Archive for July, 2013

Cloud computing, Microsoft, the Dutch regulator and financial services

July 31st, 2013

The financial services sector throughout the EU wants an answer to the question when and to what extent can we enter the cloud?

A major hold-up however continues to be a dispute over the correct interpretation to be given to the provisions of the EU Markets in Financial Instruments Directive (MiFID) which require regulators to be given ‘effective access’ to ‘data’ and ‘premises’ in many instances where data processing is outsourced.Outsourcing20

Initially, regulators expressed caution and proposed that effective access to premises equates only to physical access to all data centres upon which cloud processing takes place. Recently though, there has been some suggestion that there may be another way forward.

Earlier this year reported on an ‘understanding’ or ‘agreement’ reportedly reached between cloud provider Microsoft and the Dutch Central Bank. The agreement had been described as “setting a precedent” and suggestions were made that the agreement might benefit not only the Dutch regulator but other regulators as well. was interested to know what this meant in practice and what the agreement looks like on paper. We asked a representative of the Dutch Central Bank for a copy of the agreement between it and Microsoft but were told that one could not be provided to us.

A spokesman for the Bank confirmed though, that there is no ‘template’ clause agreed between the Bank and Microsoft setting out audit rights in favour of the Bank which may be inserted into Microsoft’s contracts with regulated
Dutch financial services firms. But he also confirmed that Microsoft has agreed that the Bank can “visit Microsoft at any moment” in order to check the data belonging to financial services companies under the terms of specific contracts. How that agreement is precisely termed was not shared with us, but the spokesman said that it allows Dutch firms to meet their requirements set out in regulations under the Financial Services Act in the Netherlands – the legislation that transposes the MiFID rules into Dutch national law.

According to Microsoft, this development demonstrates that not all clouds are equal. “There is a misconception that cloud solutions create insurmountable challenges to maintaining regulatory compliance, this misconception is prevalent in the financial services sector and other regulated sectors,” according to Dervish Tayyip, EMEA Legal Director for Microsoft.

“We think the opposite can be true, if customers choose their cloud vendor carefully. The cloud can provide all organisations the economic and technical benefits of cloud services while maintaining compliance with regulations”, he said.

While the agreement is a step forward for Microsoft, suppliers having to negotiate a right for every regulator in every jurisdiction to access every premise upon which every cloud provider processes data does not seem to us to be the most effective way forward. In our view more discussion and debate is needed over the correct interpretation to be given to the provisions of MiFID and implementing laws which require ‘effective access’ to premises.

Do on-site audits really give regulators more visibility over the quality of processing activities undertaken by an outsourcing provider? Even if in a perfect world they may, do regulators really have the resources to enable them to effectively inspect cloud resources located outside of their own jurisdiction?

The best way forward may not be at the negotiating table but through a robust legal discussion which backs the idea that effective access to premises may mean digital and not physical access.
We are interested to hear your thoughts.


Mizuho considering outsourcing back office

July 31st, 2013

The Japanese bank is planning to outsource part of its back office, including its post-trade processing unit, according to two sources close to the situation. However, the sources said the talks with various outsourcing providers were still at the consultation phase, and it is unclear how many regions the project would span across.Outsourcing19

Mizuho declined to comment.

The move follows the news last week that Societe Generale Corporate & Investment Banking is set to outsource part of its investment banking back office to Accenture Post-Trade Processing, a joint venture between management consulting group Accenture and securities services provider Broadridge Financial Solutions.

The joint venture aims to provide post-trade processing and technology services to support settlement of trades and asset servicing. The press release announcing the move said that Accenture Post-Trade Processing is “a solution to help banks operating in Europe and Asia-Pacific reduce post-trade processing costs, adapt to new regulations and technology, and quickly and efficiently launch new products and enter new markets”.

Once source close to Mizuho said talks had taken place with Accenture as well as a number of other providers. Accenture and Broadridge declined to comment.

The buyside has long been convinced of the benefits of outsourcing non-core activities, such as the essential back office operations, fund accounting, fund administration and even their trading desks more recently.

In May boutique asset manager River and Mercantile extended an agreement with custodian BNY Mellon to provide middle and back-office services for $3.1 billion of assets, and at the beginning of the year hedge fund manager Bridgewater Associates signed a unique deal that saw custodian Northern Trust replicate an already-outsourced contract for its middle and back office. The manager outsourced its back and middle office to BNY Mellon in late 2011, and chose Northern Trust to provide a shadow back-office operation.

The sellside has been less convinced. Earlier this month custodians told Financial News that only the smaller broker-dealers and banking groups had been looking to outsource their custody needs, with the larger firms keen to keep control of these operations in-house. [ ]

However, following the financial crisis and the resulting tsunami of regulation that has hit the banking industry, banks are focusing more on the costs of running these non-core parts of the business and the cost of complying with rules. One custodian told Financial News that the tier one and two banks are now looking to outsource their back-office operations.


Infosys Is Having Its Midlife Crisis

July 31st, 2013

Indian outsourcer Infosys is looking for growth in high-value services as some of its traditional businesses, such as application maintenance, become commoditized. The company also needs to convince customers and investors that it can deliver on its new business strategy, which it grandly calls Infosys 3.0.Outsourcing18

Company: Infosys Ltd.

Headquarters: Bangalore, India

Employees: 156,688

2012 Revenue: $7.4 billion

CEO: S.D. Shibulal

What They Do: Infosys is an Indian provider of IT, back-office and consulting services. Offerings include application development, infrastructure management services and business process outsourcing, product engineering, and systems integration and consultancy. Sixty-two percent of its revenue comes from North America.
The company wants to break away from having to hire people by the thousands to earn more revenue. The model worked well for Infosys and its Indian peers for several years because of the low cost and easy availability of staff in India, but it’s getting harder to recruit high-quality staff.

Infosys CEO S.D. Shibulal plans to focus more on consulting and systems integration, to partner with customers in achieving their business objectives through risk-sharing pricing models, and to develop reusable platforms and intellectual property. “3.0 is designed around a simple principle, and that is to increase client relevance,” he says.

Facing the IT Services Challenge

In the short term, a difficult worldwide market for IT services and a turbulent transformation to the new business strategy are costing Infosys in terms of revenue and profit. The company’s revenue growth of 6.6 percent last year was much lower than the 15.2 percent posted by rival Tata Consultancy Services and the 18 percent reported by HCL Technologies, according to Gartner research.

To face those challenges, Infosys brought back former CEO N. R. Narayana Murthy as executive chairman. Murthy says he will “add value” to Shibulal’s role as CEO.

Customers should keep an eye on the company’s staff attrition rate, says Sudin Apte, principal analyst and CEO of research firm Offshore Insights. Infosys reported employee attrition of 16 percent in the first quarter. “If the attrition rate reaches 20 to 25 percent, then customers may see key people leaving from the teams that are working for them,” Apte says.

Transformation Continues

Working remotely with Infosys’ IT services teams in India has not been difficult, says Carl Hoburg, who at the time he was interviewed was CIO of NovaSom, which provides home testing services for obstructive sleep apnea.

Infosys helped the startup migrate to the cloud and develop firmware for new wireless devices that collect patient data. Hoburg says he’s been impressed by the company’s professionalism, customer service and technology expertise.

Infosys is, however, regarded by some analysts as risk-averse and not very aggressive in pricing. “Their ability to execute on their strategy is taking time, and we have often seen that proposals that involve new pricing models and other mechanisms do not get approved by the finance and legal teams,” Apte says.

The company has also been too busy with its internal transformation, including management changes, while its competitors have been investing in client-facing functions to attract business, he says.

Infosys may also face problems from a proposed U.S. immigration bill that would tighten requirements for H-1B and L-1 visas. The company has facilities in key markets like the U.S. and hires locally, but it still sends many people from India to work on client projects. About 60 to 65 percent of Infosys’ staff working in the U.S. have H-1B or L-1 visas, Apte says.


HCL Tech Q4 rises 42 percent on higher orders

July 31st, 2013

HCL Technologies has posted a better than expected fourth quarter profit, lifted by order wins.Outsourcing17

India’s number 4 outsourcing company bookeded a 41.6 percent increase in its net profit at 12.1 billion rupees (US$198 million) for the quarter ended June, according to a press release on Wednesday. That’s above the 10.6 billion rupees (US$173.58 million) forecast from a Reuters poll.

Revenue was up 17.3 percent from the previous year at 60.94 billion rupees (US$997.78 million).

Anant Gupta, president and CEO, of HCL Technologies noted the company had recorded an “exceptional growth of 22 percent” for the financial year and led the industry in profitable growth. This was on the back of seven successive quarters of net income margin expansion, he added in the statement.

“We have consolidated our leadership position in the Infrastructure Management Services and verticals like Financial Service and Lifesciences & Healthcare,” said Gupta.

The positive results echo those of rivals Tata Consultancy Services (TCS) which booked a 10 percent profit growth, and Wipro which posted an 11 percent profit growth for the same period. Wipro had remarked it was seeing a large pickup in large deal closures.


Global Sourcing More Important Than Ever, Say Fortune 1000 CIOs at The World BPO/ITO Forum 2013

July 31st, 2013

For executives planning their strategies in uncertain economic and political times, amidst the rise of protectionism, the sixth annual World BPO/ITO Forum,, held July 17-18th in New York, gave some key insights on how best to manage the transition from ‘old IT’ to ‘new IT’.Outsourcing16

“We are living through a sea of change in sourcing strategy,” says Jim Noble, principal of The Advisory Council and World BPO/ITO Forum chair. “While it has taken longer than we anticipated for cloud services to become a practical reality, the impact is proving to be quite extraordinary. The impact of this shift can be truly game changing – business agility through faster outcomes, less capital investment, greater flexibility, escape from the treadmill of software version upgrades, and a technology catalyst for introducing business process best practices,” Noble adds. “This is where the World BPO/ITO Forum made a real difference — by enabling buyers and sellers of services to meet each other, and by encouraging experts to share insights in a friendly environment.”

Themed “Smartsourcing: Leveraging Collaboration & Innovation,” the Forum provided peer-to-peer group learning and influential networking atmosphere for 250+ top executives,, currently using BPO (business processing outsourcing) and/or ITO (IT outsourcing) services. With a roster of 55+ C-executives as speakers, the conference provided invaluable insight into how globalization and disruptive technological changes are making the old multinational structure obsolete.

The nation’s first CIO, Vivek Kundra, as keynote speaker (, described the tremendous challenge of leading the federal government’s information technology bureaucracy at a time when cutting costs, increasing efficiency and driving innovation was of paramount importance. Having managed the $80B federal technology budget, Kundra’s efforts yielded significant progress in transforming the way technology is purchased and managed by bringing best-in-class private sector solutions to solve massive public sector inefficiencies. The result has been a highly transparent, efficient and accountable environment focused on making systems and information useful to the public.

The conference, attended by more than 250+ C-level executives from around the world, featured more than 20 sessions in two tracks: Globalization & Leadership, and How the Technology Landscape is Changing Outsourcing.

Topics discussed included leveraging cloud computing and mobility, unlocking innovation, multi-vendor approaches, managing risk, and the economic and social impact of global sourcing, among other issues. Additional highlighted speakers,, included:

Atefeh Riazi, Chief Information Technology Officer, United Nations
Surajit Jha, President & COO, Tata Business Support Services
Soumitra Rathod, EVP, New York Life Insurance
Ben Pring, AVP, Center for the Future of Work, Cognizant
Paul Roehrig, PhD., AVP, Corporate Strategy, Cognizant
Dr. Marcell Vollmer, Chief Procurement Officer, SAP
Tanvir Khan, VP & Global Head, Dell BPO
Hasan Dewan, Head of Global Technology & Operations, Russell Investments
Shiv Kumar, Global Head, Strategy, EXL Services
Vishal Ahluwalia, Head Outsourcing Americas, UBS

“Since the Silk Road, global commerce has been a lot more than tea and spice. It has been the exchange of ideas, collaboration, innovation and ultimately acceptance of different cultures, views and perspectives. The World BPO/ITO Forum is an extension of the Silk Road where brilliant perspectives were shared and innovative ideas created,” states Atti Riazi, CITO, United Nations.

As an indication of how important outsourcing and offshoring has become, the summit was attended by current leading offshore country delegations (India), delegates from nearshoring destinations such as Uruguay, Brazil, Colombia and Argentina, and representatives from emerging offshore destinations such as Bulgaria, Poland and Kenya.

“Companies are re-thinking their offshoring strategies – as the global cost labor arbitrage is narrowing,” says Kartik Kilachand, CEO & Co-Founder, The World BPO/ITO Forum. “’Reshoring’ seems to be the new buzz word – bringing jobs back to America. KPMG even announced the ‘Death of Outsourcing’ in a research paper last year. However, the stark reality is that the developed countries will have to compete hard on factors beyond labor costs – most important will be the local availability of high-end skills; work-force re-training ; supply chain management & worker flexibility,” explained Mr. Kilachand.

Outsourcing is no doubt a contentious issue, particularly in light of the struggling U.S. economy. “American jobs going overseas is still an emotive subject,” says Mr. Kilachand

To that end, the World BPO Forum has become the leading C-level executive event of its kind. “With a strong roster of speakers, practitioners and service providers participating in the discussion this year, I believe we are well on our way to become the ‘Davos’ for strategic sourcing,” says Mr. Kilachand.

“Global sourcing has become a transformational lever that empowers businesses to take on new competition. This exclusive Forum provided opportunities to interact, learn & share issues, challenges and solutions from some of the world’s leading thought leaders on the economic, political & technical impact of global sourcing,” further explains Mr. Noble.

The seventh annual World BPO/ITO Forum is scheduled for June 25-26, 2014.


7 PH cities named top outsourcing destinations

July 31st, 2013

Seven Philippine cities have been chosen as top outsourcing destinations in the world but Chinese cities are flexing their muscles for a bigger slice in the market.Outsourcing15

Tholons in its 2013 Top 100 Outsourcing Destinations report placed Manila as the third top global outsourcing place after India’s Bangalore and Mumbai while Cebu placed eighth. Five more cities were in the list with Davao, 70th; Sta. Rosa, 84th; Ilioilo, 93rd; Bacolod City, 94th and Baguio City, 99th.

Although the Philippines and India dominate the market, China is fast becoming a choice location. In the Top 100 Outsourcing Destinations report by Tholons, cities such as Shanghai, Beijing, Shenzhen, and Dalian ranked 11, 12, 14, and 15, respectively.

The  Information Technology and Business Process Association of the Philippines (IBPAP)  noted that China is improving the quality of education , investing in infrastructure and increasing the number of English-speakers in the talent pool.

IBPAP said even countries such as Sri Lanka and Nigeria are also making their bid as IT-BPM hubs.

World Bank data showed that Sri Lanka is rising in the ranks of middle-income countries, maintaining at least 5 percent growth even during three decades of conflict. The poverty rate improved from 15 percent in 2006-2007 to 9 percent in 2009-2010.

SLASSCOM, Sri Lanka’s IT-BPO Knowledge Services industry chamber, expects export revenue to increase by 182 percent—from $213 million in 2007 to approximately $600 million in 2013. The chamber reports that employment grew from 33,000 in 2007 to an estimated 67,000 employees in 2013. The number of companies is expected to reach over 220 in 2013 from 170 in 2007.

Nigeria is similarly keen on its showcasing its potential in Africa and the rest of the world. Even with economic gains, 62.6 percent or roughly 100 million Nigerians still live on less than $1 a day.

The Institute of Software Practitioners of Nigeria (ISPON) views software outsourcing as a strategy to address massive unemployment and “brain drain”. Nigerian overseas workers bring in US$20 billion into the economy, which the industry hopes can be reversed by strengthening the IT outsourcing industry. According to ISPON estimates, Nigeria can generate “over $100 billion if software outsourcing is fully tapped and harnessed.”

In Asia, the Philippines and India remain the top performers in the voice and non-voice sectors, respectively. IT-BPM is now the “highest impact” sector for India, accounting for 8 percent of gross domestic product (GDP), up to 25 percent of exports, and 52 percent of the global sourcing market. The industry is ranked fourth in India’s share of total foreign direct investment (FDI).

In the Philippines in 2012, the industry generated revenues of $13.2 million from voice and non-voice segments and employed 777,000 across the country. The industry road map targets overall revenue of US$25 million by 2016.

“Part of our role is to manage our industry’s potential so that it brings progress to everyone. Because talent is what makes our industry world-class, we are committed to developing our employees as professionals and as individuals,” said Jose Mari Mercado, president and chief executive officer of IBPAP. “Throughout IBPAP’s existence, we have focused on developing the country’s capabilities so that we can employ more Filipinos and enable them to build a bright future without leaving the country.”

Recognizing the industry’s employment-generation potential, the Philippine government has identified IT-BPM among sectors with a crucial role in poverty reduction and inclusive growth. IBPAP aims to train a talent base of 1.1 million over the next four years through industry public-private partnerships.


Outsourcing: Industry chiefs working to change negative perception

July 31st, 2013

Outsourcing providers and clients are being called on to help tackle the negative public perception of the industry.
Industry chiefs working to change negative perception

“We’re such an important industry, and we’ve got to create some kind of change,” says Kerry Hallard, director for the National Outsourcing Association (NOA).

“There’s a concern that while the government and the media are dealing out this anti-outsourcing frenzy, the big FTSE 500 companies are cautious about admitting to outsourcing, because they understand that public perception is negative and confused,” says Hallard.

Research by the NOA in 2012 revealed that 22 per cent of the public dislikes outsourcing as a profession, while a huge 80 per cent of the general public does not think the industry is helping UK PLC.

Developing best practice and accreditation for the industry may be one way to regain public faith; however, this has proven challenging with the extensive nature of outsourcing. “Outsourcing is so broad and it needs to be bespoke with each individual company, therefore the standards need to be pretty open, which can lead to them being quite vague,” says Hallard.

“It’s trying to grapple between actually having a standard, but not making them too constrictive to the industry, yet making it enough to give people peace of mind.”

The NOA is also working on an employee satisfaction index to demonstrate that outsourcing doesn’t mean unhappy workers. “It’s the people that make all the difference, and if people are happy working within a service provider and they feel they are making a difference for their client, that speaks absolute volumes,” says Hallard.

An Olympic effort

The G4S fiasco at the London Olympics is a perfect example of skewed perceptions, demonstrating the outsourcing industry as unreliable, despite the hundreds of successful outsourced services being carried out around it. “The Olympics is the biggest case study for outsourcing in the world. Everything was outsourced; it was a big outsourced mission, but only the G4S story hit the headlines,” says Hallard.

“It must seem like every outsourcing project that ever happens fails and wastes tax payers’ money, and yet all the positive ones don’t get any attention.”

The NOA published a paper after consultation with five economists from Henley, Ashridge, Loughborough, Kingston Business Schools, and Deutsche Bank.

In the research paper, all agreed that outsourcing is both a strong contributor to GDP and tax, while it was considered a shrewd business decision to concentrate on core activities and particular competitive advantages.


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