European IT and BPO outsourcing deals grow at fastest rate since 2010

April 17th, 2014 by Rahul Jain No comments »

According to a recent article published by, the latest figures from market-watcher ISG show that the number and value of IT and BPO outsourcing contracts signed in Europe over the past three months have grown at their fastest rate in over four years. outsourcing59

The total value of contracts signed over the quarter year period are reportedly worth €2.4bn, which is a 29% increase from the same period last year, alongside a 21% increase in the number of contracts signed, reaching 165 in 2014.

€2bn of the total value was made up of the 127 IT outsourcing deals that took place during the first three months of the year, which is an 18% increase from last year.

It is of interest, then, that in contrast with the rising value of IT outsourcing contracts, ISG report that BPO value has decreased in 2014 to just €370m.

Nevertheless, in the UK alone, 59 contracts were recorded at a cost of €1bn, representing a 66% increase in value and the highest number of contracts in a single quarter for three years.

According to John Keppel, president of ISG North Europe, outsourcing activity remains high and it was the return of large relationship awards that can be seen to have positively affected the market. The future, however, will see an increasing number of customers move towards smaller contracts.

“Although these larger contracts have a strong role to play in the market”, Keppel explains, “the smaller deal size brackets will continue to grow more sharply as enterprises opt for greater flexibility and more specialised services from a greater number of providers. Multi-sourcing, increasing competition among providers and lower technology costs will continue to be the factors that drive the market for the foreseeable future.”

Keppel said global IT and BPO outsourcing is expected to grow 15% in the first half of the year and a “high single digit” figure for the full year.


Tata revenue, profit up on strong outsourcing demand

April 17th, 2014 by Rahul Jain No comments »

India’s largest outsourcer, Tata Consultancy Services, is boosting hiring and offering wage hikes after reporting strong revenue and profit growth in its recently concluded fiscal year.outsourcing58

The current fiscal year will be better than the previous one as the company expects to benefit from higher client spending in key markets such as financial services and retail, and to meet regulatory requirements, TCS CEO and Managing Director N Chandrasekaran told reporters Wednesday.

The company saw growth across all its key markets, including Europe, Asia Pacific and the U.S., although the Indian market was “soft” as deals could not be closed ahead of federal elections, which began this month, Chandrasekaran said.

TCS’ revenue in the fiscal year, ended March 31, was US$13.4 billion up by over 16 percent from the previous year, while net profit grew almost 23 percent to $3.1 billion in accordance with IFRS (International Financial Reporting Standards).

In the fourth quarter, the company had revenue of $3.5 billion, a year-over-year increase of 15 percent. Net profit was $861 million, up by 33 percent from the same quarter last year.

However, India’s second largest outsourcer, Infosys, didn’t fare as well. It said Tuesday it had a disappointing quarter with a slowdown in some market segments.

Market intelligence firm Information Services Group said earlier this month that the global outsourcing industry is “off to a fast start” in 2014. The ISG Outsourcing Index, which measures commercial outsourcing contracts with an annual contract value of $5 million or more, showed that 10 large contracts worth more than $100 million in ACV were signed in the first quarter. The large contracts, coupled with double-digit growth in overall contracting levels, led to a 14 percent increase in ACV over the first quarter last year, ISG said.

Besides growing its business, TCS has also kept its staff attrition low, which is key in the Indian IT services industry. Staff attrition was 11.3 percent and the company added 9,751 employees during the quarter, taking the total to 300,464.

The company plans to hire 55,000 employees this year of which 25,000 will be recruited at universities and colleges, TCS’ head of global human resources Ajoy Mukherjee said. The company will be offering raises to its staff ranging from 2 to 4 percent in developed markets to around 10 percent in India.

North America is the largest market for TCS, accounting for 53 percent of revenue in the year, with the U.K. contributing 17.5 percent.


Hawthorne schools move toward outsourcing aide positions

April 17th, 2014 by Rahul Jain No comments »

Against vocal protests from a packed room of special education parents, the teachers union and paraprofessionals, the Board of Education took a major step toward outsourcing 86 aide positions late Tuesday evening in an action the district says is necessary to balance the budget.outsourcing57

The 6-2 vote authorizes the business administrator to advertise for bids for contractors. The district says the $785,000 expecting savings from outsourcing will help plug a $2-million deficit created largely by rising costs of health insurance and salaries, and spare other programs from cuts.

More than 150 people packed the courtroom at the municipal building to express their disapproval. Many held signs saying, “Strangers? Not in my schools!” and wore pins saying, “Privatization Works For Profit!” They were distributed by the Hawthorne Teachers Association.

Loud, sustained applause greeted the speakers when they finished addressing the board.

“If I lose this job, I honestly don’t know what I’m going to do,” said Kimberly Griffin, a paraprofessional. “So please reconsider.”

Other comments were more combative.

“If your job were downsized and you were offered the opportunity to reapply for lower salary and less benefits, would you do it?” asked a parent who said her son learned to eat solid food from a paraprofessional.

School Superintendent Jill Mortimer said the district needed to find “fiscal efficiencies in the budget in order to get it to balance.”

“This decision was made with great reluctance,” she added.

After an hour of public comment — no speaker expressed support for outsourcing — the board made a small concession by voting not to notify paraprofessionals they won’t be offered a contract for the next school year. That decision, however, did not mean the paraprofessionals would be kept on. Trustees also voted to begin advertising for bids to fill 86 paraprofessional positions.

Anticipating a high turnout, the borough police chief had moved the meeting from the usual second-floor meeting room. Ten minutes before the meeting, one of at least three officers on duty blocked the entrance, telling people the room was full.

A similar move in Englewood in 2012 aroused fierce protests from the nearly 100 teaching assistants and secretaries who lost their jobs, as well as from special education parents who expressed concern about the qualifications and commitment of the outsourced employees, working for lower salaries and fewer benefits.

Mortimer said the Hawthorne district would retain some control over the outsourced workers, including being able to request their termination, having input in their evaluation, holding monthly meetings with the contractor and conducting background checks of the hires.

And in a Q&A recently posted on the district website, she pointed out the bid process is designed to attract qualified firms — they must have at least two years’ experience of staffing paraprofessionals in school districts, for example — and the selected contractor must interview the current paraprofessionals.

Parents and the teachers’ union said it was unlikely the district’s paraprofessionals would seek to do the same work for less pay and no health insurance.

“They are not going to come back and work for $10 an hour, and they’re not going to come back and work without health benefits, because unfortunately, they’re not going to be able to afford that anymore,” said Johanna Burke, a special education parent. “So we’re not going to get the quality that we have now. We’re not going to get the consistency the kids need in the special-education classroom.”

Talya Cacchione said she could only take her aide job because of other part-time work.

Peg Novicki, president of the Hawthorne Teachers Association said the children “are the real losers in this caper” because they do not respond well to change. “And the bottom line of all of this is they love the kids,” she said of the current aides. “Do you think this is the quality of people you’re going to get if you subcontract?”

The board also is eliminating 21 paraprofessional posts not needed for Individual Education Programs, which provide support and service for special education students. Savings from those positions amount to $340,200, Mortimer has said.

The district says cuts are forced by medical insurance costs rising $800,000 and salaries rising $500,000 next year.

If the district does not go out to bid, “we would have to sit and have a finance committee meeting ASAP to discuss what programs are going to be cut,” said Michele Hyams, the board president.


Southern California Edison plans layoffs and outsourcing of some work

April 17th, 2014 by Rahul Jain No comments »

Southern California Edison plans to lay off workers and outsource certain functions as part  of “ongoing efforts to act as cost effectively and prudently as possible in operations for its customers,”  the utility company said Tuesday. outsourcing53

In a statement, Southern California Edison said it hadn’t finalized the number of employee cuts, but State Senator Alex Padilla told the Los Angeles Times that the number of workers affected by the cuts could be as high as 500 employees and the same number of contractors. Padilla chairs the Senate Energy, Utilities and Communications Committee and had been briefed about coming layoffs.

Southern California Edison employs about 14,000 people. Travis Miller, director of Utilities Research at Morningstar says utility companies set their management and employee levels in line with growth in their customer bases and, in the case of SoCal Edison, demand for electricity. In the last few years, Miller says, between a rise in energy efficiency and a softening economy, that demand has fallen off or remained flat, but utilities are still adjusting.

“As utilities go back to regulators and try to justify their costs, regulators are going to push back on behalf of ratepayers, and say ‘we need you to become more efficient,’” Miller told KPCC, adding that the utilities will share the cost-savings that come from the cuts with customers.

Los Angeles-based management consultant David Kinney says when a company becomes top-heavy, and starts to streamline its workforce at the management level, it runs the risk of lower level employees feeling disconnected from the company’s mission.  That, he says, could have an impact on customer service.

“While Southern California Edison may see the need to do this, I think that there’s a potential for some pain for Southern California Edison customers,” Kinney says.

Edison said its efforts to outsource parts of its business include the Information Technology (IT) Department.

“IT’s effort will enable an increase in quality, speed and capabilities while lowering costs,” Edison’s statement said. “By better leveraging the knowledge, skills and expertise of industry vendors, SCE will adopt a proven business strategy commonly and successfully used by other top U.S. companies.”

In the Fall of 2012, Edison cut 20 percent of the management staff in its IT department, in response to an audit that found that bloated management ranks in the department contributed to an unhealthy work environment. In December of 2011, Andre Turner, an employee in the IT department, went on a shooting rampage and killed two co-workers before killing himself.


Niche players like IPsoft & LiquidHub eating into outsourcing pie of companies like HCL & Accenture

April 17th, 2014 by Rahul Jain No comments »

About two years ago, Sears wanted to exhibit a mobility application at an Apple show. But the US retailer was queasy to outsource the contract to the large services-led technology firms, including those in India, as it wanted to get the project up and running in less than six weeks.outsourcing52

This proved to be the entry point for a Bangalore-based startup set up just two months earlier in November 2011 with an aim of making it big in the social, mobility, analytics and cloud, (SMAC), space. The startup, Happiest Minds, did not even have a client then.

The firm’s pitch to the retailer was simple: it’ll put together an A-class team to ensure the project is completed in a short period.

Happiest Minds went on to win what was then a small contract: the order was $100,000 (Rs 60 lakh).

“We were able to deliver an award-winning application in record time and this led to an ongoing relationship with the retailer even though there were multiple incumbents,” said Ashok Soota, executive chairman of Happiest Minds.

But more than the ticket size, the order helped Happiest Minds get recognition and bring the focus on other niche players, including IPsoft, and LiquidHub. These players had not just started winning contracts by competing against big technology service firms, including HCL and Accenture, but also forced many of them to forge partnerships.

“There is a change in the C-suite’s way of thinking. Not everything is about cost-reduction now, there is more thought on speed-to-market and innovation. And not everything requires the scale of a global player,” Sushma Rajagopalan, partner and MD of digital technology company US and India-based LiquidHub, told ET.

Firms operating in automation, mobility and analytics solutions as well as cloudbased deployment are competing in areas that are seeing the fastest growth for Indian IT players. Digital technologies contribute 5-10% of the industry’s revenue, according to the National Association for Software and Services Companies.

The total digital opportunity is pegged at $164.1 billion (Rs 10.2 lakh crore) in 2013, according to industry body Nasscom and is estimated to grow 75% to $287.3 billion (Rs 17.8 lakh crore) by 2016. The smaller players not only have innovative products but also deep existing experience in the IT industry. “They (startups) know that they are competing with the big vendors so they go the extra-mile and they are fast,” said Deepak Sharma, executive vice-president and head of digital initiatives at Kotak Mahindra BankBSE -0.13 %. “Sometimes you can’t wait months to do things; you need to turn offerings around quickly and startups are nimble.”

Happiest Minds, which claims to have 80 customers, believes that almost 90% of its wins came when it was bidding against some of India’s largest IT companies.

Not for nothing then are investors backing sector-focussed firms: LiquidHub, which has about $125 million (Rs 753 crore) in revenue, raised $54 million (Rs 325 crore) in funding from private equity firm ChrysCapital, Credit Suisse and PPM America Capital in March.

The growing startup ecosystem in India also presents a challenge to Indian IT firms. Earlier this month, the Indian Software Product Industry Round Table held an event to connect startups to the chief information officers of large corporates like the Aditya Birla Group, US insurer Accretive Health, payment processor Vantiv and others. To be sure, homegrown technology players are taking steps to mitigate the danger from smaller more nimble players — from incubating emerging technologies themselves to partnering with the most disruptive companies in the sector.

Uday Chinta, managing director at robotic automation provider IPsoft, said as the company bade for projects, about seven of 10 times, it competed with leading players. “Now, of course, most of the global IT firms have partnerships with us. We collaborate and work with them to deliver best solutions for the clients,” said Chinta whose company claims to have more than 500 clients, across financial services, telecoms, and retail verticals.

Pravin Rao, president and board member at Infosy, said: “There is enough opportunity for everyone in the ecosystem as long as you are able to build the capabilities and thinking in that direction.”


Business Process Outsourcing Services in the US Industry Market Research Report from IBISWorld Has Been Updated

April 15th, 2014 by Rahul Jain No comments »

Business Process Outsourcing (BPO) is a form of subcontracting that involves the delegation of specific business functions to third-party service providers. “It is the process of hiring another company to handle certain business activities in order to achieve maximum savings, increased efficiency and a greater return on investment,” according to IBISWorld Industry Analyst Stephen Morea. BPO services is distinct from information technology (IT) outsourcing, which hires a third party business to conduct IT- related activities, such as application management and data center operations. Moreover, BPO is often divided into two main categories: back office outsourcing, which includes internal business functions such as billing or purchasing, and front office outsourcing, which includes customer-related services like marketing or tech support.outsourcing56

The Business Process Outsourcing Services industry fared well over the five years to 2014, supported by an improving overall economy and rising revenue in the human resource, finance and accounting, customer relations management and insurance sectors, which provide a large portion of BPO business. “Additionally, rising wages and increased operating costs associated with the passage of Patient Protection and Affordable Care Act (PPACA) helped drive employers to BPO companies as a method of cost control,” says Morea. As a result, in the five years through 2014, BPO Services industry revenue is expected to increase at an annualized 4.1% to reach $127.4 billion and includes a 4.5% increase in 2014 alone.

In the next five years, wages will continue to rise with federal legislation presently in the pipeline to increase the federal minimum wage to $10.10 per hour. Also, the healthcare industry will encounter an upsurge in costs due to the burgeoning number of new individuals slated to receive health insurance. In response, companies will continue to pursue outsourcing to reduce personnel expenditures and offset escalating back office costs.
For more information, visit IBISWorld’s Business Process Outsourcing Services in the US industry report page.


County schools consider outsourcing substitutes

April 15th, 2014 by Rahul Jain No comments »

Carroll County Schools may outsource its substitute teachers next school year.outsourcing55

In an information item presented to the board of education in a work session Monday night, Assistant Superintendent Dr. Christi Teal outlined the potential costs, benefits and drawbacks of outsourcing the service to a private-sector firm.

The Patient Protection and Affordable Care Act created a new definition of a school employee, changing that definition to anyone who works 30 hours per week and giving those individuals the right to health benefits.

“That’s a problem for us, with our long-term subs and subs who continually serve who rack up 30 hours per week easily,” Teal said. “So we were faced with the problem of either paying for their insurance, paying the penalty or outsourcing. There’s so many positives to outsourcing.”
Next year’s substitute teacher budget will either be for substitute outsourcing — projected to be around $89,000, according to the current budget framework — or for adding health benefits for long-term and continuous subs.

Substitutes would be paid the same by the outsourcing company as they are by the school district, Teal said.

“And they would receive benefits, from the company,” she said. “That’s one of things we’re most excited about.”

The assistant superintendent reached out to principals, she said, asking for input on the potential change, which will have to be made before the next school year.
“Principals think this system will be more effective and efficient, will save subs from receiving multiple calls and like that subs will get benefits now,” she said. “They have concerns about the autonomy or control they’ll have to give up with the new company, whether or not they’ll be able to have the subs they prefer in their classrooms and whether it will be easier for people to be absent because it will be easier to find a sub.”

Addressing that last concern, Teal said she’d spoken with nearby systems that have outsourced substitutes, finding that there is an initial spike in teacher absenteeism but that the increase quickly dies down and actually dips below the pre-outsourced rate.

The next steps for the potential change are to determine the budgetary impact outsourcing would have, choosing a vendor and communicating with schools, Teal said.
“There’s so many positives,” she said. “Just on a personal note, in our office, it will free us up to work on other things a lot. And each school has a secretary who is on sub duty who has to find subs. That secretary will be able to reallocate her time to other tasks, rather than finding a substitute.”

The process, currently done over the phone with a substitute list, would be done online, the assistant superintendent said. A teacher who needs to be absent can access the database of substitutes, seeing if a particular substitute is busy or booked on that particular day and choosing an available substitute.

The board asked Teal to report back on the budget impact outsourcing would have as soon as possible, hoping to make a decision on the change soon.
Also during Monday night’s meeting:

• The BOE may tentatively adopt the system’s Fiscal Year 2015 budget at its next work session in May.

Chief Financial Office James Fulford expects to have a proposed budget prepared for next month’s meeting, reflecting a $75,000 surplus, even though the system has added back two instructional days to its calendar for next year.

A public hearing has been tentatively set for May 12, a work session. Another public hearing will take place in the June work session.
Action may be taken at that meeting, on June 16.

Fulford projected ending this year at $10.1 million in the system’s fund equity, or reserves, at the end of the year. That number will reportedly be higher, according to Fulford’s projection — around $11.7 million at the end of the current school year.

The system projects total revenues of $106.8 million for FY15 and expenditures of $106.7 million, resulting in surplus budget of $75,000.

• Fulford also reported on the system’s financials for the month of March. Total monthly revenues were $8.11 million, up from $7.17 million in March 2013, a 13 percent increase.

Expenditures for March were up as well, though: by 3.7 percent, at $8.47 million for last month compared to $8.16 million in March 2013.
The system received $988,000 in SPLOST revenues for March, a 7.8 percent decrease over last March. The district has received $700,000 less in local tax collection this year compared to last year because of a lag in the tax collection rate, Fulford said.

• Assistant Superintendent David Goldberg updated the board on several ongoing construction projects in the county, including the upcoming Performing Arts Center and north-end campus of the College and Career Academy.

The system is still working on plans with architects at Southern A&E for the two projects, for which the board expects to have preliminary drawings in May.
Goldberg said he’s met several times with the PAC steering committee and CCA administrators, as well as Tanner Medical Center/Villa Rica for their respective projects, folding in their recommendations to the current preliminary drawings.

“We’re moving right along, and we’re happy with the direction we’re headed in and the pace we’re keeping,” Goldberg said.

The Villa Rica Elementary project, in which a new gymnasium and converted administration area and media center are being built, is making progress.
Staff members moved into the new administrative suite over spring break, and demolition of the old administrative area is taking place now to make room for the new media center.

Structural steel has been erected for the new gymnasium, music and art rooms, and masons are ready to begin installing the brick and block work.
The Bowdon Elementary project, in which a new gymnasium and six classrooms are being built, is also making strides, Goldberg said.

“This is one of the few projects that actually hasn’t been that affected by the rainy weather we’ve had so far this year,” the assistant superintendent said. “Brick masons are nearing completion, and ceiling grids are being put in now, along with windows and doors.”
The project is expected to conclude sometime during the summer months.

The board will reconvene for its next meeting on Thursday at 7 p.m.


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