Archive for March, 2011

PAL union workers vow to bring outsourcing plan to SC

March 31st, 2011

The Philippine Airlines Employees Association (PALEA) vowed to challenge before the Supreme Court Malacanang’s decision to uphold the outsourcing plan at the national flag carrier.

PALEA president Gerry Rivera made the statement on Wednesday as the Department of Labor and Employment (DOLE) tried to patch up for the second straight day the labor row between union and management that could lead to a strike as early as Saturday.

“The ruling of the Office of the President (OP) is not yet final and executory. We can still appeal that before the courts. I think the last arbiter would be the Supreme Court,” Rivera said in an interview.

He said even PAL management—before Malacanang released its decision allowing the outsourcing of 2,600 jobs—said that it would go to the courts if the Palace ruled against them.

“We just received the OP decision this Monday and we are now studying it to prepare an appeal before the court of Appeals or the High Court,” Rivera said.

The union leader also insisted that management has been refusing to negotiate for a new collecting bargaining agreement (CBA) with PALEA—the reason why the union has threatened to go on strike as early as this weekend.

Rivera explained that while PAL submitted its CBA counter-proposal on Monday, it included the ‘precondition” that the CBA should cover only those who would not be affected by its outsourcing plan.

“So, who will be left? I myself will be affected by the outsourcing plan. So, they are still refusing to negotiate. Our position is the CBA negotiation should be treated independently from other issues,” Rivera said.

“The CBA is a right of workers and the obligation of management so there should be no preconditions except for those that we agreed to,” he said.

“But they’re imposing this precondition…What if it takes the courts five years to rule on the (outsourcing) issue, does that mean we won’t have a CBA for the next five years? That is unacceptable,” he added.

Rivera said the DoLE officials suggested during the first conciliation hearing on Tuesday at the National Conciliation and Mediation Board (NCMB) that this precondition of PAL be removed but the issue remained unresolved.

Another mediation hearing was held Wednesday afternoon at the NCMB but Rivera said PAL president Jaime Bautista was not present because he left for New Delhi on Tuesday night with PAL owner Lucio Tan.

“With the (PAL) president absent, I don’t know if those present on their side have the authority to negotiate and seal agreements,” said Rivera, who also did not attend Wednesday’s hearing and sent only PALEA representatives and lawyers to the hearing.

PALEA last week held a strike vote and majority of its members agreed to go on strike due to the “refusal” of PAL management to negotiate a new CBA.

Rivera said that they submitted the results to DoLE last Friday, which meant that upon the end of the seven-day “strike ban” this Friday, PALEA would legally be able to on strike.

However, Labor Secretary Rosalinda Baldoz could assume jurisdiction over the labor case since a labor strike at the flag carrier could affect national interests. Such a move would ban any strike from breaking out at PAL.

“We’ll cross the bridge when we get there,” Rivera said, when asked what PALEA would do if Baldoz made such a move.


Solicitors Regulation Authority to review outsourcing contracts

March 31st, 2011

Looking at the growing number of law firms increasing their use of both legal and back-office outsourcing, the Solicitors Regulation Authority (SRA) is planning to regulate and keep a check on outsourcing by these law firms.

Legal Week reports that the new Code of Conduct may be published next week (April 6) which may grant SRA power to review law firms’ outsourcing contracts and files, as well as access to outsourcers’ premises for regulatory checks. This inclusion would affect all legal and business process outsourcing arrangements that SRA deems critical to the firms’ activities.

This move of SRA will now force law firms to reconsider their decisions and relook into the outsourcing contracts and arrangements.

The guidelines, coming into effect in October as part of the new Code of Conduct, state that the SRA expects firms to look at all existing outsourcing contracts. While it concedes it may not be possible to change them all before the terms end, the watchdog wants to see evidence that firms are reviewing contracts to ensure compliance.

SRA head of standards Richard Collins said, “Our primary aim is to ensure that outsourcing does not reduce our ability to thoroughly regulate what law firms do and that they can still prove that the work is up to our requirements”.

Integreon is getting bulk of back-office work from several law firms like Allen & Overy, CMS Cameron McKenna. CPA Global is also handling lot of outsourced work of different law firms. SRA intends to review all these LPO deals through this new Code of Conduct.

The law firms are already criticizing this move of SRA who argue that the guidelines are intrusive, unclear and in need of revision. The law firms are unable to understand how SRA can expect them to make sure it gains entry to the property of a third party. Also, the fact that SRA has presence only in England and Wales, it is difficult to understand how it practically plans to regulate LPOs in India and other countries.

The SRA maintains it will not be changing the guidelines.


IT leaders rely on outsourcers for innovation, study claims

March 31st, 2011

A survey of European CIOs reveals that 67 percent of IT leaders say they rely on outsourcers to turn ideas into new and improved processes, but just a third actually measure the impact of innovation delivered by their service providers.

Two-thirds of the CIOs said they would benefit from a framework for innovation and half would be willing to pay more for an outsourcer that could help them formalise and maintain a successful innovation process, according to the research conducted by the UK’s Warwick Business School (WBS) and sponsored by offshore outsourcing provider Cognizant.

As outsourcing activity picks ups (two-thirds of survey respondents said they are spending more on outsourcing than three years ago), moving beyond business-as-usual deals could benefit both customers and providers, says Ilan Oshri, WBS associate fellow and associate professor at Rotterdam School of Management and co-author of the study.

Remaining too bogged down in the day-to-day management of outsourcing relationships prevents many IT organisations from deriving innovation from the practice. “Many client firms are still occupied with outsourcing operations, trying hard to make outsourcing deals work, constantly monitoring SLAs and doing everything possible to avoid failure,” Oshri says.

Most IT service providers are equally mired, focussing on their bread-and-butter IT services rather than any kind of innovation consulting. “Many outsourcing vendors are capable of delivering incremental or radical innovation to their clients,” Oshri says. “However, they lack the capability of guiding and consulting their clients regarding the management of innovation. This pitfall in some outsourcing vendors could be the result of their concentration on mainstream outsourcing services-often their cash cow-rather than on an emerging area such as innovation.”

While many CIOs hold on to the traditional notion that IT should outsource commodity work in order to focus on higher-value tasks like innovation internally, Oshri says mature IT leaders approach outsourcing differently. “More sophisticated outsourcing clients seek innovation from their vendors,” he says, “while newcomers to outsourcing hope that by outsourcing a function they will be able to free up in-house talent to focus on higher value activities.”

An outsourcing relationship can reap more than cost savings, says Julia Kotlarsky, associate professor of information systems and management at WBS. Best-in-class expertise and experience drawn from multiple clients could theoretically be brought to fueling customer-specific innovation.

Oshri points to Shell as a company that has partnered with outsourcers to build a solid internal innovation function. They “bring together vendors to discuss future challenges, harvest solutions, identify the best solution, raise funding and execute them as joint ventures.”

The Warwick research found that just 22 percent of outsourcing engagements are joint-venture deals with profit-sharing clauses, while the remaining 78 percent were fixed-priced contracts.

The researchers interviewed 125 CIOs and 125 CFOs for the study and found that IT leaders were more likely to view their outsourcers as a potential source of new ideas than their counterparts in finance. Less than half of CFOs expected service providers to help turn ideas into new and improved processes and just 39 percent of them would be willing to pay higher rates for an outsourcer that could deliver proven innovation on a regular basis.


Outsourcing and automation not mutually exclusive

March 31st, 2011

Over the past decade, outsourcing and business process automation have been used by many organisations as separate ways to help improve the efficiency of IT.

Many companies have used third-party suppliers to deliver non-core processes such as IT support and call centres across all verticals, while one of the primary benefits of business process automation is removing non-value-add human interventions to make certain business operations faster.

The problem for organisations is that the quality and cost benefits from outsourcing and business process automation have largely dried up. Companies have banked the savings from large outsourcing contracts over the past 10 to 15 years and there are few new incremental savings to be found.

The largest contracts are also now a thing of the past, because more service providers are looking to have clear SLAs to minimise risk for the customer.

However, when profitability stumbles, managers seem to think they must either invest in business automation technology or outsource production.

And many companies don’t look far enough ahead, walking down the wrong path, too quickly. One choice does not exclude the other.

By moving forward with the globalised provision of outsourced services, with experience in process automation from certain cloud enablers, there is the potential to achieve the cost savings seen in the initial wave of outsourcing nearly a decade ago.

Both can exist on shared or virtualised infrastructure, which can be shared evenly with other parties without compromise. In addition, the service source and delivery is independent of the location.

Good candidates for business automated and outsourced services will tend to have the capability for a uniform service, regardless of location or role of the end user. Desktop support is a classic example. Furthermore, business automation and outsourcing should both follow standard processes such as software testing, HR, security, payroll, and have consolidation as a design feature via server farms.

A combined business process automation and outsourcing strategy also needs to be considered as an opportunity by the end user IT team. While outsourcing can reduce the need for in-house IT, business process automation can require it.

And this should increase shareholder value as the years progress.

This will require an active collaboration between customers and suppliers on the efficiencies and innovation that business automation may bring. Some suppliers may resist the idea of a combined business automation and outsourcing strategy in an attempt to protect their own profits.

Those suppliers will remain wedded to a classical outsourcing model, and will be driven into offering commoditised services at lower prices and margins. These will not be the chosen partners of innovative companies that wish to move their business-critical applications into the cloud over the next few years.

Combined process automation and outsourcing services are long established in sectors such as manufacturing. For example, car makers have shared platforms that deliver multiple model ranges and rival glassmakers have built factories together.

This can happen in IT, where organisations are only just beginning to identify processes that can be automated and outsourced simultaneously as part of a single business transaction.

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BT signs outsourcing contract with NTV

March 31st, 2011

To build communication infrastructure and manage ICT services

BT has signed an outsourcing contract with Nuovo Trasporto Viaggiatori (NTV), a private operator on the Italian high speed rail network, to build its communication infrastructure and to manage its ICT services.

Under the agreement, BT will be NTV’s sole partner to project manage and integrate all communication services (fixed and mobile), the systems management of the data processing centre, the Wi-Fi coverage of the stations where NTV is operational and which will provide services to their customers.

In addition, the contract covers the implementation and management of NTV’s network infrastructure and information and communication technology, including its wide and local area networks (WAN and LAN) and its wireless networks.

BT will provide all mobile and fixed lines services, using Voice over IP offerings.

BT said that it has developed device management platforms and unified communications applications for NTV’s main offices, integrating video conferencing and collaboration offerings.

Further, NTV staff on board high speed trains will be supplied with portable PDA (Personal Digital Assistant) terminals allowing, various control activities, tickets validation and selling, on board personnel’s shifts scheduling, traffic control, malfunctions reporting through a specific integrated system.

BT will also manage all of the NTV’s data centre services and SAP platform.

BT Italia CEO Corrado Sciolla said the outsourcing project developed by the company is innovative as it brings together a wide range of resources and skills and integrates many different technologies.


Poland becoming outsourcing powerhouse

March 31st, 2011

Chosen from 40 cities worldwide, Wrocław was named the new shared-services center for the multinational consulting firm Ernst & Young, Dziennik Gazeta Prawna reports.

The new hub will delegate accounting and financial documentation for the majority of Ernst & Young’s European branches. The center is expected to hire about 200 new workers.

Shared service centers are changing the face of the Polish economy. Over 300 such centers are already based in the country, employing between 40,000 and 45,000 people. That number is expected to jump to almost 70,000 workers in the next few years.

Increasingly, companies such as Citibank, IKEA, IBM, and Sony are relying on their Polish branches to service accounting, personnel, IT and purchasing for customers worldwide. Though labor of this kind is much cheaper in places such as China or India, it is also much harder to find qualified accountants and other workers who speak three languages.

However, the arrival of these new consulting and service companies is not only providing relief to local unemployment rates. Many experts, like economist Malgorzata Starczezeska-Krzysztoszek, view the rise of these new business centers as the key to Poland’s rising status in the world and increasing involvement in innovation.


Indian tech shares rise as global majors spur spending hopes

March 31st, 2011

Shares of India’s leading IT firms are rallying on hopes that upbeat results and outlooks last week from global technology majors Oracle Corp and Accenture bode well for a resurgence in tech spending.

The Indian IT sector index has jumped nearly 8 percent since results from the two U.S.-based giants fuelled hopes of a global resurgence in technology spending and added to expectations for a pickup in pricing.

“Overall, it is a positive signal for the Indian IT sector,” said Rohit Anand, senior analyst with PINC Research, who expects the dollar revenue of India’s top three IT firms to grow in the range of 25-30 percent in the year ending March 2012.

“New license sales have risen (at Oracle). That means people are looking at more discretionary spending, they are thinking of more than just merely cost cutting initiatives,” he added.

Analysts estimate revenue growth at the top three — Tata Consultancy Services Ltd , Infosys Technologies Ltd and Wipro Ltd — will rise by roughly 20-25 percent in the fiscal year ending March 2012, faster than the overall sector, driven by rising demand and price hikes.

“A continued strong uptake in IT services demand due to improving economic growth in the U.S. benefits Indian IT companies like TCS, Infosys and Wipro,” said Taina Erajuuri, fund manager with Helsinki-based FIM Asset Management.

“Pricing is expected (to) pick up this year, which augurs well for Indian IT companies,” she said.

This week, TCS Chief Executive N. Chandrasekaran said he expects to “definitely” see an uptick in pricing in the fiscal year that starts April 1, after prices rose in the October-December period for the first time in six quarters.

Last week, IT outsourcing and consulting firm Accenture raised its outlook for the full year, while Oracle forecast a 4 to 14 percent rise in new software sales for the fiscal fourth quarter after reporting a 29 percent jump in new software license sales for its third quarter. [ID:nN24180187]


According to StarMine SmartEstimates, Infosys, TCS and Wipro trade at 21.2, 21.7 and 18.9 times 12-month forward earnings respectively, a tad higher than the five-year average, analysts said.

By comparison, global rivals Accenture and Capgemini trade at 15.5 and 15.1 times forward earnings respectively.

“(Indian) IT stocks are richly valued, but they are well-positioned to command these premium valuations, due to the history of performance deliveries,” said Rakesh Rawal, head of private wealth management at brokerage Anand Rathi.

Rawal, who manages $1 billion of funds for wealthy individuals, holds the top three IT stocks for his clients.

Moves by Infosys and TCS to focus on higher value work such as consulting are also positive, investors said.

According to StarMine, out of 46 analysts tracking Infosys, 25 had a strong buy or buy with 5 recommending a sell or a strong sell. The rest had a hold.

The sector index is down 5.9 percent since the start of the year to March 30, in line with the larger market . TCS, Infosys and Wipro shed 1.2 percent, nearly 8 percent, and 3.4 percent respectively.

TCS shares are just about 40 rupees away from their record high of 1,221 rupees, scaled in January.

Investors will watch out for the guidance from Indian technology companies for the next fiscal year when Infosys kicks off earnings season on April 15.

Brokerage Motilal Oswal issued a report this week on Infosys reiterating its buy rating and a price target of 3,664 rupees — or nearly 16 percent above Wednesday’s closing price.


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