By Martin Conboy

BPO has matured, evolving from industrialisation and process efficiency, to a focus on analytics, on demand service platforms and innovation. This creates a significant opportunity for organisations to ‘leap frog’ earlier generations of BPO and drive business outcomes previously not associated with outsourcing. This schism in the BPO journey sits in the space between BPO 3.0 and BPO 4.0 and it is all about greater functionality and process excellence delivered by the latest generation of BPO, including accelerated speed to market, enhanced innovation, stronger customer loyalty, savvier talent management and top-line growth.

Against a background where physical products are commoditising, customer service is seen to be a crucial differentiator of the service offering. It is essential that the service delivered supports the product promise. In the future, it is only those organisations that provide outstanding service that will thrive, since it will allow them to differentiate their products, charge a price premium and maintain their competitive edge in the marketplace.

In the evolution of the BPO journey the reader will recall from previous readings in the Sauce that BPO 1.0 describes the first step on the BPO journey, commonly known as Labour Arbitrage. The next stage is BPO 2.0, which addresses process reengineering and using technology and point solutions to improve processes and squeeze out value and efficiencies. BPO 3.0 starts to incorporate new channels like the cloud and social media. Needless to say BPO 3.0 starts to see a dramatic leap forward in data accumulation inside the enterprise. BPO 4.0 is all about big data and how one can make sense of it and not get overwhelmed by the voluminous amount of data that are generated by all of the information flowing through the new channels.

In parallel the growth of digital content continues unabated. The Internal Data Corporation (IDC) predicts that the digital universe, a measure of content, will have grown by a factor of 300 from 2005 to 2020. And Google’s own statistics show that its total number of indexed pages was one trillion in 2008 and is expected to reach 30 trillion in 2013. The average number of daily searches on Google, another measure of digital demand, has grown by a factor of four from 2007 to 2011, according to comScore.

Marketers have contributed significantly to this content growth. Based on a 2012 survey by Content Wise, marketers increased their total spending on content development by 45% from 2005 to 2012, when the percentage of marketers’ budgets allocated to content creation increased from 31% to 39%.

I caught up with Russell Ives Accenture Australia BPO Lead and he described how this hot new frontier is being constructed around the customer experience and using data analytics and building algorithms and crunching facts and numbers to look for opportunities to improve business outcomes.

Big data is the new business black. It’s a catchall phrase for the billions of transactions and other bits of information about their customers, suppliers and operations logged by businesses every day. Yesterday’s data storage problem has become today’s strategic asset.

The large-scale gathering of data from a variety of sources and the application of sophisticated analytical tools to make sense of that data is quickly becoming the new frontier for organisations seeking competitive differentiation. The BPO and outsourcing industry is playing a pivotal role in developing the processes that overcome many of the challenges associated with data analytics.

Organisations in a variety of industries, ranging from finance to retailing to telecommunications, have started to engage in big data strategies. The reasons for engaging analytical methodologies being deployed is driven by the need to leverage data from a variety of sources and channels to achieve an accurate and universal view of the business in real time. Pulling levers is all very well, but pull the wrong one without knowing all the facts and it can lead to disastrous outcomes. After all we don’t know what we don’t know.

Russell Ives states, “Many companies struggle to achieve visibility around the customer experience when interacting with an enterprise across all channels. We are seeing an increased demand for the use of analytic tools inside the outsourced process that are required to deliver improved outcomes for end clients.”

Mr. Ives argues that there has been a shift from the standard suite of business metrics built into service provider service level agreements to more of a focus on business outcomes  “We are being challenged by our clients to collaborate more as a strategic provider to understand how data analytics can identify in what manner end customers want to interact. We can now construct service metrics built around the real customer outcomes the client is seeking to achieve; channel, sales, service, satisfaction.”

Enterprises are generating large amounts of transactional data about their customers from their internal systems and this is growing at an exponential rate. ‘Big data’ is becoming a key basis of competition, underpinning new waves of productivity, growth, innovation, consumer services and competitive advantage. ‘Big data’ offers a range of opportunities for organisations, but there are also some significant challenges.

According to research from McKinsey Global Institute, organisations and their management teams, in every sector, will need to grapple with the implications of big data. Those who ignore it will be left behind.

Through various online activities, most consumers leave an easy-to-follow trail of digital footprints that reveal who they are, what they buy, where they go, and much more. Organisations want this information to be able to gain competitive advantage and be able to offer the most appropriate offer at the most appropriate time. Organisations not only need to put the right talent and technology in place but also the structure, workflows and incentives to optimise the use of big data

“To achieve and sustain superior outcomes on behalf of their clients, as custodians of their client’s brands, providers need to change their frame of reference from supplier to a broader more holistic perspective that encompasses on continuous improvement and focuses on benefits above and beyond cost reduction,” said Mr Ives.

Mr Ives explained that at a practical level, organisations must shift away from simple SLA metrics like average handling time (AHT) to outcome metrics that might include metrics such as sales delivered by a channel. He also noted that organisations in Australia, except for the very large ones, are in the early stages of developing sufficient expertise and knowledge to develop and make sense of data analytics and lack appropriate processes to leverage data from a range of sources.

KPMG and HfS Research reveal findings of new report on outsourcing of finance and accounting operations

Spending on finance and accounting business process outsourcing (F&A BPO) services will surpass $25 billion globally in 2013, and will rise at an annual compound growth rate of eight per cent through 2017, according to new research from U.S. audit, tax and advisory firm KPMG LLP and HfS Research, a leading analyst authority on global business operations strategies.

More than 100 enterprise-level F&A BPO engagements are expected to be signed this year alone, according to the research, which covers 399 major global enterprises and analyzed 745 current enterprise F&A engagements. The research also profiled 17 leading suppliers of F&A BPO services.

The report, “Finance and Accounting BPO Market Landscape, 2013: Market Evaluation, Forecast and Competitive Analysis,” found that key market dynamics fueling global growth include:

• Proven performance: 90 percent of F&A BPO engagements have been consistently meeting their cost-reduction targets and initial delivery performance, making it difficult for finance leaders to avoid evaluating its potential.
• Desire to reduce costs and standardize processes: Enterprises overwhelmingly want to look at new ways to take advantage of lower-cost operations and standardized financial processes, where there is little competitive differentiation to be achieved by operating in house.
• The lethargy of the 2008-10 recession has slowly lifted: More enterprise leaders are now looking at more radical strategies to increase productivity and global business effectiveness.  Recent activity shows an increasing number of enterprises getting more aggressive with globalizing their finance operating models to include outsourcing services.

Ron Walker, a partner with KPMG and the F&A service line leader for KPMG’s Shared Services and Outsourcing Advisory practice, said “F&A BPO needs to be viewed as an extension to an enterprise’s capabilities, not a substitute.  KPMG is helping clients evolve toward a global business services framework that optimizes the mix of human capital, service delivery models, process innovation and technology to deliver services on an enterprise-wide, cross-functional basis to support the business strategy.”

Phil Fersht, CEO of HfS Research and a co-author of the research report, said, “Too many enterprise leaders are approaching F&A BPO with a myopic vision to reduce costs and mitigate risks.  They are kicking the can down the road by failing to invest in better technology platforms, analytics capability and an innovation roadmap.  They should be approaching the F&A BPO as an opportunity to invest in their firms’ futures.”

Click here to request a copy of the report.

By Clancy Yeates

NAB chief executive Cameron Clyne has pledged to cut costs by $800 million a year by encouraging customers to do more ”self service” banking, as he seeks to ditch its reputation as the weakest of the big four Australian banks.

After spending the past four years focused on rebuilding the bank’s battered reputation and restoring its financial position, Mr Clyne  vowed to rein in expenses and simplify its range of products.

In response to rapid growth in online banking, NAB will overhaul its outdated technological systems so that customers can do more of their banking through digital channels.

It expects the investments, coupled with moves to cut expenses across its branch network, to produce $800 million in annual savings in five years’ time.

It also unveiled a shuffle of its senior management ranks, with chief financial officer Mark Joiner retiring and the long-serving head of MLC, Steve Tucker, leaving the bank by mutual agreement.

The push to cut costs comes after investors grew increasingly frustrated with NAB last year because of the ongoing drag caused by its struggling UK business.

But NAB Chief Mr Clyne denied the bank was reshaping its Australian business and management team to appease investors who were upset with its share price performance, which was much weaker than its rivals last year.

Instead, Mr Clyne said the cost cutting and shuffle were driven by the need to offer customers better services in an age of slower credit growth, higher costs and rapid technological change.

”It’s not tenable for us to bring forward the sort of changes that customers are increasingly demanding with 1970s infrastructure and architecture,” Mr Clyne said.

”We need a much better customer experience; our customers are demanding it.”

In other staff changes, Rick Sawers, who now runs the wholesale bank, will be appointed to a new role as the group executive in charge of product and markets. This position will involve simplifying the bank’s product range.

Retail banking boss Lisa Gray has been moved to a role in charge of enterprise services and transformation, with responsibilities for cutting duplication.

Mr Clyne said there would be no wide-scale job cuts and he expected to achieve reduction in staff numbers through attrition.

As banks look to profit from Asia’s economic rise, Mr Clyne indicated NAB would take a more cautious approach than some of its rivals, given the problems created by its UK business, which has been plagued by losses.

”If you take a realistic assessment, every Australian bank, to varying degrees, has mostly destroyed shareholder value by going overseas,” he said.

Read more: http://www.smh.com.au/business/nab-pledges-to-cut-800m-costs-20130313-2g0sr.html#ixzz2NTEAyqAU

QBE chief executive John Neal has moved to stamp his mark on Australia’s largest global insurer, launching a new cost-cutting drive that will see hundreds of jobs sent overseas and unveiling a shake-up in the ranks of senior management.

The insurer said it was entering a new phase in its 127-year history, with a growing push to curb expenses and run existing businesses more efficiently after years of acquisition-fuelled growth.

In a move forecast to save A$250 million a year, QBE will shed about 700 jobs from its operations in Australia, Europe, and North America, and fill the roles with staff in the Philippines.

It also cut the share of cash profits it will pay out as dividends to 50 per cent, from up to 70 per cent, arguing this was more suited to its goal of becoming a top-tier global insurer.

Chief financial officer Neil Drabsch, who worked closely with former boss Frank O’Halloran during his 14-year stint at the company’s helm, also said he would step down as part of a broader management reshuffle.

The series of changes came after a disappointing year in which QBE’s struggling US arm was battered by hefty claims from super storm Sandy.

After-tax profits rose by a weaker-than-expected 8 per cent to $US761 million in the year to December, and the final dividend was cut to 10¢ a share, from 25¢ a year earlier.

Mr. Neal, who took over from Mr. O’Halloran last August, argued the cost-cutting drive was needed for the company to keep growing in a more subdued financial environment.

”QBE has been a hugely successful organisation over the last 15 years but, as the world changes, we need to evolve to continue to meet or exceed the expectations of our key stakeholders,” he said.

Unions have slammed the growing number of financial services firms that are sending jobs offshore, but Mr. Neal argued QBE needed to be simplified.

”If we can standardise and simplify what we do, then we can grow the business. And that means we can grow the business here in Australia, and it means we can grow the business elsewhere in the world,” he said. ”If we don’t take that type of view then I don’t think we can grow.”

It is not clear how many Australian staff will be affected by the plans, which are intended to save $250 million a year by 2015.

Mr. Neal said most of the changes would come from natural attrition and lower use of contractors and there would not be a mass redundancy round. He played down reports that the company was considering cutting as many as 3000 jobs from its global operations.

Under Mr. O’Halloran, QBE was transformed from a mid-tier player to a global insurer through over 120 acquisitions around the world. It now has operations in 52 countries, deriving about a third of its income from the US.

An analyst at Nomura, Toby Langley, said QBE under Mr. Neal’s leadership appeared more focused on containing costs and running its existing businesses with greater efficiency.

Read more: http://www.theage.com.au/business/qbe-takes-axe-to-costs-as-neal-makes-his-mark-20130226-2f42g.html#ixzz2MApD9Axx

Telstra says its customers will get better service from Filipino or Indian call centre workers who will take over from many of the 648 staff the telco axed last week.

The managing director of Telstra’s Sensis directories business, John Allan, told BusinessDay ”the vendors that we are considering provide services for customers that go beyond our service today, such as 24/7 operations and unique technologies that assist in processing efficiencies, which they do for many directory businesses around the world”.

Earlier , Mr. Allan reportedly told union officials that ”Australians will get better customer services from Manila or India. They have better technology and innovation.”

The Community and Public Sector Union spokesman Julian Lee said the comments were made during a meeting with union officials after Telstra announced the job cuts at the ailing Sensis unit.

The cuts, which include moving 391 customer service positions to the Philippines or India, come just two weeks after the telco booked a record half-year profit of $1.6 billion.

Telstra is slashing costs to arrest falling revenues at Sensis, which was once a cash cow for the company.

It hopes to turn the struggling print-based media business, which produces the Yellow Pages and White Pages directories, into one that is better suited for the digital market.

”Until now we have been operating with an outdated print-based model – this is no longer sustainable for us,” Mr Allan said. ”Our future is online and mobile where the vast majority of search and directory business takes place.”

The Prime Minister, Julia Gillard, described Telstra’s decision as ”really dreadful news particularly for the staff members”.

”It’s always incredibly tough when someone loses a job,” Ms. Gillard told the Adelaide radio station 5AA.

The union condemned the company’s actions. ”Telstra has done well out of Australia, its profits have risen off the back of hard-working staff and loyal customers and this is how it repays them – by sending almost 400 jobs offshore,” the union’s national secretary, Nadine Flood, said.

”And to add insult to injury, we have been told that one of the reasons why they are doing so is because Australian consumers can get better customer service in the Philippines or India.”

The Sensis business has been under pressure in recent years as customers desert print for digital advertising. At Telstra’s most recent half-yearly results, the unit reported a 12.6 per cent fall in revenue.

Telstra remains obliged to produce the White Pages as part of its license conditions.

Read more: http://www.smh.com.au/business/outsourcing-will-deliver-better-service–telstra-20130221-2euby.html#ixzz2MApdPaDa

From Economist Intelligence Unit

For many economies, 2012 was a year to forget. Austerity in the developed world and a slowdown in China dented global growth. The downturn caused hardship for households and businesses, and headaches for many politicians. Markets also endured their torrid moments, mainly reflecting ever-changing perceptions of the risk of a break-up of the euro zone. In the US, electoral politics got in the way of constructive economic debate.

In 2013 global economic prospects look slightly brighter. Here, we list some of the key economic themes that are likely to occupy governments, businesses, consumers and investors in the year ahead:

Stronger global GDP growth. The global economy will remain weak, but some improvement is in prospect. The downturn in the euro zone will ease, with the 17-country bloc likely to return to very weak year-on-year growth in late 2013. Recent stimulus in China should feed through more visibly during the year, with Chinese growth accelerating to an annual average of about 8.5%—although it should be noted that this will be a peak for the current cycle and is unlikely to be matched again given the slowdown in China’s trend growth rate. Congress’s January 1st mini-deal on the “fiscal cliff” removed an immediate threat to US growth prospects, but how the world’s biggest economy performs in 2013 will depend on the extent to which the next few months are marred by similar fiscal policy showdowns. The key downside risk to our forecasts will remain the possibility of further financial upheaval in the euro zone. But upside risks are arguably strengthening, in particular over the timing of the modest global recovery, which could gather pace sooner than we expect if confidence returns.

Relative calm in the euro zone? We expect plenty more ups and downs in efforts to contain and, ultimately, resolve the debt crisis in the euro zone, but the picture has brightened since mid-2012. The European Central Bank’s commitment in principle to unlimited sovereign debt purchases has calmed financial markets. Italian and Spanish sovereign bond yields have fallen to much more sustainable levels compared with late 2011 and mid-2012. The single currency’s crisis seems to have entered a less acute phase, in which concerns about austerity, slow growth and a lack of competitiveness are starting to replace fears of sovereign default and financial-market implosion. That said, the fundamentals of the debt crisis are far from resolved, and worries about France—something of a laggard in owning up to the severity of its fiscal challenges—could come to the fore this year. Events—from the Italian general election to political unrest in Greece—still have the potential to trigger a crisis, but 2013 could well be a year in which the euro zone’s problems largely rumble on.

More fiscal brinksmanship in the US. If the world breathed a sigh of relief when US lawmakers struck a deal on January 1st 2013 to prevent/delay implementation of assorted fiscal tightening that could have sent the US into recession, the risks of a self-inflicted economic downturn have not disappeared. A grand bargain over the country’s long-term fiscal challenges has eluded Democrats and Republicans, and the fiscal cliff mini-deal was disappointingly modest in scope. The legislation preserves some tax breaks and extends unemployment benefits but has deferred any decision on government spending cuts. This sets the US up for repeated bouts of political wrangling over fiscal policy during 2013. In particular, partisan brinksmanship will complicate negotiations over the raising of the US federal debt ceiling (which will probably be necessary in late February). All this bodes ill for economic policymaking during the year, and could hurt consumer and business sentiment—although markets and firms have become more resilient.

An extension of the risk asset rally. Quantitative easing (QE) in the US and elsewhere, combined with a slackening of financial tensions in the euro zone periphery, has fuelled a rally in risk assets in the past few months. The rally has a decent chance of continuing in 2013, as the ultra-low interest-rate environment in the developed world will encourage investors to seek higher yields in riskier assets such as equities, commodities and corporate bonds. That investors are still moving into risk assets is visible in higher yields on the traditional safe havens of US and German government bonds. Although still very low by historical standards—indicating continued investor caution—US 10-year yields were at 1.92% on January 7th, around 50 basis points up from July 2012. German yields are up by a similar amount from their June 2012 lows. For many investors, the search for yield may override valuation fundamentals, which could be a source of longer-term financial risk when markets eventually normalise.

A Japanese reflation agenda. The election of Shinzo Abe as Japan’s prime minister in December 2012 has potential repercussions that extend well beyond the domestic economy. One of Mr Abe’s main policy goals is to end the deflationary pressures that have long dogged Japan, and thereby to create conditions for self-sustaining economic growth. As part of this agenda, we expect Mr Abe to push aggressively for the Bank of Japan to raise its inflation target from 1% to 2% and to commit to unorthodox monetary easing on a much greater scale—both to stimulate domestic demand and to counter the deflationary impact on Japan of QE elsewhere. The success or failure of these efforts could have implications for global exchange rates, and the policies could create international trade tensions if perceived by Japan’s trading partners as an attempt artificially to support Japanese exports. Yet Japan’s poor demographics and other fundamentals mean that Mr Abe’s stimulus measures may fail to gain traction. At the same time, the prime minister’s agenda raises the prospect of increasing political interference with the central bank.

A higher profile for structural reform. In the coming year policymaking may take a longer-term view. Emergency measures were necessary in 2008-09 to prevent collapse of the global financial system and in 2010-12 to prevent a possible fracturing of the euro zone. Major risks to the integrity of the euro remain. Nonetheless, just as global financial policymaking is now focusing on systemic protection against future crises—albeit with uneven results, for example in banking regulation—in the euro zone questions of long-term competitiveness and structural reform are gaining a higher profile. Provided that further acute bouts of financial contagion can be avoided, issues such as the need to lower unit labour costs, liberalise services markets and create better conditions for innovation and sustainable growth will gain prominence. The reform focus will be echoed in parts of the emerging world—most notably in Brazil, where policymakers are having to come to terms with the country’s post-2010 slowdown and address long-standing needs for greater flexibility in the economy.

Austerity. Fiscal tightening will continue to constrain growth and dominate the public debate in many countries in 2013. Most obviously, it will remain a central economic and political issue in the EU, in part because of the severe fiscal consolidation still under way. Our budget-balance forecasts indicate that 20 out of the EU’s 27 member countries will experience fiscal tightening in 2013, which in many cases will come on top of a prior year of such hardship in 2012. In the UK, austerity will remain a source of tension between the two partners in the coalition government. In a number of countries in Europe, the social and political pressures that have emerged as a result of austerity will continue to fuel hostility towards immigrants and ethnic minorities. In the US, austerity will not bite as deeply or cause as severe social stresses, but the debate about fiscal sustainability will be intense and highly politicised. More broadly, in many countries a combination of weak or negative growth and a lack of fiscal resources will limit policy options.

Political changes. 2013 looks set to be relatively quiet year for major elections, but a number of forthcoming and ongoing political changes will still bear watching. Some of these will be the result of transitions that commenced in 2012. As discussed above, the change of government in Japan has potentially far-reaching economic policy consequences. China, meanwhile, is still in the early stages of a once-in-a-decade transition to a new political leadership. Economic challenges facing the new leadership (the members of which will be further formalised at a government conclave in March) include planning structural reforms to anticipate the erosion of China’s advantages as a low-cost export manufacturer. In Europe, general elections in Italy (in February) and Germany (in September) will be important for those countries’ continued policy responses to the euro debt crisis.

Accountants and superannuation administrators are being hit with a surge of newly created self managed superannuation funds (SMSFs), at a time when most are struggling to cope with existing SMSF business.

The recent surge in SMSF’s highlights the shortage of accountants and could prompt many to outsource the processing burden, according to a provider of back office services to SMSFs.

The Australian Taxation Office’s quarterly survey of do it yourself funds found that nearly 7,200 funds were established during the June quarter, and the total for the 2011-12 financial year was 36,270.

With an average 3,000 SMSFs being established every month, it makes the last financial year the second busiest since 1995 (the busiest was 2007-08 with 45,700 new funds in response to the government’s changes to contribution limits and the introduction of tax-free pensions for over-60s).

A spike in SMSFs will have a knock-on effect to accountants and superannuation administrators, who may be stretched by the additional processing demands, according to Harish Rao, head of Business Development for BPO provider Sundaram Business Services. “For many accounting firms and dealer groups the growth in SMSFs is creating staffing issues.

“It is difficult to build scale quickly to take care of such spikes in demand, and we have seen more interest in the possibility of outsourcing the back office processing of these funds. In fact this is the real benefit we bring to our clients.”

The India-based company is forecasting growth to 20,000 SMSFs over the next four years. Mr. Rao said the ATO’s report confirmed the firm’s bullish expectations of the sector. “Self-managed funds have been in a strong growth phase for over 10 years and we know that more accountants and superannuation administrators find the increase in processing workload challenging.

By Martin Conboy

Former Australian Treasury Secretary Ken Henry has cautioned Australian businesses that the resources boom fuelled by Asian demand has transformed the structure of the Australian economy so deeply that the lack of competitiveness suffered by foreign exchange and trade-exposed industries (Retail, Tourism, Education and Manufacturing) is largely irreversible.

Dr Henry, who is also heading up the government’s Asian Century white paper task force, told a Melbourne business conference that the mining boom had resulted in a surge of investment 62 per cent higher compared with the sector’s 20-year average rate of growth.

Not only has the investment boom being skewed to the mining and resources sector; it is also starving other sectors of capital to improve their businesses. Moreover, the investment bulge is leading to higher labour and material costs and an appreciably stronger Australian dollar. In 2000, one Australian dollar brought US$ 0.55 and twelve years later it is buying US$1.05. Trade-exposed businesses would need to achieve an unrealistic fifty per cent increase in productivity to make up for the lower price to sell their products.

Additionally a new wave of robots, far more adept than those now commonly used by car makers and other heavy manufacturers, are replacing workers around the world in manufacturing and distribution.

We only need to look at what’s happening in the automation of call centre and customer service environment as smart phone apps and self-serve websites erode the need for human agents

Such advances in manufacturing are also beginning to transform other sectors. One is distribution, where robots that zoom at the speed of the world’s fastest sprinters can store, retrieve and pack goods for shipment far more efficiently than people.

Robotics executives say even though blue-collar jobs will be lost, more efficient manufacturing will create skilled jobs in designing, operating and servicing assembly lines.

Dr. Henry went on to say that Australia was “kidding ourselves” if productivity measures, often mooted by business and government leaders, would help “obviate the need for structural adjustments in the economy”, he said.

“There’s simply no feasible increase in productivity growth that would reverse all or even a significant proportion of international competitiveness that’s presently being experienced by Australia’s trade-exposed non-resource industries,” He said.

Furthermore the simple fact of the matter is that global labour markets have restructured and highly skilled and less expensive Asian knowledge workers can and will do the work required of them. Gone are the days when Asia was a place where low value business processes were sent as a labour arbitrage play.

“If we want to benefit from the Asian Century, we can’t think of us standing apart from Asia selling product into it,” he said. “Rather Australia will be most successful if we achieve deep, seamless integration [with Asia].”

“We’re living through an extraordinary period of economic change, the like of which will never appear again in our lifetimes…and perhaps won’t come to Australia again for several generations,” he said.

“And that’s why it’s important to think deeply about these issues and to engage widely in the Australian community to ensure the opportunity is not squandered.”

Dr. Henry said the structural changes in the economy meant jobs are being lost in traditional trade-exposed industries like manufacturing, but stressed many are also being created elsewhere. A report commissioned by the International Federation of Robotics last year found that 150,000 people are already employed by robotics manufacturers worldwide in engineering and assembly jobs.

“You never hear anyone say that on an average business day in Australia something like 5000 to 6000 people walk into a new job – that’s each day,” Dr Henry said.

On another related note I have just returned from China (Wuhu City) and I met an American executive whose US-based company was picking considerable volumes of work from Australia in the areas of live web chat support, Social Media Monitoring and email response. This without a physical presence in Australia from local companies frustrated by Australian BPO service providers not being interested or not having the wherewithal to provide such services. These companies were not chasing a cheaper price, they just wanted the work done. As I have indicated before, the results of the Australian BPO Study 2012 clearly indicate that Social Media and online marketing are going to be growth markets for BPO providers – I just wonder if anybody is listening. The other related thing that I heard from the Americans that I met was that the lines between marketing and Social media were blurring.

Watch for my China report next week.

By Cynthia Karena

iWallet, PayPal, apps may grow faster than banking innovation.

The banking industry has been given a warning: beware of new competitors stealing traditional financial services via technology.

Consumers with mobile devices have the potential to access financial services outside bank offerings, says Bob Hayward, a keynote speaker at the recent Retail Financial Services Forum in Sydney .

Non-traditional banking organisations are offering consumers everything from payments to insurance to investments, he says. Hayward is the chief technology and innovation officer at IT services company CSC Australia, which counts Westpac as a client. He is a former KMPG director and Gartner research fellow.

“We’ve already seen PayPal delivering services that used to be done by financial services. It’s broadening its horizons and moving into traditional payment markets. In the US, Home Depot stores allow people to pay with a PayPal pin. You don’t need anything physical like cash or credit card.”

PayPal solutions are taking over the traditional ground of banks, agrees Ovum research director Kevin Noonan. “We’re starting to see the banks (moving) but PayPal has stolen the march as online transactions have exploded.”

Apple has developed an electronic payment system for its iTunes and App stores, and Hayward is convinced it will make “a clear move” in finance services with the iPhone 5. Many observers believe the upcoming phone will have an iWallet app to replace cards and cash.

The good news for banks is that Apple’s strategy is not to become the number one payment provider, says Christophe Uzureau, research vice president of Gartner banking & investment advisory services. “It’s more about taking control of payments for their own products, and reducing their fees.”

However, the mobile banking market is ripe for the picking. According to Gartner, worldwide mobile payment transaction values will surpass $171.5 billion in 2012, a 61.9 per cent increase from 2011. It forecasts a market worth $617 billion with 448 million users by 2016.

The banks have allowed more nimble competitors in the mobile banking space because they were a little complacent in years gone by, says Ovum’s financial services technology research director, Denise Montgomery.

“They have allowed telcos and other digital media companies in the space. I don’t think they counted on the size of their competitors. They were looking at other banks, not at digital and telco giants.”

But now mobile banking is a high priority for banks, she says. The Commonwealth Bank’s Kaching app allows people to pay anyone by using their mobile number, email address or through a Facebook friends list, r via PayPass.

CommBank has done some “cool” and innovative things, agrees Hayward. “CommBank thinks more about being a technology firm than a bank. It wants employ the type of people who work for Google.”

Uzureau cites Westpac’s Cash Tank app, which allows people to quickly check the balance of a pre-selected account, as another example.

“Consumers are looking for specifics. Cash Tank is a very simple app that responds to a specific need, instead of an app that provides all different functionalities. It’s not about providing a sophisticated complex solution. Westpac has created a more targeted and specific application. This is a new (way of thinking) for banks.”

Leveraging the numbers

There’s a blurring of financial services – Google, Apple, and Facebook all have customer relationships,” says Tony Ritchie, vice president technologies, Asia Pacific, American Express, which has a Facebook presence.

“The challenge for (traditional) financial institutions is to respond more quickly than the rate at which organisations such as Google and Facebook introduce their services.”

American Express is forming partnerships with social media companies, including Twitter and Foursquare, and investing in new technologies and ventures, so it can introduce disruptive technologies, he says.

Hayward says the membership size of Facebook, Amazon and iTunes are a big consideration for the banks.

“Any one of these has more than ten times the customers as all the banks in Australia added together.”

However, Gartner says only 1 per cent of US online consumers prefer Facebook as a digital wallet provider. Customers don’t think their financial information is secure in the hands of a social media company, says Uzureau. “Consumer trust in Facebook is very limited.”

This gives financial institutions a clear opportunity to capitalise on existing consumer trust, and focus on security and financial control, he says. And “Facebook (and others) don’t have the financial skill set. Mobile banking is not a core competency.”

Read more: http://www.smh.com.au/it-pro/business-it/connected-consumers-go-where-banks-havent-20120625-20xd7.html#ixzz1yrQr5x6E

By Marty Wolf, M&A advisor

Many people would argue that Apple is the strongest company today. The way it makes money, it almost resembles a bank. But if you applied the Apple valuation on Facebook’s revenue, Facebook would trade at about $12 billion, not $57 billion (as of market close June 6, 2012), down from more than $100 billion on its inaugural IPO date.

Also, if you look at other great companies, such as Oracle, Microsoft or SAP, and their valuations on revenue or on EBIT, those companies trade between $10 billion and $14 billion.

I’m basing this off of the barometer my team uses. Each quarter we introduce the MW IT Index. Our market-weighted-value index takes the market value of 120 companies grouped into four technology categories: IT services and business process outsourcing, IT supply chain services, software, and SaaS. The index assigned a value of 1,000 to each composite group on December 31, 2008, and it has tracked the category performance since then.

Bottom line is that SaaS companies are trading at a premium of 150 percent or more from the other segments according to our latest quarter.

Facebook initially traded at about a 300 percent premium above such SaaS companies as Salesforce.com.

Facebook was trading at 30 to 40 times revenue, compared to companies in the IT products and services space that are trading at four to 10 times EBITDA and SaaS companies that are trading at two to five times revenue. If Facebook’s financials were in the IT Services space, it would be valued between $4 billion to $6 billion, not $57 billion.

It just shows that the space you are in matters. SaaS, IT services, IT BPO and IT supply chain companies are valued quite differently than Facebook.

But people must remember that when they invest in Facebook, they are investing in a company with assumptions that are going to be very difficult to achieve over time. Assumptions that leave little margin for error are built into the price of the stock.

For example, in the ’90s, Cisco was going to be the first trillion-dollar company. But they didn’t make it. The reasons why do not matter — what does matter is that a very high bar was set.

So, the Facebook market expectation is set as high as they have ever been. In addition, Facebook’s CEO, Mark Zuckerberg, was quoted as saying in a recent article in New York Magazine, “We don’t build services to make money; we make money to build better services.”  Most companies must do the opposite — make money then build better services. This is bearing out in the market reaction.

Today, Facebook has almost $4 billion in revenue and a billion in earnings. That is a real company. But, the market expectation might not be real yet, and there is little, or no, operating margin of error for the company to make its mark.

Plus, when we look into the future at possible competitors for Facebook, we don’t know who they are. They are probably in college or in a garage. That is why Warren Buffet does not invest in technology companies. Today’s technology darling can be obsolete tomorrow.

If you want to look at out-of-sight valuations, look at the SaaS space. If you want to leave the galaxy, look at Facebook.

We will see if they can meet expectations five years from today. That is possible.

The news that GM pulled its advertising will have little bearing on Facebook’s valuation. By the way, I assume you saw that Warren Buffet recently bought 10 million shares of GM.

Marty Wolf is the founder and president of martinwolf, a leading middle market IT M&A specialist. 

Organisations are continuing to expand the services they outsource, according to KPMG’s latest global survey. Based on the views of respondents across North America, the UK, Asia and Europe, the quarterly study indicates that the growth in businesses using ‘shared service centres’ continues to outpace the number of organisations who favour traditional outsourcing.

Shared services, which refers to centralising admin functions once performed in separate divisions of a business, was cited as the strongest area of growth by over half (52 percent) of the respondents polled in the first quarter 2012 survey. In comparison, just 37 percent said they have seen growth in demand for traditional information technology outsourcing and just 27 percent for traditional business process outsourcing.

More than two-third (68 percent) of the service providers polled were also cautiously optimistic about pipeline growth for the next quarter – a figure that has risen by 7 percent since January. Asked to identify the key areas of interest, 50 percent suggested that they expect customer demand for IT services to increase between now and the end of Q2. Some also suggested growth would come from bundled business and IT outsourcing (21 percent), finance & accounting (11 percent) and HR (11 percent).

The survey goes on to suggest that while traditional outsourcing remains a valuable component of business’ efforts to reduce overheads, relative growth of its use has slowed. This is especially the case with business process outsourcing (BPO), which only 27 percent of the advisers polled cited as the strongest growth area.

“It appears that the trend towards focusing on more specialised outsourcing is a consequence of the expanding number of quality global sourcing locations with highly skilled resources, the ability of Indian services providers to diversify delivery capabilities beyond their home markets, and the growing sophistication of skill sets becoming available,” said Shamus Rae, partner in KPMG’s Shared Services and Outsourcing Advisory team.

“Clearly, the relatively weak BPO growth expectations are a reflection of diminished demand for more traditional, generic, transaction-oriented outsourcing arrangements, such as in finance and accounting, in contrast to the greater demand for more specialised BPO,” he added.

The findings also highlight that while many businesses are re-examining their use of domestic outsourcing, the use of near and offshore shared services and outsourcing continues to grow – especially buyer interest in offshore services delivered from locations other than India. For example, asked whether they agreed that buyers are looking beyond India for outsourced services, respondents scored 3.53 on a 5-point scale.

The survey found that respondents are seeing an increase in usage of Cloud services to complement, extend and in some cases replace traditional approaches to outsourcing, with 50 percent of service providers indicating that clients have one or more “live” cloud services deployments at the business unit level. They anticipate that this percentage will rise to 92 percent in 12 months.

“These findings highlight the fact that businesses need to continue to improve their cloud skills and acumen, especially relative to addressing data security, risk and regulatory compliance requirements,” said Rae.

http://inaudit.com/economy/growth-in-use-of-shared-service-centres-outpaces-traditional-outsourcing-as-economy-falters-19837/

China is currently working to rebalance its economy, as it attempts to shift from a reliance on net exports to boosting domestic consumption.



Fund managers tell Channel NewsAsia that ASEAN economies and businesses are far more likely to benefit from this trend than its North Asian counterparts.



China is set for an economic slowdown this year.



Experts said this could mean demand for imports from the rest of the region will also moderate, translating to slower growth in the rest of Asia. 



But at least one analyst is confident that Southeast Asia will fare better than other markets.

Senior vice president, head of strategy & currency at the Fullerton Fund Management Gerard Teo said: “If you look at the composition of exports from ASEAN, they tend to be consumer related, food related, manufacturing related items that would benefit from stronger consumption.



“In contrast, if you look at Northeast Asia, such as Korea and Japan, they tend to be more geared towards investment demand in China – which is precisely what it is trying to reduce its dependence on.


”So on balance, our assessment would be within the region, it looks like ASEAN will more likely benefit compared to Northeast Asia.” 



Teo predicts that companies geared towards Chinese consumption should start seeing the benefits over the next six to 12 months.

Other hot sector picks include a recommendation to invest in the Philippines, with a focus on banks and consumer stocks.



With one of the youngest populations in Asia, and a business process outsourcing industry forecasted to grow at a rate of 25 per cent per annum, the Philippines economy represents an alternative to other popular emerging markets.



Mark Matthews, managing director, senior advisor head of Research Asia, Julius Baer, said: “It is really one of the bright spots out there. I think more and more people are understanding its potential. It used to be considered a peripheral frontier, really uninvestible place. Increasingly, more people are becoming more interested.” 



As for currencies, the Australian dollar which is expected to be worst hit by a rapid slowdown in China. 

Instead, investors are switching to the Singapore dollar, given its safe haven status.

Source: Channel News Asia