Archive for November, 2010

SEI adds absolute return funds to outsourcing solution

November 30th, 2010

Outsourcing asset management group SEI has added absolute return capabilities to its seven-strong strategic portfolio suite.

The SEI strategic portfolios are a risk-profiled range with £78m in assets under management.

The new portfolio of Ucits III absolute return funds includes long/short equity, market neutral equity, long/short credit and global macro mandates, and will be run by SEI’s alternative investment team, which manages $2bn.

The strategies will be used to increase diversification and reduce risk, and will comprise up to 10% of the Conservative, Moderate, Core and Balanced portfolios within the strategic range.

SEI says further absolute return strategies may be added in the future.

“Absolute return strategies are an excellent addition to the portfolios, providing further opportunity to diversify risk,” says Cedric Bucher, director of client investment strategy at SEI Global Wealth Services.

“The universe of Ucits funds that employ absolute return strategies has grown significantly over the past three years, providing the opportunity for broader screening and better portfolio construction in the context of a multi-asset portfolio.”


SRA set to review LPO regulation in wake of recent outsourcing deals

November 30th, 2010

The Solicitors Regulation Authority (SRA) is gearing up to carry out a review of legal process outsourcing (LPO), as the number of firms using external outsourcing companies for legal work increases.

The body is considering conducting a “thematic review” to identify issues or risks that warrant regulatory changes or additional supervision. The prime focus for the SRA is to ensure that outsourcing legal work to an external provider does not absolve the law firm of responsibility for the matter outsourced.

A spokesperson for the SRA said: “Although we have not made any final decision, [LPO] is such a growing and fast-developing issue that we may undertake a thematic review next year to identify whether there are any particular issues or risks that require changes to our current regulatory requirements or whether certain outsourcing arrangements need particular attention in the supervision process.”

The review comes as the regulator looks at LPO as part of its consultation on the latest draft of its handbook, which is due to be launched in April next year.

In the current version of the handbook the SRA states in chapter four that outsourcing should only be undertaken when the delegator is “satisfied that the provider has taken all appropriate steps to ensure clients’ confidential information will be protected”.

Additionally, the handbook states that outsourcing must not “jeopardise the quality of legal activities nor impair the quality of internal controls” or “impact on the SRA’s ability to monitor compliance with all obligations in the handbook”.

Last month CMS Cameron McKenna partners gave their seal of approval to plans to outsource the firm’s back-office support departments to Integreon, while Herbert Smith last week opted to set up its own office in Belfast to handle volume disputes work rather than using an external LPO.


Report reveals Indian IT suppliers are getting a second wind

November 30th, 2010

Equaterra is about to announce the results of its latest survey of the performance of IT service providers working in the UK.

The survey interviewed over 200 large businesses and analysed over 600 IT outsourcing contracts.

There are lots of interesting findings but I though I would start with the success of the Indian suppliers in this year’s study.

The results show that in terms of general customer satisfaction Wipro is leading the way. Second is Mahindra Satyam and Cognizant is third.

I spoke to Lee Ayling, managing director at Equaterra last week. He says the Indians are coming back. I know they have never really gone away but they could be getting a second wind.

This second wind could be a sign of these companies maturing in the Western markets.

Ayling believes part of the reason for success this year is the fact that many of the Indian suppliers have built local management teams. This has given them a better understanding of customer needs. It also allows them to be close on hand when required.

He also says that some Indian companies have moved beyond their traditional application lifecycle specialisation to offer infrastructure management.

So ten years on Indian companies, which got their first wind as a low cost answer to the Y2K bug, are maturing into true globalised suppliers.

Measured across about 10 KPIs the Indians did pretty well.

Look out on Computer Weekly for a version of the full report available for free. When it is ready I will blog about it.


Tuesday tips round-up: British Airways, African Barrick, Phoenix IT…

November 30th, 2010

There is one undeniable reason to hold British Airways shares. Investors are entitled to a 10% discount on its fares, and this perk is being maintained and even extended to Iberia routes once the two are formally merged in the new year.

The shares, at 265p, now sell on less than ten times the next financial year’s earnings, though its cyclical nature means it it is preferable to look at average earnings over the previous five-year cycle. The shares are on about 20 times these. Given the potential for upset, this looks unjustifiably challenging says the Times.

Brokers forecasts put African Barrick Gold at under 10 times forecast earnings for next year. That compares with nearly 13 times for other UK-listed gold and silver stocks. ABG is more than pricing in any risk of a short-term fall in the gold price. Added to its growth prospects, this is a buy says the Independent.

Phoenix IT offers its business clients outsourcing services and is well placed for what it says is “the move to a new era in IT infrastructure, sometimes known as the cloud”. The price-to-earnings rating of the stock is an undemanding 7.7 times estimated earnings in 2011. Buy says the Independent.

Phoenix shares have always been poorly rated by the market, on well below ten times’ annual earnings, because of its overhang of debt. But with borrowings now down to a more comfortable £63.5m, the company has stepped up the dividend and they now yield approaching 5%. Buy for an eventual rerating adds the Times.

Playtech is a business-to-business outfit that provides the infrastructure for firms offering gaming products, such as online poker and bingo. The Playtech model works. At 16.5 times 2011 earnings, it’s not cheap. But it offers great exposure to the growth of online gaming with none of the risks. Keep holding says the Independent.

Component distrbutor Acal swung back into an underlying operating profit of £2.8m, from a £1.8m loss last time. Much of this is already in the share price, which has risen a pound or so since the start of the year and now stands at 240p, putting the shares on about 18 times’ this year’s earnings. Hold; not worth chasing at this level says the Times.

Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.


Firms find outsourcing isn’t always the solution

November 30th, 2010

When executives at Master Lock Co. evaluated manufacturing they had outsourced to China, they decided it was better to make some of those products in Milwaukee.

Even with lower labor costs in Asia and Mexico, Master Lock and other companies have found that outsourcing isn’t always best and, in some cases, it’s laden with problems and disappointments.

That’s clear from a new survey from American Society for Quality, which polled more than 300 companies about outsourcing.

The survey, done in October, found that 55 percent of the companies were “substantially dissatisfied” with their outsource provider in the areas of innovation and making process improvements. “There are all sorts of stories of failure, where companies bring work back because their customers are complaining,” said Jean Harvey, an outsourcing expert at the society for quality.

“The best way to sum it up is we are continuously looking at our supply-chain strategy,” Rebecca Smith, a spokesman for Master Lock, said. “You have to look at the total costs.”

The quality society survey found that low-cost outsource providers may attract customers but can’t always keep them.


Major enterprises in chinese service outsourcing market available through bharatbook

November 30th, 2010

Outsourcing refers that enterprises outsource their non-core business to other enterprises, so that the enterprises can lower the cost, raise efficiency and optimize their core competitiveness. Currently, there are over 3,000 Service Outsourcing enterprises in China. They would support software development and project maintenance, or be private teachers, securities and even doctors of foreigners through Internet, or establish call centers in their cities for multinational companies.

Economic globalization is now developing into a new stage, with global industries transferring from manufacture industry to service industry. Service outsourcing has become a major trend of the development of service globalization. Since the end of 1980, some multinational companies of developed countries have begun to outsource their non-core business of IT service to those professional service suppliers with lower cost so as to save their own cost and raise operating efficiency and core competitiveness. After rapid development of 20 years, today’s service outsourcing industry has owned a considerable scale. Its business has expanded from original IT Service Outsourcing to higher-level business process outsourcing, both of which have become the main business of current service outsourcing industry. It is predicted that the value of global offshore service outsourcing market will reach at least USD 1.6 trillion by 2020.

Chinese service outsourcing industry is still in the initial stage, but it has huge potential. China has huge labor resource, complete infrastructure and growing economy. Integrating the rapid expansion and development of domestic offshore service outsourcing market will become a new strength in international competition.


Core Systems BPO Heating Up

November 30th, 2010

While insurers face numerous challenges in making business process outsourcing (BPO) work, many expect their company’s use of BPO to remain level or increase in 2011.

Analysts at Celent are beginning to see signs that core systems BPO and Software-as-a-Service (SaaS) is heating up. According to the financial research and consulting firm’s recent report, “Approaching the Boiling Point: BPO, SaaS in Insurance,” in the current economy, competitive pressures will continue to drive insurers to seek solutions that balance reduced costs, high service quality and well-managed delivery risk. “We expect that the first wave of strong movers into core systems BPO and/or a SaaS model for core systems will gain competitive momentum that will be difficult to copy,” the report states.

The firm conducted interviews and surveys for the report, finding that nearly half of all respondents (49%) expected their company’s use of BPO to remain level in 2011, while 36% expected it to increase. The top three areas of concern regarding BPO for core business processes were lowering of service levels (49%), loss of control (44%) and data security (41%).

Significant hurdles and challenges are forcing insurers to play a waiting game. One challenge is finding a vendor “fit,” Celent says. Insurers believe that BPO- and SaaS-based offerings have not matured. Respondents rated vendors’ capabilities strongest in the print/mail areas and weakest in the core business processes.

Another challenge is getting processes under control so that they can realistically be outsourced. A third is pushing their corporate culture toward BPO. And a fourth is getting over the perceived loss of control inherent in outsourcing business processes.

Celent advises insurers that will eventually take the plunge to make it a short wait. They should get started bringing these new tools to bear on their core systems strategy, perhaps experimenting with a portion of core systems and services that travels well.


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