Posts Tagged ‘Outsourcing’

IT outsourcing deal values hit 10-year low

May 27th, 2015

Amid increasing automation and decreasing prices, the IT outsourcing industry has just recorded its worst first quarter in terms of annual contract value of deals awarded since 2004. However, the current slowness is not necessarily a negative thing.
The IT outsourcing industry just logged its worst first quarter in terms of annual contract value of deals awarded since 2004, according to analysis by outsourcing consultancy and research firm Information Services Group (ISG). Just $3.5 billion in annual contact value was awarded in the three-month period, down 27 percent from the same time last year, said ISG.

The mega-deal market showed particular softness this quarter, says ISG president John Keppel, but it was weakness in the Asia Pacific and the Europe, Middle East, and Africa (EMEA) regions that brought contract values down so significantly.

“For Asia Pacific it was really [a] tough comparison. In the first quarter last year, the region’s performance was at near record levels and this was simply impossible to repeat,” Keppel says. “Overall outsourcing activity, however, looks strong for the region so we put this largely down to timing with such a strong recent showing.”

The IT outsourcing deal slowness now is NOT a sign of things to come

After one of the strongest years yet for the IT outsourcing industry, the sluggish tempo of the quarter is unsurprising, according to ISG. Ultimately, 2014 turned into the third best year for the industry in the last decade—driven by a buyers’ market, a rise in contract restructuring, and an increase in mega relationships. But ISG’s analysts say early 2015 slowness is not necessarily a sign of things to come.

“IT outsourcing strength in the U.S. bodes well for the full year, and the first quarter dips in Asia Pacific and EMEA also suggest there should be more in the pipe,” says Keppel. “IT outsourcing solutions and client demands are changing rapidly, and as these change, they bring new opportunities for improved capabilities, improved flexibility, and lower costs—a combination we would expect most buyers to find irresistible.”

In a continuing trend from last year, buyers are testing the status quo and are willing to switch providers when they don’t think their current deals are serving them well in a dynamic technology environment. “We expect to see significant client interest in market-testing current provisions and looking to change to more modern, cloud-enabled IT outsourcing solutions,” says Keppel.

Larger deals (those worth more than $30 million annually) declined by 25 percent both in number and value over the previous year, while the volume of smaller deals continued to flow steadily, according to ISG.

An increasing push for automated solutions and robotics embedded in IT services may also help to explain this year’s early activity.  “There’s nothing surprising about the trajectory of the findings,” says Katharine Rudd, managing director of technology consultancy Alsbridge’s transformation services.

“The market has been changing over the last several years, with the automation of people and processes and with the enablement of cloud and robotic process automation. Sourcing strategies and transactions are also evolving, with non-traditional challengers in the [IT and business process outsourcing] space like Amazon Web Services changing the game on how customers procure and buy. All of this is blurring the lines and driving a migration away from the traditional outsourcing deals,” says Rudd.

The combination of more contracts being signed at lower value is an early indication that service provisions are becoming more efficient, says Keppel. That is “something we would associate with more widespread adoption of automation and robotics solutions,” he adds. “We are not seeing a massive uptick in specific automation deals, per se.  But, based on our volume and value numbers, we believe that the technology is increasingly being embedded within provider solutions.”

As the IT outsourcing price wars continue, those providers with strong automation propositions “will likely gain market share,” Keppel adds, “while others with less-well-developed capabilities will scramble to adopt the technology to remain competitive in an increasingly price-conscious marketplace.”


Indian Firms Fight Fiercely with Global Peers Over Large Outsourcing Deals

May 26th, 2015

Indian outsourcing firms such as Cognizant and Wipro captured nearly a quarter of the top 100 outsourcing deals in 2014, according to a study by research firm IDC.Outsourcing
Despite being small in size compared to their American peers, Indian BPO providers are proving strong competitors for large outsourcing deals. To strength their hand they are putting forward new offerings such as cloud and hosting services.

Analysts say that investing in more transformative capabilities in areas such as analytics, social media, and mobility, and enhancing strategic local capabilities and resources, have enabled them to compete successfully with well-established players.

Leveraging the offshore business model has also contributed greatly to their success, according to David Tapper, IDC’s Vice President, Outsourcing and Offshore Services.

According to IDC’s data, Indian outsourcing companies represented more than 50% of the total contract value of the top 100 outsourcing deals in 2014. In 2013, by comparison, they represented 43% of the total contract value.

Globally, the top five vendors – who include the likes of IBM and CGI – have continued to snap up nearly 50% of high-valued outsourcing deals. With US$13.8 billion worth of deals, IBM tops the list. CGI is ranked second, though the value of the contracts ($2.8 billion) it won is considerably lower.

Indian firms Cognizant and Wipro are quickly catching up with CGI, having won contracts worth $2.7 billion and $2.3 billion respectively.

The research firm says the number of mega deals is currently shrinking, as are the number of government contracts. Furthermore, very few providers are competing for mega deals, partly due to a belief that large deals can be very complicated to implement.


Aegis Named a Top 10 Outsourcing Service Provider by ISG

May 25th, 2015

Aegis Limited, a global outsourcing and technology services company, today announced that it has been named a Top 10 Outsourcing Service Provider by Information Services Group (ISG), a leading technology insights, market intelligence and advisory services company.Outsourcing50

Aegis was among the leading providers in the Breakthrough 10 Sourcing Standouts category for the Asia Pacific region based on annual contract value (ACV) won over the last 12 months, according to the ISG Outsourcing Index™. Now in its 50th consecutive quarter, the ISG Outsourcing Index provides an independent quarterly review of the latest sourcing industry data and trends for enterprises, service providers, analysts and the media.

Sandip Sen, Global CEO, Aegis Limited, said, “We are delighted to be featured in the ISG Sourcing Standouts for the Asia Pacific region. Asia Pacific market is now changing as service providers realign their offerings to incorporate the demands of the local Asian customers. Aegis helps clients manage these changes by transforming their customer operations, incorporating smart technology, and improving their customer experience.”
With over three decades of leadership in customer experience management, Aegis’ strategy relentlessly focuses in getting an effective and efficient fit between a brand’s business objectives and its consumers’ expectations. The company also increased its capacity in India, Malaysia and Australia to over 30,000 employees, supporting some of the large and mid-sized organization cross Customer Lifecycle Management, Finance & Accounting, Procurement and SMAC enabled BPM solutions.

Aegis’ inclusion in the ISG Outsourcing Index is based on data the company submits to ISG each quarter.

“For more than a decade, the ISG Outsourcing Index has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance,” said Paul Reynolds, chief research officer of ISG. “Aegis continues to establish itself as a leading and growing player in the global market for [describe] services, based on its volume of business in relation to other industry providers.”


Desi IT Cos Seal 23 Percentage of Top 100 Outsourcing Deals

May 25th, 2015

Indian IT outsourcers accounted for 23 per cent of the top 100 global outsourcing contracts, said research firm IDC.Outsourcing52

In 2013, Indian firms accounted for eight per cent of the Total Contract Value (TCV), up from 7 per cent in 2012. However, the contract value of the top 100 deals declined by 10 per cent to $45 billion in 2014 from $50 billion in 2013.

“The combination of effectively leveraging the offshore business model and incorporating new methods of service delivery such as hosting and cloud has enabled the India-based outsourcers to effectively compete with well-established competitors in the outsourcing industry for the largest of large-scale outsourcing deals,” said David Tapper, Vice President, Outsourcing and Offshore Services, IDC.

The IDC Top 100 Worldwide Outsourcing Deals of 2012-13 report also noted that Indian firms were making inroads into the top 100 outsourcing deals.

Outsourcers were investing in transformative capabilities in areas like analytics, social media, and mobility and enhancing strategic local capabilities and resources.

According to IDC, there has been a significant shift from public sector deals to commercial/private sector deals from 2013 to 2014, with government capturing just 12 per cent of deal value in 2014, down from 48 per cent in 2013.

Meanwhile, the top five global vendors in 2014 captured over 50 per cent of the TCV of top 100 outsourcing deals in 2014, up from 43 per cent in 2013. This include IBM with $13.8 billion, CGI with $2.8 billion, Cognizant with $2.7 billion, Capgemini with $2.6 billion and Wipro with $2.3 billion. However, the average deal size continued to shrink along with fewer mega-deals (TCV of $1 billion or more), IDC said.

While the average deal size for the top 100 worldwide outsourcing deals fell 4.5 per cent annually over the past 10 years, the number of mega deals was at the lowest level in more than a decade at nine in 2014. This is significantly lower from the highs of 2003 (24 deals) and 2006 (25 deals).


India-based vendors bag 25 percent of IT deals: IDC

May 25th, 2015

India-based outsourcers bagged nearly 25 percent of the top 100 IT deals in 2012-14, global market research firm International Data Corporation (IDC) said on Wednesday.
Analysis of outsourcing deals worldwide in the past three calendar years revealed that top five vendors captured 50 percent of the total contract value as against 43 percent in 2013.

The top five top vendors with captive units are IBM, which bagged deals worth $13.8 billion, followed by CGI with $2.8 billion, Cognizant with $2.7 billion, Capgemini with $2.6 billion and Wipro with $2.3 billion.

“We have also seen a shift in the deals to commercial/private sector from state-run enterprises (pubic sector) in 2014, while an average deal size continued to shrink with fewer mega deals,a IDC vice-president for outsourcing & offshore services David Tapper said in a statement.

Noting that India-based global vendors were making inroads into the global top 100 outsourcing deals, he said leveraging the offshore model, incorporating new service delivery, investing in analytics, social media and mobility and local capabilities have enabled them to compete with established players in the outsourcing industry.

The analysis of top 100 deals across IT outsourcing and BPO (business process outsourcing) services markets provides guidance to outsourcers and service providers looking to optimise potential opportunities in capturing deals that rank at the top of the outsourcing market.


IT Outsourcing: The Top 5 Business Considerations

May 22nd, 2015

In today’s fast-paced business world, driving efficiency is often at the heart of growth plans.

When thoroughly planned, outsourcing plays a vital role in ensuring productivity is high; enabling managers to focus on business development and disruptive innovation.Outsourcing46

However, some organisations cause irreparable damage to their business by outsourcing too early, while others risk falling behind to more innovative competitors by ignoring the opportunities available; and some companies outsource the wrong mix of activities. It’s unclear whether this balancing act is why the outsourcing market in the UK declined in Q1 compared to the same period last year, although it could also imply a wariness to trust third parties with internal business processes.

If this is the case, business leaders are setting themselves up for a fall. Failing to outsource effectively can cause irreparable damage to an organisation. Put simply, business growth will be stunted.

To ensure SMEs are reaching their full potential, John Cooke, a founder and managing director at Black Pepper Software, investigates the top five considerations every business should make before outsourcing.

1.         Cost-efficiency

Put simply, the majority of outsourcing takes place to increase profit margins, lowering expenditure on labour and operational costs, while improving the bottom line. However, the cost-efficiency of taking this approach comes into question if the wrong processes are left in the hands of a third party.

Offshoring well-defined maintenance tasks, such as payroll management, removes the need for businesses to hire in-house experts to manage accounts, freeing up capital which can be invested elsewhere. Core activities shouldn’t be outsourced though, as the necessary knowledge levels will inevitably be found in-house and should remain at the heart of the company. Google wouldn’t outsource search engine algorithm innovation to a third party for example – it would risk losing its competitive advantage. The same is true for all businesses, regardless of size.

2.         Business reputation

Businesses live and die by their reputation and in the social media age, each product and service they offer is scrutinised under the microscope. It’s therefore vital that the highest possible standards are maintained continuously, especially for external facing processes. Failing to take your reputation into account before outsourcing may be the biggest mistake you ever make.

Take call centres for example. When outsourced efficiently consumers rarely realise they aren’t speaking to an in-house representative. However, if offshored poorly a disconnect between the business and its customer service becomes far too apparent, leading to a vocal and costly backlash. The same is true of all external processes. Offshoring may free capital, but if service levels drop the cost of rebuilding business reputation is much higher than any initial savings.

3.         Innovation

Many businesses aim to transform their offerings and innovate like a ‘start-up’. However, internal constraints and practices can stifle this. Established businesses investing capital in disruptive innovation should be the cornerstone of their development plans. Outsourcing innovative processes such as software development often breeds the best results, as internal team members may be too close to the business’ existing processes to ‘think outside the box’.

When successful, such innovation is highly lucrative. By researching and identifying a new market the disruptive business will immediately become the industry leader, leaving competitors in its wake. If companies fail to do so their competitors will, so outsourcing wisely in areas such as innovation is critical.

Businesses need to be wary though, pick the wrong partner and it can set back innovation and growth, resulting in missed opportunities. A partner must be agile, able to rapidly adapt to ever changing business needs, all while working very closely with the company.

4.         Communication & collaboration

Agile development has continued growing in popularity, with continuous communication and collaboration at the heart of innovative projects. It’s therefore vital to keep this in mind before outsourcing project work to a third party, especially when considering offshoring. UK businesses which turn to Asian companies will likely find daily iterations are difficult to manage due to the vast time differences. In some circumstances, there may only be a few hours of overlap during the working day so time for communication is limited and can seem rushed. This will either impact product quality, or at least result in unnecessarily long lead times. Also cultural differences shouldn’t be underestimated, companies frequently need to work much harder to overcome these than is often considered up-front.

However, when outsourcing onshore, communication isn’t strained by time zone difficulties, cultural differences are minimised and daily iterations are also still possible to ensure projects remain on track. Large companies can benefit greatly from onshore outsourcing, taking advantage of rapid and low cost innovation using an external team without draining resource from their day-to-day operations.

5.         Calculated risk

Outsourcing is often unfairly viewed as a risky option, and although there is risk involved this depends on the type of processes outsourced. If core business practices are offshored the risk is huge, as you have little control over what is a central element of your organisation, which can have disastrous results. On the other hand, outsourcing development projects should be viewed as well-calculated risk, offering businesses an opportunity to research their market and work closely with a third party to innovate and generate the highest quality results possible.

Our work with design specialist Black Country Atelier (BCA) highlights this, as the firm is aiming to offer technology which enables consumers to design their own loomband pendants on their mobile device before 3D printing it in-store. This was a movement into a completely new market for BCA yet they outsourced app development and the project was turned around within a week, rather than the usual months which traditional approaches offer. Having such fast turn around and innovative input at a low cost enabled BCA to test the waters with a product that may now hit the high street before the end of the year.

Time to reap the rewards

Outsourcing is a key element of business today and to write it off as unnecessary risk is short-sighted and leaves organisations at risk of being left behind by their competitors. Companies simply can’t be as efficient if they handle all tasks internally, while failing to look further afield than the office floor for expert advice when aiming to disrupt the market can be a mistake which is impossible to bounce back from.


UK visa outsourcing firm closed by Montenegrin authorities over tax avoidance and being found operating illegally

May 22nd, 2015

A controversial outsourcing company paid millions by the Home Office to process UK travel visas has had its operations in Montenegro shut down by authorities, who said it has been operating illegally in the country for more than a year.Outsourcing45

Teleperformance’s UK visa centre in Podgorica, the capital of Montenegro, was closed down by officials at the country’s tax administration on 18 May after an investigation found it had not registered itself as a business there and had not paid any taxes.

This is despite the French company acting as the sole handler of UK visa applications in Montenegro since March 2014, when it took over the responsibility from the British embassy under a contract signed by the Home Office. Teleperformance is being paid £300m by the Government over five years to deliver similar services in 74 countries across the world.

The company’s visa services were criticised last month by the family of Anthony Eldridge, a decorated Second World War veteran. The 92-year-old died before his grandson could reach his bedside due to delays with his visa application in Norway.

Former workers at the Podgorica visa centre told The Independent that it had been plagued by problems from the beginning. Delays and confusion with UK visa applications had resulted in staff being physically threatened by angry members of the public, they said.

In one particularly embarrassing case last summer, they said the passport of Nina Vujanovic, the daughter of Montenegro’s President Filip Vujanovic, had been accidentally sent to another visa applicant.

Managers had ignored warnings about the company’s legal status in Montenegro, the staff claimed. “From the very beginning, me and my colleagues were telling them, ‘Is the company registered?’, and ‘Why isn’t it registered?” said one. “We were adamant, but they didn’t want to listen. I think they were just really unprepared.”

In a statement, the tax administration of Montenegro told The Independent it had conducted an audit of Teleperformance’s UK visa centre after receiving a tip-off from an “anonymous citizen”. “During the inspection, it was determined that this entity did not have a business registration at the central registry of commercial entities or general tax registration at the central registry of taxpayers and the insured persons,” the statement said.

“Teleperformance’s UK visa centre was sanctioned by a temporary business operation closure until the irregularities are corrected. Proceedings will be initiated towards responsible persons.”

It is unclear when the centre will be able to reopen. In the interim, Montenegrins wanting to travel to the UK have been told to use the company’s centres in the neighbouring countries of Albania, Bosnia and Serbia.

A Home Office spokesperson said: “UK Visas and Immigration (UKVI) are aware that the visa application centre in Podgorica has been temporarily closed by the Montenegrin authorities. Teleperformance, which runs the centre on behalf of UKVI, is discussing the matter with them.

“We have put measures in place so that people can make applications through other centres should they need to.”

Teleperformance is not responsible for making decisions on whether to grant visas, but manages the face-to-face interviews where photographs and fingerprints are collected from applicants. The company did not respond to repeated requests for comment from The Independent.


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