily overseas – whereas offshoring means carrying work out in a different country. This distinction is not widely

understood, as the survey’s results illustrate. Only 14 per cent of respondents correctly identified hiring an accountant to help with a tax return as an example of out-sourcing, whereas 58 per cent iden-tified a major bank opening a call centre in India, which is actually an example of captive offshoring.

This confusion is significant because often the negative percep-tions surrounding outsourcing are more applicable to offshoring. When asked “What words do you associate with outsourcing?”, 65 per cent of the survey’s par-ticipants selected “cost cutting”, while the next most popular choices were “job losses”, ”call centre” and “India”.

In reality, outsourced activities often remain in the UK, although they may take place in a different part of the country. And while the prospect of job losses looms large for many of those with con-cerns about outsourcing, it is not uncommon for staff working for an organisation to make a career move to one of the company’s out-sourcing partners.

“Yes, there are jobs that are being lost, but the nature of efficiency and specialisation means that jobs are constantly going to be lost and reinvented in an economy,” says Matthew Bennett, partner at law firm Olswang. “Outsourcing is just part of that – it’s not the cause.”

Inevitably some people under-stand outsourcing better than oth-ers. Male respondents to the NOA’s survey were more likely than their female counterparts to agree that outsourcing benefits the UK. Age also has an impact: 27 per cent of 18-24 year olds acknowledged the benefits for the economy, compared to 12 per cent of 55-64 year olds. When asked whether outsourcing can help get the UK out of recession, only 11 per cent of

55-64 year olds agreed, compared to the overall figure of 19 per cent.

Meanwhile, familiarity with the topic is likely to be affected by occupation and any personal experience people might have had in this area. “Outsourcing has been around a long time and there’s a pretty good knowledge

base,” says Chris Moyles, chief technologist at HP Enterprise Services. “But for people who don’t spend as much time with outsourcing, it gets tagged with certain labels that don’t reflect the full nature of the service.”

While these negative percep-tions are pervasive, positive stories about outsourcing tend not to be celebrated. Mr Bennett says that successful outsourcing projects tend not to get the accolade they deserve. “The general perception is that there are failings, but no one really talks about the positive transactions,” he says.

The danger is that the negative perceptions make outsourcing less attractive, despite the asso-ciated benefits, and companies concerned about the PR implica-tions of outsourcing some of their activities may ultimately decide against such a move.

In order to change these negative perceptions, solid proof is needed of the benefits outsourcing provides. When asked “Which of the following do you think would make outsourc-ing more acceptable to you?”, 70 per cent of the NOA survey’s respond-ents chose “Evidence of how many

UK jobs are created by outsourcing”, closely followed by “Proof of how much outsourcing positively con-tributes to UK economy”.

The NOA is taking up the gaunt-let with its Outsourcing Works campaign, which will focus on providing further research into the subject as well as a PR campaign to improve the profile of outsourcing. Another goal is to position the UK as an offshoring destination in its own right, focusing in particular on areas such as knowledge manage-ment and software development, in order to encourage more invest-ment and more jobs in the UK.

There is much that outsourc-ers themselves can do to tackle negative perceptions. Celebrat-ing the successes of outsourcing more proactively may be helpful here, as Mr Bennett points out: “Sometimes it’s difficult to see the benefits because successful outsourcing should be invisible by its nature.” He says that the role played by outsourcing has almost gone unseen in high-profile public sector projects, including Transport for Lon-don’s Oyster card.

Meanwhile, for companies which do outsource some of their activi-ties, engaging with customers more closely can help them to challenge misconceptions and celebrate success stories. Social customer relationship manage-ment (social CRM) presents some interesting opportunities here.

As the NOA’s Mr Hickling concludes: “Outsourcing is defi-nitely contributing massively to the economy, but it’s the unsung hero. If the public perception was changed, maybe it could contribute more.”

The unsung herorivalling the City

Outsourcing worksfor UK economy

Outsourcing is the victim of a reality gap – the difference between its real worth to the UK economy and negative public perceptions, as Rebecca Brace discovers

Outsourcing is the victim of a reality gap – the difference between its real worth to the UK economy and negative public perceptions, as Rebecca Brace discovers

National Outsourcing Association chairman Martyn Hart argues that more effort is needed onshore to bring jobs to the UK

Despite making up a sizeable percentage of this country’s GDP, outsourcing continues to be associated with negative connotations

PERCEPTIONS

OPINION

Ȗ When firms are thinking of out-sourcing, one of the first places they turn to is the National Out-sourcing Association (NOA). We are the independent, not-for-profit body with a remit to help anyone wanting to make outsourcing work.

NOA offers qualifications accred-ited by Middlesex University which cover a wide variety of out-sourcing management roles and our research is vital reading for anyone wanting to keep abreast of what is happening in the industry. Among our most important offer-ings is the NOA Life Cycle model, which provides a practical frame-work for firms going through the outsourcing process.

Our latest challenge is tackling the misunderstandings around outsourcing. When the NOA formed in 1987, outsourcing was at the cusp of being recognised as a key operational strategy. The earlier outsourcing practices were largely limited to local suppliers and contractors – this is still the major part of our industry, but as far as the public is concerned, this seems to have been forgotten. Outsourcing’s image these days is synonymous with offshoring, as our recent study into The Public Perception of Outsourcing showed.

The Public Perception of Out-sourcing is the first wave of research in the NOA’s flagship campaign for 2012/13: Outsourc-ing Works. The next step is a study that will quantify the business and macro-economic benefits of sending work out. Outsourcing is a major contributor to UK PLC, weighing in with nearly 10 per cent of GDP, yet it is the unsung hero, often maligned, largely misunder-stood. When its goes wrong, it’s national news – when it goes right, it’s ignored. Outsourcing works. Our industry needs to unite to champion our successes.

For as many projects out there that are gaining negative media attention, there is an abundance

of contracts that are improving services, saving public sector money and genuinely ameliorat-ing business prospects. I for one am eagerly waiting to see who wins the new Outsourcing Works Award at the NOA Awards (in association with Wipro) coming up in October. Kudos will go to the entry that demonstrates the most tangible benefits against the original busi-ness case, highlighting the real dif-ference that outsourcing can make when done right.

Newspapers have long been full of UK manufacturing's decline. Offshoring has had its part to play in that and, for companies doing large production runs, that will always remain a strategic option that’s impossible to ignore with global competition. But manufacturing is not what we’re all about. It is imper-ative we get everyone to realise that not all offshoring is outsourcing, not all outsourcing is offshoring.

In addition to the excellent work going on offshore, more work is needed onshore. The NOA is work-ing to redefine what outsourcing means in the hearts and minds of the public, and make sure we, as a nation, do all we can to promote the UK as a destination to offshore to.

“Our-shoring” is a key element of the Outsourcing Works campaign and aims to drive onshore invest-ment in our sector – reinforcing the fact that outsourcing is a com-ing force that can help create jobs in the UK.

Additionally, the UK is certainly well placed to become the interna-tional strategic hub for outsourc-ing. Our aim is to preserve the UK's competitive edge, keep jobs and bring more in. We have the skills and the knowledge and, as well as that, other supplementary factors are perfectly aligned. In terms of time zones, manageable commuting distances and access to major finance markets, the UK is ideally situated to ensure out-sourcing works for us all.

Confusion between outsourcing and offshoring may be the reason why so many people hold a negative view of this UK asset

03% | Strongly agree 15% | Slightly agree 45% | Neither agree nor disagree 19% | Slightly disagree 18% | Strongly disagree

To what extent do you agree or disagree that outsourcing can help get the UK out of recession?

| 06% | Lastminute.com selling holidays on the internet| 14% | Hiring an accountant to help with getting your tax return right| 27% | A local computer company providing IT support to small businesses| 32% | A government department buying software licenses from a French supplier| 47% | A sports brand setting up a factory in China to manufacture trainers offshore| 58% | A major bank opening a call centre in India| 15% | None of the above

| 01% | Pride| 02% | Courage| 04% | Trust| 10% | Fear| 11% | Wasteful| 13% | Disgust| 16% | Rip-off| 45% | India| 48% | Call centre| 53% | Job losses| 65% | Cost-cutting

Which of the following do you think describe an example of outsourcing?

| 08% | Proof of how much more an iPad would cost without outsourcing| 14% | Getting a job in outsourcing yourself| 17% | Proof of how much a TV license would cost if the BBC didn’t outsource| 55% | Less wasting of taxpayers’ cash in public sector contracts| 69% | Proof of how much outsourcing positively contributes to UK economy| 70% | Evidence of how many UK jobs are created by outsourcing| 18% | None of the above

Which of the following would make outsourcing more acceptable to you?

What words do you associate with outsourcing?

Outsourcing: facts v perceptions

Source: Survey conducted on behalf of the National Outsourcing Association and Outsourcing Yearbook 2012 by Populous, a member of the British Polling Council, www.populous.co.uk

3%17%

44%

18%

18%

Strongly agree

Slightly agree

Neither agree nor disagree

Slightly disagree

Strongly disagree

Based on what you have heard or understand about

the term ‘outsourcing’, to what extent do you agree or

disagree that outsourcing benefits the UK job market/economy?

Outsourcing facts

£207bnamount Britain’s outsourcing industry accounts for each year

8%contribution to UKeconomic output

Source: Business Services Association (BSA), 2011

Outsourcing facts

3.1mjobs directly supported by outsourcing activities

Source: BSA, 2011

raconteuronthetimes.co.uk theraconteur.co.uk twitter.com/raconteurmedia10


onshore Fte(full-time equivalent)

offshore Fte robotic Fte


Commercial Feature

Robotic automation: driving next-generation BPO?

Ȗ Since the 1990s and early-2000s, supported by the revolution in global telecommunications, the potential for huge labour savings made desti-nations such as India, the Philippines, Costa Rica and South Africa hugely attractive. Organisations could hope to save as much as half their costs by running large operations centres in these territories.

Now, though, wage inflation and currency uncertainties are under-mining the economics of this propo-sition. Organisations are constantly looking for competitive advantage and a new generation of technol-ogy is emerging which may further undermine and even reverse the off-shoring trend: robotic automation.

Robotic automation refers to a style of automation where a machine, or computer, mimics a human’s action in completing a task. In office administration, clerical robotic automation refers to automa-tion where a computer drives appli-cation software in the same way that a user does. This is different from the standard IT approach, in that the robot is not programmed, nor does it need large IT engineering to install.

In fact, the robot is trained by a business user in a similar way that a new employee may be shown how to complete a task. The flexibility of this, coupled with its inherent scal-ability, means the days of routine process management, bread-and-butter to most offshore business process outsourcing (BPO) propo-sitions, may be numbered.

“The BPO market is changing and next-generation BPO will need to go beyond simple labour arbitrage,” says Richard Jones, chairman of procurement, outsourcing provider Proxima Group. “Automation has tra-ditionally been hard for outsourcers; they often face highly bespoke, as well as complex IT estates, across multiple clients and multiple tech-nologies. In contrast, robots use and drive applications in the same way humans do, so automation not only becomes possible, but also offers flexibility, scalability and affordability.”

The advantage of robotic auto-mation is that it al lows compa-nies to repatriate processes, as the economics of performing routine and rules-based tasks on machines makes location less rel-evant. It is particularly appealing to those with back-office tasks that cross a number of disciplines, such as banks, uti l ity companies and telecommunications businesses, says Mr Jones, adding that BPOs, which fail to adapt to this emerging reality, risk seeing customers start to take back processes in-house at the end of contracts.

This style of automation allows organisations and BPOs to auto-mate processes which previ -ously would have been hard to justify through the traditional IT-resourced and delivered route, says David Moss, co-founder and chief technology officer at Blue Prism, a company at the forefront of this emerging technology.

“The flexibility of the approach means that, while IT hosts, monitors, audits and governs the use of the technology, the actual configuration and use of the technology is distrib-uted through the business teams,” he says. “This is a form of self-ser-vice that allows automations to be controlled at the level of a business unit, something much lower and more intimate with the procedural requirements than has been possi-ble before. It means the strategy for finding automations is based on a divide-and-conquer strategy across the whole business.”

A clear example of the benefits of this approach is mobile opera-tor O2, which has deployed robotic automation software to automate business processes, reducing the cost of back-office operations. The organisation has also cut its reliance on offshore recruitment when dealing with spikes in work-load; a recent example of which was the surge in demand for the

release of the new Apple iPhone which required a SIM swap pro-cess to be built for the back-office in a matter of weeks.

A further advantage is the ability to scale as needed. “You can very quickly add virtual machines to host robots and this can even be done in the cloud, removing the cost of physical ownership,” says Mr Moss. “You’ve already got the infrastruc-ture, the systems and the security, so the approach is simply to re-use what is already in place.”

Senior figures in UK corporates are starting to get up to speed with this new thinking through a thought leadership group called The Opera-tional Agility Forum. The group was formed with Barclays, BT, O2, Co-operative Banking Group, npower, Shop Direct, the NHS and 18 other organisations from the utilities, tel-ecoms and retail sector to discuss best practice and the impact of “self-service” automation.

One of the major attractions cited by the group is the ability to combat “time delays introduced by traditional IT”. A good exam-ple of this was highlighted when a re c e nt re q u i re m e nt fo rc e d f inanc ia l inst itut ions to ass ist w i th o b l i g at i o n s a ro u n d p ay-ment protection insurance. Huge amounts of transactional work and correspondence had to be carried out in a very short space of time, and robots were judged to be the only viable approach given the timescales.

Ultimately, robotic automation is aimed as being a genuine source of competitive advantage for organi-sations. “ If you combine robotic automation with your sexy new application running on Oracle or SAP, it’s like having a workforce of highly disciplined and dedicated people who work 24 hours a day,” says Mr Jones.

“If you have that, you might start creating products or services for your business which can shift your competitive edge. You could actually change your marketplace because you can offer products that nobody else can.”

telecommunications business o2, owned by telefonica uK, is just one of a number of com-panies that is already taking advantage of robotic automa-tion. wayne butterfield, business owner for telefonica uK’s back office, will be explaining how this is helping the business repatri-ate processes to the uK at the national outsourcing associa-tion on June 28. For more infor-mation visit www.noa.co.uk

For more information on the con-cept of robotic automation visit www.operationalagility.com or to find out how blue prism could help your business take advan-tage visit www.blueprism.com

bpos that fail to adapt to this

emerging reality risk seeing

customers take back processes

in-house at the end of contracts

The world of outsourcing – and offshoring in particular – is being challenged. The days when organisations would shift large operational capacity offshore to destinations around the globe could be numbered and a new model, based on robotic technology, could be set to take its place

BEST PRACTICE

As companies look to scale back expensive in-house operations, outsourcing is once again appearing as an attractive option for businesses, large and small. But there are many pitfalls along the way. Nick Martindale speaks to executives from ten companies with experience of putting outsourcing projects into action

for successful outsourcing and business growth

Ȗ In 2006, construction firm Lend Lease chose to partner with Achil-les to help improve performance and efficiency in its complex supply chain.

For Nigel McKay, head of procure-ment and supply chain at the company, an important element to creating a successful relationship is ensuring there is buy-in from the senior team. “This will drive organisational com-mitment to the process and a potential cultural shift in thinking,” he says. “They will need to understand why the service can’t be delivered internally, whether it’s lack of skills, resources or the simple fact that someone else can do it better or more efficiently.”

06 lend lease

Ȗ Ensuring the full range of activi-ties for the process being outsourced is covered by an appropriate business agreement is essential, says Anoop Sagoo, Accenture’s business process outsourcing cross operating group lead. “For those that are most suc-cessful, the entire end-to-end busi-ness process is within the scope of the arrangement,” he says.

“This includes elements managed within the client’s enterprise and those run by third parties, as well as related processes that may impact overall performance. Service level agree-ments are important, but both client and provider need to work together to focus on overall process excellence and business outcomes.”

01 accenture

Ȗ The computer software giant is now two years into a five-year, £130-million business process outsourcing deal with Arvato. According to Kyle Christensen, Microsoft’s senior director for world-wide business process outsourcing oper-ations, the key to a successful relation-ship is to remain focused on the bigger picture and to give the provider space to implement their own way of working.

“Concentrate on what you want to achieve, not necessarily how you want to accomplish it,” he says. “It’s easy to get caught up in the day-to-day detail, but that doesn’t leave much room for your outsourcing provider to bring any added value. Empower your provider to define the ‘how’.”

07 Microsoft

Ȗ The global soft drinks manufacturer has effectively outsourced its creative thinking by drawing on the input of external marketing specialists based around the globe, using online co-cre-ation community eYeka.

“As brands look for creative partner-ships, it makes a lot of sense to tap into a less exclusive channel,” says Leonardo O’Grady, director at Coca-Cola Asia Pacific. Simplicity is the key when it comes to setting a brief for a campaign, he says. “Try to capture the spirit of the project within a minimum of five words,” he says. “For example, ‘Show Coke’s infectious happiness, cause change’ or ‘Switch on Coke’s energising refreshment’.”

02 Coca-Cola

Ȗ West Sussex-based Thales Training & Consultancy outsources its online marketing operations to local firm Smart Monkey.

“Having worked with London agen-cies in the past, we specifically wanted to work with a local marketing agency,” says marketing manager Simone Davies. “We are able to meet regularly and work together as part of a team. It also means we get a personalised level of service and we don’t have to spend days out of the office.” Clear communication from both sides is also vital. “Getting your suppliers to com-municate with you is just as important as ensuring that you yourself are com-municating effectively,” she says.

08 thales training & Consultancy

Ȗ Businesses looking to outsource need to ensure any contract they sign is an accurate reflection of negotia-tions, warns Andrew Priest, a partner at Davenport Lyons, which outsourced its internal IT function to Plan-Net in 2011. “Sometimes it’s too easy for the customer to accept that they will be receiving the supplier’s standard ser-vices,” he says.

Bringing in legal advice can iden-tify potentially problematic areas. “The initial draft of the outsourcing contract is likely to be very much in favour of the supplier,” he says. “Your lawyer should be able to identify terms which need to be amended or even deleted.”

03 Davenport lyons

Ȗ Travel retailer World Duty Free Group has a long-standing relation-ship with ResourceBank to help with its fluctuating levels of recruitment.

Geoff Hall, World Duty Free Group’s head of HR, says it’s important to adopt a partnering approach rather than looking to create a client-supplier relationship. “Choose a company which has a similar approach to you in terms of outlook and business goals,” he says. This is particularly important in the current uncertain climate, when both sides need to be honest with each other. “During difficult times we come to a true, joint agreement of what is realistic and set measurable key per-formance indicators.”

09 world Duty Free group

Ȗ The internet and telecommunica-tions specialist recently outsourced part of its customer service opera-tions and found the experience a steep learning curve.

In particular, Peter Gradwell, the company’s founder and managing director, discovered there was a gap between the expectations that had been promised by the provider’s sales team and what the operations team were able to deliver. “Interview the operations managers to check that their under-standing of what they can do is the same as the sales team’s,” he suggests. For their part, businesses should not assume they can outsource responsibil-ity for defining their own procedures and processes to the provider.

04 gradwell

Ȗ In 2011, NHS consultancy Zircadian took its first steps in outsourcing by partnering with Polish software devel-opment firm Future Processing.

Product director Angus MacDou-gall stresses the need for effective communication, complete with the human element. “Things can get lost or meanings misunderstood over email,” he says. “Tools for virtual face-to face communications, such as Skype, are widely available for free and can make a real difference to how the project goes.” Companies should also factor in the difficulties caused by working with partners in radically different time zones, such as Asia or Australia, he says.

Ȗ Problems can often occur on the client side when processes that were previously managed in-house are transferred to external organisations, says Claudio Altini, director, sourcing advisory, at KPMG, with individuals and teams struggling to adapt to their new roles.

“The client organisation is often not prepared enough for the change that is being worked towards and retained organisation re-alignment is absent,” he says. “This allows for shadow organisations to be set up which are either checking the service provider’s work or, worse, duplicating it. Actu-ally doing the work is very different to managing a relationship and requires a different mindset.”

10 Zircadian

05 KpMg



The utility sector is increasingly using mobile device management for field-workers to send data back to head office

Outsourcing on the move is freedom to excelMobile technology allows informed decision-making away from the office and now outsourcing is on the move, as James Silver reports

Ȗ From Lloyds of London insur-ance brokers using Xchanging Insurance software on their iPads to keep track of claims while away from their desks, to service provider Intermec’s products for tracking and managing supply chain assets and data, business process out-sourcing (BPO) has gone mobile.

As the IT outsourcing market expands (by 7.8 per cent globally in 2011), a recent Gartner report on mobile device management (MDM) services predicts that the average MRC (monthly recurring charge per mobile device) will increase through 2015, because of the “growing acceptance of MMS (managed mobility services) by small and mid-size businesses and large enterprises”.

Gartner estimates that world-wide there are 250 companies pro-viding IT and process outsourcing services relating to mobile devices, and it expects another 300 vendors to bring MMS to market during the next three years.

“Organisations see that adding good mobile interfaces to both core applications and important information, such as research, will allow them to interact on the go, in a much more engaged manner,” says Cathy Tornbohm, research director at Gartner.

“This could be from something as mundane as approving an invoice in almost real time – thus benefiting the business by allowing it to choose whether to capitalise on negotiated discounts or keep

hold of its cash – to an important approval from senior management of a hiring requisition. Organisa-tions may also want to capitalise on the current trend to use analytics to better effect and their big data mobile access can facilitate quicker, if not better, decision-making.”

Ms Tornbohm says this trend is leading to good opportuni-ties for mobile services firms and the range of services now on offer bears her out. Vendors such as MobileIron and AirWatch offer variations of mobile device management, Skynax, Intermec’s Mobility Management System puts hand- held devices at the fore-front of logistics data-gathering and tools such as bar-code printing and RFID-scanning, while mobile apps like GlobalSourcer by Head-stream Advisory help businesses track down outsourcing vendors.

Yet Gartner reports that adop-tion of MDM services may be slow for a variety of reasons, including that “service providers struggle to articulate the value of MDM”, “companies have concerns about outsourcing...as this might involve sensitive corporate data residing outside the corporate network” and that “investment by enter-prises in MMS will not necessarily lead to cost reductions”.

John O’Brien, research director at TechMarketView, argues that, while Lloyds of London brokers carrying networked iPads rather than huge bundles of paper outside the office is a symbol of progress (of sorts), use of mobile devices to manage BPO is still very much in its infancy.

“While it’s absolutely at the beginning, it is starting to grow,” he says. “The utility sector, for example, is increasingly using mobile device management for field-workers, so they can send time sheets and other data directly back to head office systems, which improves the efficiency of the pro-cesses themselves. I expect to see increasing mobile management usage in areas like that.”

Technology services and out-sourcing company Accenture has developed a portal, the BPO Navigator, which it describes as “a central, one-stop online portal that provides both clients and Accenture teams with real-time visibility into business, includ-ing operational performance and critical business data on any device with internet access”.

“The dashboard provides both a snapshot and detailed view of business performance, showing metric thresholds and trends, comparing data across business unit or country,” says Charles Sutherland, Accenture’s BPO growth and strategy lead. “By lev-eraging analytics, the tool derives actionable insights from the data through statistics, forecasting and modelling, leading to better busi-ness decisions and outcomes.”

MOBILE MANAGEMENT

source: gartner

value of global managed mobility services in 2011£250m value

in 2016£2.2bn of revenue generated in Europe and North America80% providers of mobile

process outsourcing services by 2015550

Ȗ Beloved by “yummy mummies”, organic baby food presents com-plex supply chain challenges to its manufacturers and distributors. The journey from muddy field to sticky highchair is fraught with issues ranging from the difficul-ties of sourcing large quantities of organic produce from reliable sup-pliers to managing shelf-life so that expensive (and fancily-packaged) stock is not written-off.

With such finely-calibrated logis-tics, infant food manufacturers Organix turned to an outsourced cloud-based warehouse manage-ment system (WMS) solution to minimise waste and boost bottom line, through 360 degree visibility. “What we get [thanks to the cloud] is prompt access to ‘live’, accurate data which gives us flexibility around shelf-life management, as each of our customers has their own specific shelf-life require-ment,” explains Hazel Lees, Orga-nix supply chain controller.

The cloud-based element to Organix’s business was developed in conjunction with logistics firm Howard Tenens, whose WMS allows customers access to their data through web portals so they can log-on and check stock pro-files, securely, at any time on desk-tops or tablets and smartphones.

“That gives them additional flexibility and the ability to react to any given circumstance,” says Jamie Hartles, head of commer-cial at Howard Tenens. “With any large IT rollout there needs to be an interface between the custom-ers’ system and ours to allow for the seamless transfer of data - the order coming in and going directly into our WMS to start the process-ing. Historically, that’s been a costly exercise involving IT infrastruc-ture. A cloud-based environment means that headache has gone.”

But while logistics firms are increasingly turning to cloud-based solutions, the vast majority

of business process outsourc-ing (BPO) services in the cloud are rather closer to the “early adopter” phase, than a “tipping point” moment. Although Gartner reported that the Worldwide IT outsourcing market grew 7.8 per cent in 2011 year-on-year, with revenues totalling $246.6 billion (compared with $228.7 billion in 2010), it also pointed out that globally cloud-delivered BPO only accounted for approximately 13 per cent of the total BPO market worth $135 billion last year.

“This industry moves at a glacial pace when it comes to adopting new services and technologies,” says Cathy Tornbohm, vice presi-dent of research at Gartner, who authored a report on BPO and the cloud. “Cloud-based BPO is unproven in most markets, so organisations are approaching its use cautiously.”

Cloud-based solutions are, however, becoming more com-mon in back-office processes such as HR. Northgate’s euHReka product for global HR service delivery, for example, is used by AstraZeneca and is claimed to have driven cost efficiencies.

Ms Tornbohm explains: “Cloud-based BPO is well-used in HR, especially for payroll, which is a highly-automated, standardised and a pay-as-you-go model. Essen-tial cloud-based BPO is business services on demand, probably based on SaaS-type [software as a service] platforms that deliver more than the application’s func-tionality, as the provider takes on the risk of supplying the actual business process. This is growing in expenses, e-invoicing, pay-ments services and other industry specific activity, but is unlikely to take off for full-blown finance and accounting for a few years due to the dependency on ERP [enter-prise resource planning] across organisations,” she says.

Last year’s Amazon web services cloud outage, which caused huge disruption in the US to services, such as Foursquare and Reddit among others, has only added to the sense of caution surrounding cloud-based BPO, leading some to question its stability and security.

That’s not surprising, says Stan-ton Jones, analyst of emerging technologies at Information Ser-vices Group (ISG). “Concerns about scalability, reliability and security are based on two key reasons. First, cloud is focused on 'what' and not 'how'. Cloud, especially platform and software services, abstracts the underlying infrastructure from the consumer of the service. This is a titanic shift for IT, legal and procure-ment organisations, as they have traditionally focused on 'how' rather than 'what'. These organisa-tions, typically the key technology buyers and decision-makers, are struggling to make this shift, which leads to even more 'how questions', ultimately delaying adoption of cloud services.”

He continues: “The second key reason so much confusion and

When games giant Sega set out to develop infrastructure, which would enable it to share new games with external testing studios around the world, it collaborated with telecoms services multinational Colt and virtualisation software company VMWare to create a hybrid cloud and scalability on demand - reducing games testing time by 70 per cent as a result.

“Sega had been game-developing using their own infrastructure and they had a few challenges, not least that, when it came to testing, they would send the games out on DVD to the game-testers and also allow [the testers] at times to come in to their

secure network,” explains Joe Bagu-ley, chief cloud technologist EMEA at VMware. “So they worked with Colt to use the vCloud essentially to have a huge on-demand testing environment which scales when they need it.”

The business impact for Sega included greater consistency and control of testing, as well as offering a safer testing environment, says Mr Baguley. “They saved a lot of money and improved their service because this greatly reduces their time to market in terms of how they can test and deliver games. They can now deliver better quality games, faster than their competitors.”

Game on as Segaheads for the cloud

Case stuDY

Cloud-based solutions are becoming more common in back-office processes such as HR

CLOUD COMPUTING

Take-up of cloud-based solutions in business process outsourcing is slowly gathering pace, but still has some way to go, writes James Silver

a cloud-based warehouse management system provides accurate live data

Cloud at the tip of the iceberg

concern exists is due to the fact that cloud services, by their very nature, are highly standardised. This is how suppliers create econo-mies of scale by sharing infrastruc-ture and software across hundreds or thousands of customers. Stand-ardisation does not only exist in the underlying infrastructure, but also in contract terms, service lev-els and pricing. While customers are attracted to the idea of stand-

ard solutions and understand the benefits, it is difficult to implement on a large scale, because enter-prises are accustomed to building or outsourcing solutions that meet their very specific needs.”

Mr Jones believes the industry is only “at the tip of the iceberg with cloud”. Buyers are still at the “kicking the tyres” stage on these new solutions, he says. “They are not yet buying on a large scale.”



The most popular gamification tool is a leader board, where staff compete against one another based on certain criteria

Cost-cutting and technical expertise means outsourcing has grown in value to the state and its agencies

More than just fun and games

Government contracts are big business for smaller firms

Gamification is one of the outsourcing industry’s fastest growing business trends, helping firms to improve their employees’ working practices, as Jason Hesse discovers

The recession and public deficit have resulted in radical cuts to Treasury spending, but outsourcing still represents value for money, writes Michael Dempsey

Ȗ When gamification is discussed, many people immediately think of games. Yet it extends much fur-ther. Gamification is defined as the process of using game thinking and game mechanics to engage audi-ences and solve problems.

It isn’t about turning every-thing into a game, explains Gabe Zichermann, author of Game-Based Marketing. “This is a very common misconception, but not every situation is suitable to turn into a game. What we want to do is to take the best ideas out of games, which often don’t look like games at all.”

Why is gamification one of the hottest trends in the business out-sourcing industry? The industry has been a gamification pioneer for many years, using game-based concepts to motivate and chal-lenge employees.

Much business process out-sourcing work is “boring”, says Mr Zichermann. “Jobs tend to be low or middle-level tasks, such as data entry or fielding calls. By using gamification techniques, many outsourcers can get their employ-ees to do the job better and more effectively, cutting down on errors and increasing throughput.”

A recent white paper by IT ser-vices firm Cognizant recognises this. According to the report, most people are inspired by a challenge or the promise of a reward and they feel gratified when they win something. “These basic human tendencies can be channelled into behaviours that are reward-ing not just to the users – be they employees, customers or business partners – but also to the com-pany itself. For most companies, it makes business sense to invest

in strategies and process enablers that reinforce behaviours which meet corporate objectives, rather than merely executing processes.”

For outsourcers, the most popular gamification tool is a leader board, where staff compete against one another based on certain criteria; for example, the number of calls or the number of sales conversions.

Ȗ The Coalition Government’s ambitious plans to rein in a huge public sector spending deficit might appear to threaten the out-sourcing trend. In fact the cost-cutting promise of outsourcing contracts allied to the demand for technical expertise means out-sourcing has grown in value to the state and its numerous agencies.

What has changed in Whitehall is a determination to see smaller players get a slice of the outsourc-ing action, with the government pressing its spending depart-ments to take more account of the services small and medium enter-prises (SMEs) can offer. Baroness Wilcox, parliamentary under-secretary for Business, Innovation and Skills, talks of an “aspiration that 25 per cent of central govern-ment contracts should be awarded to SMEs”.

This new emphasis on getting less prominent names into the picture is having a clear impact on the way businesses like Hewlett-Packard (HP) operate. HP is a global tech-nology giant that runs a large share of the IT at the Department for Work and Pensions (DWP), the largest spending UK government department. The DWP pays out £800 million in benefits every day and has a technology regime to match. While HP is a prominent player in the DWPs tech line-up, other businesses are responsible for parts of the wide-ranging contract.

Emergn is a Dublin-based con-sultancy that specialises in help-ing organisations to implement new systems as quickly as possible

for the lowest outlay. In 2011 it became one of the 600 SMEs that feature in HP's UK supply chain when it was contracted to work on the DWP project. Brian Hanly is in charge of UK business develop-ment at Emergn and says the IT giant “asked us to approach the DWP from our own perspective”.

For its part, HP reckoned using a small, lean and agile business would help DWP staff change the way they approached certain tasks. And employing the large contractor as a filter allows the UK government to be much more radical in recruiting SMEs, says Stuart Bladen, a senior HP execu-tive who deals with public sector contracts. “It’s not easy for the government to contract with 40 or 50 SMEs delivering on one large programme. We are able to iden-tify pieces of work that are right for SMEs like Emergn.”

This initial involvement in the DWP contract has opened the door to a succession of government deals for Emergn. The Maritime and Coastguard Agency is now a client, one that Mr Hanly and his colleagues approached via G-Cloud, a new online tendering platform for state work which was devised to encourage SMEs to get involved.

The need to keep costs under control while simultaneously responding to the public’s appetite for better service standards will continue to trigger outsourcing deals, large and small.

Sefton Council stretches from the northern end of the Liverpool conurbation out over farmland to affluent coastal suburbs. In 2008, it signed a 15-year £17-million contract with arvato, an out-sourcing provider that is part of Germany’s Bertelsmann group, to handle a whole range of public-facing services.

Michael Jones, arvato’s partner-ship director for Sefton, points out how a fresh eye can soon find new ways to save money at a time when “pressure on services is unprec-edented.” Reducing the computer printer population alone from 1,800 to 200 by using more flexible devices should save £1 million over five years. This kind of simple but radi-cal revision of existing practices has recovered £1.6 million in overpaid housing benefit and promises to deliver total savings of £20 million during the term of the partnership.

The bottom line remains deliver-ing value back to the taxpayer and outsourcing is still the means to that end.

A leader board is proven to boost employee productivity, says Toby Beresford, a gamification expert and founder of leader board soft-ware company Leaderboarded. “It’s a simple but effective way for outsourcers to engage employ-ees,” he says. “You can get quick improvements out of these game mechanics.” Other gamification concepts revolve around contests, challenges and team play.

The primary benefit of using gamification techniques is improv-ing employees’ job satisfaction and, therefore, cutting down on attrition. Mario Herger, a senior innovation strategist at enterprise software giant SAP, says gamifica-tion’s “dirty secret” is feedback.

He explains: “In a game, you’re constantly getting feedback about how you and others are doing. But in work, this is often not the case; employees might just get an annual performance review. By providing continuous feedback through game-like tools, workers can learn and understand how to improve. If they have the feel-ing that they’re progressing and learning, it’s extremely satisfying for them.”

Gamification can help make outsourcing work more inter-esting. “Typically, being a call-centre agent is not satisfying,” says Mr Herger. “But with a gami-fied approach to work, they can become more engaged, motivated and encouraged. They will learn and improve, receiving feedback from peers and clients.”

This not only improves employee job satisfaction, but it also benefits

the business outsourcer and its customers directly. “By making a job more interesting and satisfy-ing, employees will enjoy what they do and the customers feel that. Customers can tell when someone is going the extra mile; it’s very positive for the whole company and will be reflected in customer satisfaction.”

Mr Zichermann adds: “At the end of the day, the job still has to be done; someone still has to sit there for eight hours and work. But instead of coerc-ing employees into it, you can engi-neer their job so it becomes more engaging. It’s about finding what sort of incentive system you can build to deliver the right throughput and to maximise outcomes.”

PUBLIC SECTOR

GAMIFICATION

outsourcing represents value

for government agencies that need to make

efficiency savings

Keshav r. Murugesh, group chief executive of wns global services

01 speed up feedback cycles so employees know how they’re doing to stay motivated

02 establish clear goals and rules of play so that employees buy into the game

03 Create short-term tasks that are challenging but achievable to maintain engagement

04 build a narrative to engage players to participate and achieve your activity goals

05 set yourself a gamification target with at least one gaming exercise a year

of firms will gamify some

processes by 2015

50%

attrition rate in Indian BPO

industry

55% RULES OF PLAY

source: M2research, gartner

Commercial Feature

Great brands need great business process solutions

Ȗ What do Coca-Cola, Google, Microsoft , Nokia and McDon-ald’s have in common? They are undoubtedly some of the world’s leading brands.

A brand is much more than a product, a service or a business. A brand is the overall experience that consumers have with a company. Trust, credibility, great customer service, effective communication, innovative products and services all add up to create a strong brand. A brand is really the personality or identity of the business.

The brands that we love and admire are timeless. Such brands have dared to be starkly different from peers by offering a whole new experience to the consumer, rather than just putting forth a mere product or service.

What do leading brands do differ-ently to achieve this goal of creat-ing a great experience for the con-sumer the first time, every time?

leading brands gauge customer needs and take the right decisions at the right timeAs we continue to work with more than 200 brands across the globe and get a peek into what makes them “leading” brands, some key reasons become apparent:

The ability to constantly innovate To adapt to changing customer demands To sustain excellence To embrace the right strategies at the right time.

“Embracing the right strategies in the context of business today means the ability of a business to decide what it needs to focus on and keep in-house, and what it could leverage better by outsourc-ing it to a partner,” says Keshav R. Murugesh, group chief executive of WNS Global Services.

The fol lowing example eluci-

dates how a leading global airline, a top brand in its own right, made the right moves by innovating and partnering with the right business process solutions provider, when faced with a tricky challenge and finally emerged victorious.

The challenge was to effectively trace lost baggage – quite a men-ace and a difficult challenge to tackle in the global airline industry.

WNS partnered with the air-line to create a “proactive” tracing alert that would constantly trigger updates to the end-customer about the location of the bag and when it would reach the final destination. This helped avoid regular, angry calls from the same customer to the airline help desk.

The result was the loyalty created in the customer’s mind that the air-line cared enough about them to reach out proactively. A thought process like this is what makes a brand what it is. A brand knows what a customer needs, many-a-time before the customer realises it.

the right business process ser-vices provider can enhance brand value and brand equity“Leading brands understand the importance of having strategic business partners that under-

stand their requirements and bring domain expertise to the table, which can assist in creating value for their end-customers and, in turn, enhance brand loyalty,” says Mr Murugesh.

As a provider of solutions, we have broken from the traditional mould of the outsourcing services industry of providing only cross-industry functions, such as finance and accounting, and customer care, and structured ourselves industry-wise to become more agile and focused to our clients’ demands.

Smart metering solutions for the utilities industry, campaign manage-ment solutions for the retail indus-try and actuarial solutions for the insurance industry are just some of our industry-focused solutions which have immensely benefitted the brands we work with.

the wns approach to working with brandsWhile engaging with any brand, we ensure that our delivery mecha-nisms are aligned to contribute to the overall growth and strategy of the client organisation. We invest in people, process and partnerships to drive excellence into our clients’ business processes, so that they emerge as winning brands, always.www.wns.com

ikon images/alamy

Outsourcing Business - Netpublicationnp.netpublicator.com/np/n34908574/Raconteur-Outsourcing-Business... · Outsourcing Business ... (ITO) is technology-spe-cific work like managing

Documents