Archive for August, 2010

Security-as-a-service growing

August 31st, 2010

When you ask IT professionals if they use cloud computing or software-as-a-service, most start by saying “no”. But if you ask some follow up questions, you will quickly find out about “that one application” that is a SaaS application.

In security, this effect is even more pronounced. Companies don’t think they use security-as-a-service or “cloud” security. Yet, many do, in the form of messaging security: e-mail antispam and antivirus. This type of security outsourcing, where security is delivered as a service from the cloud and without on-premise hardware, is growing 12% year-on-year. It’s becoming a great outsourcing option for companies that lack the skills or do not want to retain and maintain the skills in some security function.

Of course, not all security functions are suitable candidates to move into a cloud environment. Messaging security is particularly suited to cloud delivery for two reasons. Firstly, e-mail travels through external gateways anyway, so security professionals don’t have to worry too much about putting their data “out there”. Secondly, e-mail transmission has variable latency measured in minutes, so adding an external gateway won’t delay things noticeably.

In our research we’ve found that e-mail antispam accounts for the vast majority of cloud-based security services. Of those companies using some form of security-as-a-service, 84% used e-mail antispam services. Antivirus was the second most common with 42% share among security-as-a-service users. Other services include cloud-based firewalls, intrusion-prevention systems (IPS), protection against distributed denial of service (DDoS) and vulnerability scanning.
Many of the above-mentioned security services are well suited to cloud delivery. Controls like firewall, IPS and DDoS protection are best applied on the far side of an Internet or WAN connection as they result in a reduction of transmitted data. Filtering the unwanted traffic means less traffic to carry across expensive links and less pressure to upgrade congested links. Another advantage of cloud delivery is the external perspective of the service provider, as is the case with vulnerability scanning, where those buying the service want to know what vulnerabilities are visible from the outside (this is often a specific regulatory requirement).

So why are companies buying security-as-a-service or “cloud” security? As with most outsourcing, there are a number of business drivers that may be influencing the decision to purchase these services. Conventional wisdom would point to “cost” as the top reason and as in many other situations the conventional wisdom is wrong. In fact, the primary driver for adoption of security-as-a-service is that companies see these external services as more effective than in-house solutions. Antispam for e-mail is a good example — it’s at the front lines of the security “war” and involves constantly changing attacks and countermeasures. What worked a few months ago and gave your company pristine mailboxes will almost certainly result in a tsunami of spam a few months later. So hiring, retaining and re-training people to fight this battle is expensive and less effective than hiring an external company to do it for you.
Cloud computing has already arrived for security. It’s often overlooked because antispam-in-the-cloud may not be as glamorous as “cloud computing” implies, but it is a practical, effective and cost-effective solution.


Lanka eyes share of India’s BPO pie

August 31st, 2010

Post-war Sri Lanka is turning the heat on India’s $12.4-billion business process outsourcing (BPO) sector. The neighbouring island, armed with a pro-outsourcing government and a sizeable pool of low-cost, service-oriented talent, has become a happy hunting ground for companies wanting to set up offshore centres.

Sri Lanka is providing BPOs tax holidays for a period of 5-12 years, wholesome infrastructure support and various grants for training and quality enhancement. This has India’s IT/BPO trade body Nasscom worried, with its president Som Mittal admitting to FE that Sri Lanka has emerged a strong competitor.

Officials with Slasscom—the IT/BPO governing body of Sri Lanka—in an exclusive interaction with FE, said the companies such as Convergys, HCL and Accenture have approached them in the past few months, with the intention of setting up new centres. Convergys is looking at setting up a joint venture there. Firms like MphasiS, WNS, Aegis and Quatrro BPO have already set up operations in Sri Lanka.

Earlier this month, the United States Agency for International Development (USAID), announced a $10-million corpus for training Lankan youth in the IT-BPO sector. Sri Lanka is also ranked above India in the World Bank’s `Ease of Doing Business’ index. No wonder, international giants such as HSBC, Aviva, Microsoft, Motorola, and Virtusa have been operating in the country for long.

Says Ashique M Ali, director and global trade forum leader, Slasscom, “Since the end of the war, there has been a renewed vigour in promoting the sector. There has been a special focus on India through a dedicated body. We have been seeing great interest on the part of Indian companies in setting up and expanding their centres here.”

India, on the other hand, is presenting a contrasting picture, with factors like a drying talent pool, increasing overhead costs in metros and a slow rate of development in tier II towns. No wonder BPO companies, especially the small and medium sized ones, have been scouting for less troubled shores.

Aegis, Essar’s BPO outfit, which has 550 people in Sri Lanka, plans to take the staff strength to over 1,500 in the next two years. “And in the next 6-9 months we are also planning to start serving our international clients from Sri Lanka,” says Sudhir Agarwal, president, APAC & MEA, Aegis. WNS Global Services is looking to tap the domestic market in Sri Lanka, says Keshav R Murugesh, its group chief executive officer, indicating the growing stature of the industry in Sri Lanka.

Raman Roy, chief executive officer of Quatrro BPO, also regarded as the father of the Indian BPO industry, says, “Government support and talent put together, I would say that Sri Lanka offers a superior cost proposition compared to India. There is a need to fine tune policies to ensure that India retains companies and does not lose business. The demand for skilled man-power in India far exceeds the supply.”

Som Mittal says it makes sense for companies to look at Sri Lanka. “Companies are seeing it as a preferred destination for establishing new centres. In India, over head costs are more, and with uncertainty on STPI sops, India has a disadvantage. The government needs to be more proactive and provide tax benefits, at least for SMEs.”

If the sops are withdrawn under the STPI after March 2011, Indian companies will have to set up operations in SEZs, in order to get tax incentives. This will be an unattractive proposition, specially for smaller companies, as the norms require them to have a minimum of 10,000 employees and cover an area of at least a million square feet.

But still India holds a few aces up its sleeve. “Lanka is emulating the India success story. The absence of physical infrastructure such as roads and high cost of telecom infrastructure are the major disadvantages that the Sri Lankan BPO industry suffers from,” says Kumar R Parakala, global head of sourcing, KPMG. India also has the advantage of numbers. Says Gopi Natarajan, chief executive & president, Omega Healthcare Management Services, “The entire country has a population of about 20 million people which is lesser than some of our big metro cities in India. There is a finite number of talent pool available in Sri Lanka especially for voice services, but certainly not as big as what India has to offer.”


Boeing’s expensive lesson in outsourcing

August 31st, 2010

Boeing Co.’s (NYSE: BA) sixth delay of its 787 Dreamliner won’t postpone the delivery date of the aircraft ordered by Royal Jordanian, the carrier’s Chief Executive Officer Hussein Dabbas said.

“We were assured the delivery of our airplanes will not be affected,” Dabbas said in a telephone interview today from Amman, where the carrier is based.

The carrier expects to receive its first plane in 2013, according to Dabbas.

But Boeing has learned the hard (and expensive) way that delegating too much of the advanced work on the 787 to global partners has not worked.

Despite having bought out the Global Aeronautica stakes from Alenia and Vought, the company is still experiencing quality issues that should not be occurring so close to when the 787 is on the final leg of its completion efforts.

Acquiring the Italian Alenia operation now would be a risky move, but leaving it longer will continue to compound the risk as Boeing looks to ramp up production towards 10-per-month by 2013.


BSG delivers IT support to midwives

August 31st, 2010

IT outsourcing specialist Business Systems Group (BSG) has clinched a five-year deal worth £5.2m with the Nursing and Midwifery Council (NMC).

The firm, which was bought out by healthcare IT specialist ACS last year, will be responsible for managing and hosting NMC’s entire IT infrastructure.

Under the terms of the contract, BSG is required to ensure 99.9 per cent service availability and provide support for the council’s Microsoft Exchange, Citrix desktops and Cisco-based telephony system.

Prior to BSG’s involvement, NMC managed all of its IT in-house.

Jolyon Ingham, interim head of ICT at NMC, said the council’s change in IT support strategy would allow it to concentrate on other things.

Ingham said: “The NMC is the regulator for nurses and midwives and not a maintainer of IT services, and so we require dedicated IT specialists managing and supporting our networks and servers.

“With BSG onboard, we are confident that our IT infrastructure will operate effectively and securely and will be managed by a team of knowledgeable and highly qualified IT experts.”


Business process outsourcing skyrockets

August 31st, 2010

Business process outsourcing has taken a dramatic upturn in 2010, becoming an ever-increasing target for small and increasingly large businesses around the world.

Otherwise known as BPO, business process outsourcing has the potential to dramatically reduce the costs for almost any company operating in a Western country.

It is a very flexible process, whereby companies outsource anything from IT to accounting, or records, or any task involved in the processing for the company, be it technical or simple and repetitive.

It has expanded to include payroll accounting, human resourcing, training and development, and all sorts of everyday company tasks.

In this way a business can focus on its core competencies, leaving the necessary but different specialist tasks to outside specialists.

With the recession across the US and Europe, the idea of outsourcing has grown greatly as company owners desperately need to find ways to cut costs efficiently.

The downsides some firms are experiencing as a result of outsourcing is that there can be communication problems, and things can get done more slowly than with in-house departments.

Also, there may be a difference in what people see is good or decent quality work, but these are all things that can be ironed out and often do not even arise.


The effect of the financial crisis on outsourcing

August 31st, 2010

The economic crisis has affected outsourcing providers in several ways.

First of all, as with all corporations, they are seeing their market value declining and access to capital is also becoming more difficult.

As outsourcing providers are typically high capital consumers (since their income trails expenses), many of them are having to manage their expenses more carefully.

This tight management usually leads to decisions, such as not fully staffing projects, restricting discretionary expenses, that adversely impact client satisfaction and client acquisition activities.

On the other hand, the tight economy and companies’ desire to reduce operating expenses has led to a higher level of outsourcing activities.

However, these outsourcing deals are shorter in contract length (since companies are not confident in their ability to predict the future of their business) and often demand higher value from the service providers.

Because outsourcing is a very low margin business compared with most other industries, this has created a tremendous pressure on providers to further reduce their own costs.

Although large established offshore IT and IT-enabled services have done well in capturing a high market share, smaller and more niche offshore service providers are finding that business is slowing because of some of the restrictions being placed on companies who have received government economic stimulus funding.

This is quite prevalent in the US and, to some extent, in some EEC countries.

Outsourcing providers also face increasing competition from India and China, which are experiencing high economic growth.

Combined, all these factors are pressurising other providers into offering economically viable value propositions.

Economic uncertainty and, to some extent, depressed market valuation of service companies, is leading to an increased number of industry mergers.

As well as the high-profile acquisitions that have taken place in the pharma market, several large acquisitions have taken place in the IT industry in the last 12 months, such as HP acquiring EDS, Xerox acquiring ACS, and Dell acquiring Perot Systems.

This consolidation of service providers and, more importantly, widening of the platform of offering, will change the landscape in coming years.

For example, Xerox’s acquisition may lead the company to create a document management and data processing product offering aimed at pharmaceutical companies.

Meanwhile, Dell–Perot as well as HP–EDS may be able to offer a packaged solution of hardware, software and services in the healthcare industry.

The pharma industry’s situation

Public information shows that, as a whole, the pharma industry seems to be following general industry trends of cost management and a higher level of outsourcing activities.

At the same time, there is greater pressure on the pharma industry to compete effectively against generic drugs and patent expiries, which has led to stronger emphasis on effectively managing the research supply chain and outsourcing (or partnering) more activities.

In particular, there has been an increase in the use of offshore outsourcing for drug testing because of the access to a larger patient base.

For many outsourcing activities, including pharmaceuticals, India and China are considered as destinations of choice.

However, the strengthening of the economies in these countries, as well as rising costs of employee acquisition and retention, has led many companies to look for alternative outsourcing destinations, such as South America and Asia, as well as closer to home.

For the pharma industry, Costa Rica is becoming an important destination, with Allergan, Eli Lilly, GlaxoSmithKline and Pfizer all using Costa Ricabased service providers, as well as having their own captive operations in this area.

Eastern European countries are also becoming attractive locations and as EU membership expands to include many of these countries, it will make them even more attractive to both European and US companies.

However, some more remote destinations, such as the Balkan countries, may not be considered for outsourcing because of privacy regulations and confidentiality concerns.

In the coming decade, I believe that many pharma companies will also explore opportunities for outsourcing in Central and South America, as well as in South Africa.

These countries offer a growing educated workforce and an increasing market for pharmaceutical products.

Consistency and availability of infrastructure, established educational programmes and government encouragement will be key factors in these countries becoming top outsourcing destinations in the future.

Challenges and opportunities

The prevailing economic uncertainty will continue to create a challenging business environment for service providers.

For some, this may be a source of opportunity to gain business from companies wanting to reduce their costs, but other service providers may find it challenging to maintain sufficient margins as they are pressured into offering lowering prices.

Uncertainty in the capital market will impact new investment decisions, such as creating a network or building new services areas, and will be a driving factor for both the providers and customers of the services.

One of the latest technology directions that is being pursued by large service providers, such as IBM, HP and Microsoft, is called “cloud computing”.

This is a fancy name for the services where multiple companies share the same resource over a network rather than having these resources fully dedicated to each company.

Thus, higher performance hardware and software investment can be shared by many users of services.

With this growing interest cloud computing, companies will be looking to providers of these services to compete aggressively against traditional service offerings in pricing services and providing performance levels.

Recently, Microsoft formed a large consortium of hardware/software companies offering cloud computing, and more and more midtier and larger companies will be looking to take advantages of the benefits offered by such services.

Globally far-flung, distributed pharmaceutical industry companies will find the offerings particularly attractive with the low cost/impact implementation of services.

It will allow these distributed companies to have a common application platform running in one place (on the cloud) making implementation, training and support simpler than having to have multiple copies running globally.

Take advantage of technology

In a competitive pharmaceutical world, companies are not only looking to reduce their cost of operation, but are also looking to service providers to reduce cycle times.

Ultimately, this may create opportunities for service providers to offer innovative solutions that take advantage of data mining techniques or more automated management processes — I believe that providers who implement such solutions will have an advantage over those depending simply on labour cost savings.

However, the use of new data technologies will also lead to greater awareness and concern with the privacy of information, as well as confidentiality of drug activities.

As recently as 29 July 2010, Microsoft, Google and other technology giants have been appealing to the EEC privacy act body to enable the implementation of cloud computing beyond national boundaries, according to a report in the Wall Street Journal.

However, service providers would be required to create safe data environments and provide for a higher degree of warrantee in their services for the protection of private information, which would lead to higher operating costs.

I also believe that this will lead to a growing importance of governance processes in an outsourced environment; to date, governance has been a rather low priority topic for both service providers and their clients.

Another related topic that will draw higher attention will be making effective use of knowledge management in an outsourced environment.

A recent (2010) informal IAOP study showed that a large majority of customers and service providers either do not understand the implication of knowledge management or have not provided adequate framework for managing it.

This is and will remain a critical topic for the pharma industry because a lot of its business activities depend on both shared knowledge and a higher utilisation of knowledge for related activities.

Lastly, as the outsourcing industry continues to mature and service providers begin to leverage their investment in people, technology and process know-how, we will see higher-end processes, such as R&D through drug approval and global drug efficacy support, being outsourced more often than they are today.

Some have labelled this “Knowledge Process Outsourcing (KPO)”.

In the pharma industry, this will lead to the increased outsourcing of crucial activities such as governmental approval process management, copyright and patent protection vigilance, and legal research.


Sharing services versus Outsourcing

August 31st, 2010

As part of the Sungard Online Series: ‘Making the move to Finance & Accounting Shared Services Centers’ – SSON recently hosted a roundtable session on Centralizing payments.

Part 1 looked at standardizing processes and how this can actually build underlying procedures to capture visibility around the outgoing cash flows. Part 2 looks at choosing between sharing services and outsourcing and lists the internal challenges when faced with setting up a Shared Services Center…

SSON: What are the benefits then of setting up a payment shared service center as opposed to outsourcing the function?

HS: The reasons will depend on the organization. One reason is cultural: where you’ve got a close local relationship with suppliers, you may feel comfortable with effectively outsourcing your payments within the company into a shared services centrer environment.

You can make sure that your invoices still have the right format and still maintain a strong relationship with that local supplier. It also helps you to stay close to your bank, especially now when relationships are often more fragile because of the constraints on financing. Maintaining that closeness of relationship and working directly is an important feature.

Another issue is to do with who your outsourcing provider actually is. If they are a bank then that limits your flexibility in terms of banking relationships potentially.

It may be considered to be a core activity that you don’t want to have the risk of outsourcing to a bank or to a third party vendor where the long term feasibility of the business is questionable.

CJ: When we think about outsourcing versus setting up an internal payments shared service center, it’s important to distinguish between outsourcing the role and the function versus outsourcing some of the connectivity and technology pieces. Everyone recognizes that all vendors who are receiving payment are not equal.

An organization must maintain a very good relationship with their vendors because they’re a key part of the financial supply chain. They’re a key way of delivering and increasing efficiency in how you do business. If you outsource everything, there’s not necessarily as much of a driver to improve your relationship.

LB: What we’re seeing is that a lot of clients make a distinction between internal shared services and outsourcing the plumbing. SunGard not only hosts a payment factory but a managed service to cover the plumbing: the infrastructure hardware and software to automate the centralized process. Designing the process and making sure that it is operational is of strategic importance and is typically not outsourced.

SSON: Once a corporation has a smooth operating payment shared services center in place, how can they make the move from their payments factory to a corporate transaction banking platform?

LB: The term payment factories itself does not cover the entire spectrum in terms of business veins and complexity. Sending a payment out the door is a very simple process, although it entails quite a bit of complexity. However, building a business case might be challenging for corporations.

So we thought about the kind of adjacent workflows which are building up on processes that are typically implemented in a payment factory.

Payment workflows are traditionally at the core of a payment factory but a similar process might be sending out a collection instruction, also known as a direct debit instruction – leveraging that payments factory concept for non- payment business workflows. Another workflow can cope with account statements.

Another with treasury deal confirmations. We reflected on another term of a solution and we actually ended up with the term ‘corporate transaction banking platform / system’, which is really a system used by corporations to tap into transaction banking services offered by their cash management banks.

SSON: When an organization is implementing a payment shared service center, how are internal challenges best overcome?

HS: There are five key internal challenges:

1. Initial upfront costs: One of the ways of addressing that is, to have a clear business case and a metric on the performance of the shared service center.

2. Sponsorship Challenge: Ensuring those internal roadblocks can be cleared. Senior level sponsorship is critical to almost every one of the organizational challenges that are likely to come up.

3. Structural challenges: particularly when there’s a conglomerate or a holding company with a lot of joint ventures. The challenge is the shared service center can only apply to a certain part of the business rather than the joint ventures.

4. Mergers and acquisitions: It’s about planning and making sure that you’ve got a very clear migration plan for new entities coming into the group and how you’re going to migrate payments.

5. Sharing cash management business between providers: The difficulty arises when you’re fairly highly leveraged and you’ve got your own core financing relationships.

This makes it harder to centralize your payments activity to the extent that you want for one or two providers if you need to be seen to be providing ancillary business. It’s about making sure that you are spreading ancillary businesses and finding other ways of giving value back to your bank.

CJ: Helen gave a great recap of some of the biggest internal challenges. One area of focus or challenge has to be attention. There are so many key issues with opportunities that an organization is confronted with that sometimes it’s hard to bring this type of activity and idea to the forefront.

Building a business case is certainly important and it’s vital that it doesn’t focus solely on the financial benefit, the benefits of efficiency and working capital optimization; it also has a link to some of the strategic aspects of what the business is trying to do.

Look at ways to help the business be flexible, adaptable, resilient, and manage its growth if it’s a growing firm. Linking and tying in those key strategic components is vital.

Creating a structure that allows for growth, provides for the ability to grow, as well as achieve a reasonable return on investment for the activity, is one aspect.

The second item that seems to emerge as a challenge has to do with complexity. When you start talking about centralizing, there are numerous people who have various reasons why they want to keep things centralized but there are also numerous systems, numerous processes, and sometimes they can almost seem overwhelming.

There’s too much complexity and we can’t really solve that. That can and should be solved through creating a clear and prioritized roadmap that delivers benefits in an incremental and organized fashion, both from a process consistency viewpoint as well as from the plumbing and connectivity perspective.

LB: I would like to add one remark related to implementing an underlying technology solution, which is you need to have a strong sponsor in charge of the entire process.

This is also making sure that from a technology perspective, once decisions have been made, that the implementation plan is actually focused on the return on investment, as was documented in the business plan and that, like Craig was referring to, ROI is protected by going after low hanging fruit, so to speak, first, and create some successes first.

Typically, what we see in larger centralization exercises, which have a technology component, in the sense of implementing a payment factory, we do see that that is a challenge, that people tend to actually expand scope and basically protecting that scope and making sure that there is focus on the low hanging fruit items, so to speak, is one of the challenges. Having strong project management skills is obviously a solution to overcome that challenge.


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