IT Sourcing Europe highlights the major trends and challenges facing the UK IT outsourcing companies in 2010.

IT Sourcing Europe, a UK-based research company and nearshore IT sourcing advisor, announced today the completion of its UK IT Outsourcing (ITO) Survey 2010. The Survey was conducted in the frames of the IT Sourcing Europe’s All-European ITO Research and aimed to explore the current trends, challenges and problem solving strategies among the UK companies that outsource their software/web development function offshore, nearshore or within the United Kingdom. The Survey was completed by 250 IT decision makers of the UK-based businesses.

The Survey allows us to observe the following ITO trends among the UK outsourcing companies:

• Although most of the UK companies still outsource their software/web development offshore (at least 3 time zones away from home country), the number of companies outsourcing nearshore (maximum 2 time zones away from) is very close to and is likely to outnumber offshore outsourcers by the end of 2010;
• Top three reasons why UK companies outsource their software/web development are: to reduce operating costs, to accelerate time to market via flexibility and scalability and to free in-house resources for other business purposes;
• Web and Enterprise solutions remain the most outsourced ones among the UK companies;
• Most UK outsourcing companies partner with only one services provider;
• Low costs remain the key factor impacting the UK companies’ choice of the Outsourcing destination and vendor;
• The majority of the surveyed companies report 40%-59% actual savings from the outsourced development;
• Most of the UK companies believe that outsourcing their software/web development has been the right decision.

Among the most frequently cited challenges facing the UK outsourcers are:

• Delays in product delivery schedules;
• Poor communication with vendor’s project management;
• Cultural difference.

The Survey also finds that most of the UK outsourcing companies do not know the exact salaries of each of their team members on the outsourced development team. It means that their current IT Outsourcing engagement does not allow them to have 100% managerial control of project teams and costs associated with Outsourcing. It creates a huge barrier in the way of successful ITO adoption.

The Report arrives at more thought-provoking conclusions that generally shape the UK ITO landscape of 2010.

Aon Corporation has via its subsidiary, Aon Consulting, acquired Hewitt Associates to create one of the world’s largest HR outsourcing companies. The other big providers left in the global HRO enterprise level space are IBM, NGA / Convergys and Xerox /ACS.

When the merge is finalised, Aon Hewitt will have under its employ over 29,000 associates and operate in 120 countries. Leading the new Aon Hewitt is Russ Fradin, the current Chairman and CEO of Hewitt Associates. Human capital solutions, together with consulting, benefits administration, and business process outsourcing will be offered in numerous areas.

Both Aon Corporation and Hewitt Associates are convinced that this strategic move will benefit both companies and all their clients, as Hewitt Associates is the largest HR business process outsourcing provider, and Aon uses the best technology in analytics through Aon GRIP and Greater Insights. There are however some market analysts who question how the two different cultures will merge.

Aon Consulting CEO, Edouard Merette, says, “The merger is both strategically and economically attractive for several reasons. One is that the new organisation will have a deeper global team with the capability to serve our clients locally in over 120 countries. Another reason is that both our management teams have a strong track record of successful integration.”

The transaction is expected to be finished in mid-November. Prior to that, the two companies will continue their operations independently.

Now that the Tamil Tiger civil war is mostly behind it, Sri Lanka is poised for growth. The end of the 26-year conflict has opened the door for reconstruction and development projects in the North and East. The Sri Lankan stock market gained over 100% in 2009, one of the best performing markets in the world. Sri Lanka’s most dynamic sectors are now food processing, textiles and apparel, food and beverages, port construction, telecommunications, and insurance and banking. The outsourcing industry of Sri Lanka has earned US$275 million  in 2009 – the 5^th largest income in the global IT outsourcing industry.

Building upon this impressive achievement, the BPO industry aims for a target of US$2 billion revenue, not to mention the creation of 400,000 direct job opportunities and 300,000 indirect job opportunities. To achieve this goal within five years, Jayantha De Silva, IFS South Asia Vice President, advised, “Sri Lanka needs to increase the quantity of IT/BPO professionals without compromising on quality for the industry to grow.”

The growth rate in the industry was 23 percent during 2006/7 while the industry took a huge impact from the global recession in the past two years. Compared with other industries, the IT BPO industry has over 90 percent of value added to it.

Sri Lanka’s IT BPO industry still needs more qualified professionals. Presently, there are around 300,000 qualified professionals in the industry.

The SLASSCOM (Sri Lanka Association of Software and Service Companies) in partnership with ICTA (Information and Communication Technology Agency of Sri Lanka) has taken the initiative to boost the number of IT professionals. The two organisations are also working hand in hand to ensure that these professionals are highly qualified by giving them further education and training. De Silva says that the IT BPO industry is one in building awareness and desire as a career choice among school children while strengthening the capacities of their university students.

He also adds, “Sri Lanka can improve in IT BPO industry because it is not restricted to a specific geographical location. IT BPO can be developed even in non major urban areas once it is enabled with necessary infrastructure facilities such as broadband and electricity.”

Over the last few years the Australian BPO and outsourcing market has matured. Further growth is predicted as organisations expand the range of business functions they are prepared to outsource as a way not only to lower operating costs but also as a way to become more efficient and play to their strengths.

Outsourcing is becoming a very broad church and is much wider than simply customer service via call centres. A leading industry player Richard Switzky, Managing Partner of Publicis Solutions believes, “I foresee increased growth in areas that haven’t been outsourced as much in the past such as HR, accounts processing, legal process outsourcing, as well as education and training.”

Organisations have a greater understanding of what they are buying into and how to approach potential providers. Ovum analyst of IT services, Jens Butler, believes that the question for many companies is no longer whether or not to outsource but what processes and to whom. The IT sector that led the charge without sourcing and off shoring has learned some valuable lessons that can be picked up by the broader BPO sectors.

Vendors in the Asian Pacific region have started to collaborate with each other on major contracts and playing to their strengths. Multi-vendor selection is gaining traction within the industry, and vendor selection it is moving away from a country specific to a more global, talent based destination mix.

So as the first wave finishes in Australia we are seeing BPO companies merging to combine their strengths and offer a more end-to-end delivery model. This is the natural course of events in any services market. The market settles into some bigger players who pick off other companies on a strategic basis and smaller niche or boutique players.

Despite some significant consolidation in the Australian industry with Aegis’s takeover of UCMS and Vertex’s of PCU, and Salmat of HPA and Salesforce, it seems that the GFC will have little effect on the general growth and future of the industry. Switzky believes, “The GFC in the long term will end up helping the BPO industry. During the GFC companies have been reluctant to make capital expenditure type of investments, though they need the capability. This plays right into the rationale for going down the BPO path.”

As social networks continue their explosive growth, all the aspects of social network listening should grow significantly. There is evidence of a down turn in voice transactions and an upswing in customer interactions via electronic means like email and social media channels. Charles Pludthura, director of SquareOutside, a specialist in social media marketing comments, “The ability to easily hear and analyse all the conversations about your brand and products can provide significant insights that affect all parts of the business, from the tone of marketing communications, to important company policies.”

Martin Conboy a Director at FooBoo who have an outsourced Social Network Listening service remarked, “Companies are starting to realise that they may not have the skill sets internally to properly deal with what is being said about companies online. There has been a major paradigm shift to the benefit of consumers and companies need support to help them get clarity around issues like poor customer service and what people are saying about them online.”

Another area that offers outsourcing providers and their customers some major efficiencies and cost benefits is cloud computing. Firstly, it allows outsource providers and customers to leverage technology at a lower cost. Secondly, it provides the capability of doing work and accessing mission-critical applications, virtually anywhere without regard to geographical proximity.

Michael Pain, managing director of Accenture’s management consulting division said in a recent article, that organisations tended to consider outsourcing business processes like human resources, training, and finance, as well as application development, IT infrastructure management, and IT infrastructure through cloud computing.

The future of the industry is looking very positive as a whole range of new opportunities are emerging. With a seasoned weather eye Switzky advises, “Outsourcers must understand their business model, especially costs and margins, so that they don’t price themselves into receivership, as has happened to some key players both here in Australia as well as the UK.”

Outsourcing Malaysia, an initiative of the Malaysian outsourcing industry, is leading a business delegation to Australia provide a platform for both Malaysian and Australian service providers to collaborate on business strategies that will be beneficial to both countries.

According to David Wong, chairman of Outsourcing Malaysia, the seminars will provide opportunities for Malaysian and Australian service and solutions providers to explore ways of working together to achieve a common goal. “We must look beyond the country if we want to expand and go global and Australia is a logical choice because both countries have strong diplomatic ties and over the years, numerous agreements such as Asean-ANZFTA (Australia and New Zealand Free Trade Agreement) and government-to-government trade agreements that facilitated trade between Malaysia and Australia,” he continues.

In cooperation with the Multimedia Development Corporation (MDeC), Malaysia’s business delegation will hold two seminars, one in Sydney on 3^rd August and the second in Melbourne on 5^th August.

Outsourced call centres can be “chum and bum” environments, where agent burnout may be common and teams lack motivation and perform poorly. Whether you have highly motivated teams working for your organisation or not, it will depend upon the presence of enterprising, dynamic and responsible managers. Successful managers who can drive enthusiasm and vitality in their team will ensure high levels of productivity and longevity in increasingly hard to acquire agents.

Most management tips are basic common sense, but we often get caught up in management speak. Below are a few straightforward tips that can assist managers to get the most out of their teams:

Know your team

The more you know about the members of your team, the more you will understand their strengths and weaknesses as well as what motivates them. This will allow the manager to easily identify areas where agents may need extra coaching, training or mentoring. Or who, based on their ambitions and skills, should be given the responsibility of new tasks allocated to the team.

Paul Benson Telemarketing Consultant for Sage Business Solutions, “Some level of bonding between managers and agents will help create an environment where communication is easier and more productive.” This doesn’t mean that a manager should try to become everybody’s friend, but verbally acknowledge when an agent has done a good job and show empathy when they are experiencing a challenge or a problem.

Open Communication

Everyone in it must know the mission of the facility or business unit and all must be working towards a common and shared goal. Benson advises, “Every agent must understand their role and how that contributes to the bigger picture. If they feel they share or partly own the objectives and mission of the organisation, then they will be far more motivated to perform at their best.” Managers of high-performance teams keep their employees aware of what is going on. They consistently share the good and the bad news.

Reward and recognition

Everyone wants their efforts to be recognised.  According to Marli Lutz, in her article What Makes a Call Center Successful, competition-based incentives can quickly instil in a team the confidence that their efforts will not go unnoticed or unappreciated. Once you encourage one, several others will feel enthused about giving their all to make the project work.

Building a highly motivated and high performing team will take a bit of time, but the results for your business can be dramatic and it can be done.

Vertex Business Services, an international Business Process Outsourcing (BPO) and Customer Management Outsourcing (CMO) company, announced its acquisition of PCI, an Australian-owned contact centre and IT outsourcing provider.

Upon PCI’s acquisition, it will be rebranded as Vertex Business Services. Led by PCI’s previous CEO Phil Allan, PCI’s strength in multilingual inbound and outbound customer contact services will add to Vertex Business Services’ existing global offerings in financial services, retail, and utilities. The new business will make further developments in client relationships and use its experience to take advantage of the Asia Pacific market’s great potential.

Vertex Business Services’ CEO, Paul Sweeny, said, “This acquisition will allow us to enter markets where we can make a real difference to the way organizations interact with, and manage, their customers’ experiences. It also gives us direct access to a growing regional market that is an important element of our global growth ambitions. I am especially delighted that Vertex Australia will be able to offer increased, added-value solutions to its clients and enhanced opportunities for all our people.”

Phil Allan added, “We are excited by opportunities unlocked by the wider Vertex Group, its global infrastructure, people and technologies. There is considerable potential in our market and we are in an excellent position to capitalize on this.”

Other plans include building a new site in Ballarat and further investment in the Philippines.

Ness Technologies, a leading IT outsourcing provider, will continue to provide the Israeli ministry of Environmental Protection with its services for three more years. The extension of the contract is worth an estimated USD 2.6M, and extends Ness’s reach into the machinery of the government of Israel.

Ness Technologies, located in 18 countries and with over 7,800 employees, will continue on with managing the operations and maintenance of the ministry’s IT systems and infrastructure systems including application development.

Ness Technologies Israel’s president, Effi Kotek, said, “The Ministry’s decision to extend the outsourcing contract with us further positions Ness as a leading supplier of IT services to Israel’s government. We are committed to provide high quality services which will enable the Ministry to meet its challenges in the coming years.”

The terms of the extended contract stated that Ness’s Unified Reference and Delivery (URD) Center will be the ministry’s help desk, serving around 600 users.

Other Israeli ministries including Immigrant Absorption and the Ministry of Interior also awarded outsourcing BPO contracts to Ness Technologies earlier this year.