Talking outsourcing- a blog from computing.co.uk

Wednesday, 03 March 2010

Inside story of how TCS won flagship government contract

Indian technology giant Tata Consultancy Services (TCS) has won another British government contract. This time it’s to build and service the next generation government pension scheme, formally titled the National Employment Savings Trust (NEST).

Most of the online comment today seems to be little more than the information on the press release, so I thought I would ask TCS for a comment – only to find that they are keeping quiet for the moment and letting the client do the talking. So I got in touch with Tim Jones, Chief Executive of the Personal Accounts Delivery Authority (PADA) – the government agency charged with making NEST a reality.

What’s interesting about this contract win is that TCS stuck it out, even after all other players decided the margins on the new government pensions would be too slim to make any decent returns. Additionally, this is a central government project that is commissioning offshore IT, admin, and processing.

I met government CIO John Suffolk last month and one point he made was that the British government will not shy away from offshoring, they will take each tender and supplier on their merits.

Clearly that’s the case with this hybrid delivery model planned for the new pension scheme.

This blog is a bit longer than usual, because I want to ensure I quote all of Tim’s answers to my questions:

MKH: Could you briefly introduce NEST? What is it and why do we need a new pension system?

TJ: The Government is implementing an integrated package of reforms to help millions more people save for retirement, in particular those on low-to-moderate incomes. The package includes changes to the state pension to make it fairer, and increases to state retirement age.

But it’s not just the state pension that is changing. The Government is also reforming workplace pensions. Under the Pensions Act 2008, employers will be required to enrol workers into a workplace pension scheme that meets certain criteria and make a minimum contribution to their workers’ retirement pots.

Currently around 750,000 employers in the UK’s private sector offer no pension to their workers. While a further 280,000 offer some provision, these employers’ contributions to their workers’ pensions are less than 3 per cent. The government estimates that approximately 7 million people are not saving enough for their retirement – in particular those on low to moderate incomes. For example, more than half of workers earning between £5,000 and £25,000 do not contribute to a pension at all.

The introduction of auto-enrolment means workers can eventually expect a total minimum pension contribution of 8 per cent on qualifying earnings. This will be made up of a minimum 3 per cent employer contribution added to tax relief and the worker’s own contribution. Both employers and workers can contribute more than the minimum if they wish.

An essential part of these reforms is the introduction of NEST (National Employment Savings Trust) - an occupational pension scheme being designed specifically for people on low-to-moderate earnings who currently don’t have access to a workplace pension.

Importantly, NEST will have a public service obligation to be open to any employer that wants to use it to meet their new duties for any of their jobholders. This is significant because there are groups of employers and workers that the existing pensions industry struggles to service. Business that can be less attractive to private pension providers includes small and micro employers, particularly where workers are transient and on low-to-moderate incomes.

NEST is being introduced alongside existing provision to meet the needs of just these types of employers and their workers, complementing the existing provision. Which qualifying workplace pension scheme or combination of schemes they use will be their choice. Providing the scheme they choose meets the criteria set out by the government, employers can fulfil their new duties either by using their existing workplace pension scheme, setting up a new private provider scheme or by using NEST.

MKH: What were the attributes that meant TCS won the contract?

TJ: This has been a complex procurement so we are very pleased to be able to report that this has been completed ahead of schedule and we have found a great supplier that can deliver the services we need at a good price.

All of the bidders involved with this exercise have been impressive – we enjoyed working with them over the past year and benefited from their input throughout the dialogue process. TCS progressively demonstrated its ability to meet PADA’s requirements and emerged as a very strong bidder. This has been confirmed by a rigorous evaluation of its final bid.

MKH: Many in the industry have said that every possible supplier dropped out of the tender leaving TCS as the only bidder.

TJ: Competitive dialogue is an expensive process – it’s only right that we should give feedback to bidders throughout the process so they can take appropriate decisions, and to enable us to run an efficient process.

In a complex procurement such as this it is not unusual for bidders to re-assess their position as competitive dialogue continues. TCS final bid has been formally evaluated against PADA’s evaluation criteria.

As with any competition where a strong single remaining bidder emerges, there may be concerns about whether the final bid still offers value for money. TCS’s final offer showed little variance with their bid from the early stages of the competition, so we can be sure that the contract does provide value for money.

MKH: Is this for onshore/offshore/mixed delivery (noting that TCS is an Indian supplier)?

TJ: The public-facing elements of service provision – such as call centres and all data storage – will be in the UK. Resources in India will be used to deliver the IT solution and to perform back office administration and processing functions.

MKH: The government is clearly no longer afraid of the Indian hi-tech sector. Is there an official policy to widen the net beyond the more traditional suppliers?

TJ: This is not a question for us. Best to contact the DWP [Department for Work & Pensions, the government department where PADA is located].

Posted at 03:50 PM in government, innovation, internet, management, offshore outsourcing, outsourcing, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, 23 February 2010

Is IT services missing an opportunity?

Arvind Thakur, CEO of NIIT Technologies, has some interesting ideas on where IT service companies need to look in future. He believes that there are many new markets the IT services industry is not considering in the constant drive to consider ‘when will banking or retail recover from the recession?’

These are the new global mega trends of the twenty-first century and they will fundamentally reshape where services can be sold.

Arvind explained the concept to me: “The ageing population in many developed nations means more healthcare, and more healthcare means the fragmented healthcare systems have to be improved. Second, anything and everything we now do has to focus on energy efficiency. Third, global unrest will continue, which means there will be increased investment in security systems.”

These three key trends will clearly shape IT services in future, but how many service sector CEOs have a strategy planned out for taking advantage of long-term trends such as this?

Posted at 09:59 AM in innovation, management, strategy | Permalink | Comments (2) | TrackBack (0)

Monday, 22 February 2010

Brazil enters new wave of thinking

When I was in India recently for the NASSCOM conference I noticed a lot of other countries being represented at the show. In fact, over twenty different countries had delegations there in Mumbai.

One of the most prominent was Brazil. Possibly because of the sheer size of the industry there, but also because they have some different views on what makes outsourcing work.

I called up Flavio Grynszpan today to ask him about the Brazil approach. Flavio is well known as one of the leading outsourcing advisors in Brazil and he formerly spent a decade running Motorola there. I asked Flavio first about the lack of recognisable Brazilian IT brands. He said: “It’s important for Brazilian firms to develop their brand internationally, but they should not try to compete in the low cost area. We are not so competitive at the low cost game. We are competing on value added.”

I asked Flavio to elaborate on this point. It’s something that a lot of regional representatives talk about without ever really defining. He said: “We have a lot of advantages and experience in the financial services sector. There are other specific verticals like oil & gas and manufacturing where we have a large number of global participants. Brazil is also becoming a strong open source software solution centre. In this area we are becoming real experts and there is not so much interest from some other regions, such as India and China.”

But Flavio’s final point, when I asked him about the agenda for a forthcoming conference he is organising in Brazil, was really the one I noticed most of all: “Outsourcing is really changing. There is a new wave of delivery models that will be built around the concept of the app store – and that really emphasises the need for collaboration.”

This is an important point. There were some leading thinkers in India considering how the services market is changing, but the majority were still just talking about a return to the good times as growth returns – business as usual. The intelligent players will be thinking about the future of how services are going to be sold and it seems that the Brazilians are stepping straight to the new ways of thinking without ever trying to win the low-cost offshoring argument.

Listen to the Talking Outsourcing podcast for the full conversation with Flavio Grynzspan by searching for ‘Talking Outsourcing’ on iTunes or by clicking here

Posted at 04:45 PM in management, offshore outsourcing, outsourcing | Permalink | Comments (0) | TrackBack (0)

Wednesday, 03 February 2010

It's time for the NASSCOM conference in India

It’s that time of the year again. The NASSCOM conference in Mumbai, India, is the largest annual gathering of tech people in India. And now, with over 20 countries represented, it’s a more of a global gathering looking at the year ahead in outsourcing and technology services.

I’ll be there all next week reporting back to you on what’s happening at the event - I’m even an official NASSCOM blogger. If you are going to be there then drop me an email so we can fix up a time to meet – I’m keen to gather as many industry views as possible while I am there so the video, audio, and blog content can all be featured here for the readers who aren’t going to make it to India next week.

By Mark Kobayashi-Hillary

Posted at 11:22 AM in management, offshore outsourcing, outsourcing | Permalink | Comments (0) | TrackBack (0)

Wednesday, 20 January 2010

E.On cuts service jobs... but staff not first to know

E.On just announced that 600 jobs are to go as they close their customer call centre in Rayleigh, Essex, here in the UK.

E.On’s managing director of retail business, Graham Bartlett, claimed in a press release that “…the decision to close the Rayleigh site was not a move that we've taken lightly and we absolutely understand the effect that this decision will have on our colleagues who have been affected. But the fact of the matter is that our retail business has only just returned to profit after years of loss-making and, to ensure we can continue to do that, we have to make these tough choices.”

A few thoughts run through my mind when I read a story like this, apart from the obvious industry-level issues of customer call centres changing in the way they operate – automation, social media interaction and the like – I am wondering:

• How can the business be doing so badly when energy prices have soared in recent years?
• How come a business that is enjoying the fruits of economic recovery is scaling back on customer service? Isn’t that all the wrong way round?

But the really shameful aspect of this story is the way it was released to the public before the employees even heard about their own situation. The official press release was published at 10.01 this morning. The Essex Echo newspaper had their hands on the story early and published it last night at 21.20.

Take a look at the comments on the Essex Echo story as they tell the story of a disastrous handling of a call centre closure – the comments are from the people local to the Rayleigh call centre, the workers, their family, and friends.

E.on sent a text message to staff on Thursday evening, about three hours before the story broke in the local press, informing them of an important announcement that would take place today. Clearly the company knew that the news had leaked as they were rushing to get their staff all in a room to hear the news in a controlled way.

But they never managed it. Many of the employees and their families heard about their jobs being scrapped by reading it in the local newspaper first.

What a shambles. I remember taking a photo of the E.On corporate offices in London in April 2007 because I noticed that their corporate slogan is (or was) “We don’t hurt people.” No, not people in general, just your own employees.

Posted at 12:11 PM in management, strategy, Web/Tech | Permalink | Comments (4) | TrackBack (0)

Wednesday, 13 January 2010

Thoughts on Barclays' shift away from outsourcing

So what is prompting Barclays to start shifting more and more processes in-house, having previously favoured an outsourced model?

Last month they dumped Getronics and brought the management of their desktop systems in-house, six months before the contract was even due to run out. Yesterday, it was announced that they are dumping Accenture and bringing application development back in-house. Some 230 Accenture employees will join Barclays, though when that deal was signed five years ago about 900 Barclays staff moved to Accenture.

So what’s the thought process behind all this?

It could be that big outsourcing contracts have just fallen out of favour at Barclays. With more and more services being sent to the supplier, perhaps the deals looked expensive after five years? But that would usually lead to a new RFI based on the present level of service, so some fresh blood could pitch against the incumbent.

Or it could be the economic downturn has led the bank to start exploring how to create short-term savings (kill off supplier contracts) and long-term value (use internal staff to stimulate innovation and faster time-to-market).

Or it could just be that the bank felt that these services are more essential that previously thought. Who remembers the old adage about core competence and doing only what you do best? Well, the "core" is constantly being redrawn, so maybe Barclays has decided that the systems used by their staff are actually such an important part of what the bank does, they want their own people focused on those systems.

I’m open to ideas. What do you think is prompting this change in strategy?

Posted at 12:23 PM in innovation, management, outsourcing, strategy | Permalink | Comments (3) | TrackBack (0)

Friday, 27 November 2009

An NHS prescription for successful shared services

So what’s going to happen in UK politics in 2010? There will be a general election and the received wisdom is that there will be a change of administration as Labour is getting tired and the Tories are in the ascendancy.

But will there be a big shift in government attitudes to outsourcing and shared services?

I think so, regardless of the party. If Labour does manage to survive then they will need to sort out the public finances after a crippling two-year economic downturn where we have ended up nationalising high-street banks and printing money just to stay afloat. If the Tories gain power, they will want to draw a line under the previous administration (naturally blaming them for the mess as any new government does) and start afresh with a new approach to public sector services.

So it really doesn’t matter who wins the election. Any new leader is going to form a government that faces a huge public sector borrowing record and there are only minimal savings possible through further efficiency. Something is going to have to change.

I had lunch yesterday with a senior executive from Steria and we were talking about the joint venture they created with the NHS a few years back. It’s now a mature service offering back-office shared services such as finance and accounting to NHS trusts and all run as a 50/50 venture between the Department of Health (DoH) and Steria.

It’s not likely that any new government will start offshoring services. It’s still seen as taboo to send public sector work offshore, even if it reduces how many tax pounds need to be spent. So it’s highly likely that more and more shared service ventures will be the approach. The approach taken by the DoH and Steria allows the public sector to benefit from private sector experience of managing shared services, but with the close involvement of both public and private – it’s not rampant outsourcing for the sake of slashing budgets. Profits from the joint venture are returned to the NHS, so there is an ongoing incentive to keep making it work better.

The NHS and Steria partnership has been going for about four years now, so it’s well known, but even so, if public sector leaders want to see a case study in how a partnership with the private sector can work in their favour they could do a lot worse than exploring what NHS Shared Business Services has achieved.

Posted at 09:56 AM in government, management, strategy | Permalink | Comments (0) | TrackBack (0)

Wednesday, 25 November 2009

Can outsourcing bring Playboy back to rude health?

Playboy doesn’t crop up often in Computing. For good reason you might say, but here is an outsourcing story connected to the famous men’s magazine.

They are losing around $8m a year at present. Clearly the guys who used to buy it "just for the interviews" are no longer buying – probably finding entertainment on the internet instead of on a magazine shelf.

Playboy has agreed to outsource every business function of the magazine, except for editorial, to American Media. They will handle the production, circulation, advertising sales, and marketing.

The plan is to immediately reduce losses to around $5m, and to get the title back in the black by 2011.

It’s a good example of outsourcing being used to save a failing business, rather than just to strip out costs for the sake of shareholder value, but isn’t the Playboy empire just a bit dated anyway?

Posted at 12:00 PM in management, outsourcing, strategy | Permalink | Comments (2) | TrackBack (0)

Tuesday, 24 November 2009

Serving the needs of the Twitterati

I wrote about BT on my personal blog recently. Not for any business reason, though I have done some work with them in the past, but just because I was pleased with the customer service they offered me as an individual customer via Twitter.

The comment received a lot of attention, so I thought it was worth reiterating here with the questions more directed to the outsourcing element of this story.

For BT to be supporting users via Twitter demands some highly trained agents who are empowered to quickly fix customer issues without the usual (painful) step-by-step approach we have become accustomed to with call centres.

Many of those processes and steps have been built into the support process so the actions of the agent can be tracked, and to prevent mistakes or wasted time. But most of us hate having to use a Frequently Asked Questions screen before the company allows us to send a problem. It often feels as if there are walls placed between you and a customer service email address or phone number because the firm wants you to spend hours fixing something a knowledgeable adviser could fix in seconds.

Monitoring what people are saying about a brand in Twitter and then proactively stepping in to help people when they have problems and are shooting off negative tweets is an excellent way to offer direct help, and can turn a negative experience into a very positive one with a brand.

But how does it scale up once the average consumer – rather than just the internet-literate – starts firing comments online and expects instant service from a consumer firm like BT? Obviously it doesn’t just affect BT, but they have dipped more than just a toe in the water and it’s clearly their own staff in northern Ireland that are managing the Twitter interaction.

Will we start seeing a proliferation of business process outsourcing firms that presently manage contact centres integrating this type of feedback management into their service list? And if so, then how? This kind of service demands deep knowledge of the services available and very fast service, while also operating in a very public forum where all users can see the messages. The agents working in this way really need to know what they are talking about.

So which contact centres are starting to offer Twitter management as an outsourced service already?

Posted at 01:55 PM in innovation, management, outsourcing, strategy | Permalink | Comments (0) | TrackBack (0)

Tuesday, 06 October 2009

A matter of life and death

So the deputy chief executive of France Telecom has quit over the fallout from 24 employee suicides in the past 20 months.

The company claims that they have not made any more people redundant than similar-sized firms in their sector, the actual number being around 22,000 layoffs.

But what’s the subtext? Even if France Telecom is right and one suicide a month is about average for a company this size, would it be expected that all those suicides were in some way connected to the reorganisation of the company?

As we see large companies changing they way they operate and manage their staff, these are the social problems that are going to be encountered even more frequently. Think of the Japanese ‘Salaryman’ who had to get used to large organisations downsizing in the 1990s, using flexible staff, and outsourcing.

The issues may have been more acute in Japan because of the way the company knitted itself into the identification of middle-class males, but we in danger of witnessing the same identity crisis across European companies if the executives don’t balance the needs of the company (and it’s shareholders) with the needs of the staff (who create value for shareholders).

Posted at 03:16 PM in management | Permalink | Comments (2) | TrackBack (0)