Outsourcing Times

SunCorp Announces 7-Year Outsourcing Contract

Australian financial services firm, Suncorp, has announced a seven-year technology outsourcing contract with First Data.  First Data will manage Suncorp's credit card merchants. The development will allow Suncorp, a relatively recent entrant in the market of Visa and MasterCard transactions, to offer merchants around the clock payments processing.  In a broader sense, this long-term contract indicates that while shorter and more detailed outsourcing contracts are becoming en vogue in the United States, in some nations such as Australia, longer-term broader contracts still prevail.  Computer Business Review Online Reports:

"Our OmniPay technology platform and processing solution is designed to actively manage the entire merchant acquiring payment processing cycle, delivering the power, functionality and compliance that acquirers and merchants demand," said Peter Blackett, vice president of marketing and product managment, First Data International - Australia, New Zealand and South Asia.

Read More: Suncorp signs seven-year outsourcing agreement with First Data

EU Funds Pro-Outsourcing Publicity Program

The European Union is currently engaged in a bit of domestic propaganda in an effort to encourage trade unions and employee representatives to embrace outsourcing.  The organization, known as MOOS, is and EU funded effort at making offshore outsourcing, a primary concern of national labor organizations, more palatable to the nation as a whole and these organizations specifically.  The organization's existence indicates a response by corporate europe to increasing concern within the European public about the effects of offshore outsourcing on the individual laborer.  While the United States certainly has its share of corporate-led efforts supporting similar aims, and Bush's recent efforts to expand market competition in federal jobs all parallel this organization's efforts, a formal governmental agency tasked with offshore outsourcing lobbying is a new level of western government intervention into the debate over outsourcing. UNI Telecom Reports:

MOOS is a major EU funded project which aims at making offshore outsourcing socially more sustainable. Partner organisations from 6 countries and the labour research institute of the Belgian university Leuven monitor and track offshore activities in several sectors all over Europe

Read More: UNI: Making Offshore Outsourcing Sustainable Project (MOOS)

Study Indicates IT Outsourcing Satisfaction Down

A recent report indicates that instead of providing cost-benefits, the majority of companies involved in IT outsourcing actually perform poorer than those not involved in the practice.  The Socitm report documented satisfaction before and after outsourcing indicating a 27 percent decline in one outsourcer and a 32 percent decline in another.  While the survey is far from exhaustive, (differences in levels of satisfaction were relatively minor when aggregated across the larger sample pool), the survey does throw into question a flurry of recent studies which have touted improvments in quality of outsourced work and in transition satisfaction.  The survey fails, however, to corrolate user dissatisfaction with the company's bottom line, an integral component in determining the overall effectiveness of the outsourcing undertaking. Silicon.com Reports:

Efficiency gains through investment in IT will only be made if the IT service is credible," he said. "A large slice of that credibility must come from what users think of the service they receive and the degree to which IT helps them deliver high-quality services."

Read More: Councils: Outsourcing IT hits performance

Outsourcing Contract Sparks Union Strike

Bradford council IT staff will strike this week upon a recent admittal by an executive that a 160 million pound contract will lead to redundancies and eventual layoffs. The strike is being held because the Unison trade union holds that the company previously negotiated with employees that the Bradford-i outsourcing project would create no job losses. This incident may be particularly of interest to unionized companies considering outsourcing contracts because it indicates a very tangible outsourcing backlash cost incurred by some companies.  Additionally, it may serve as an indication that concessions in IT union negotiations regarding outsourcing can be particularly costly to the company if handled poorly. silicon.com Reports:

The latest calls for a strike were triggered by a meeting between Bradford council's CEO and the 105 IT staff affected by the Bradford-i project, where it was confirmed that at least 22 jobs would be axed and a further 40 roles impacted by the move.

Read More: Outsourcing job losses trigger strike ballot

Outsourcing Nightcrawlers

In a hilarious parody of the outsourcing debate, Jed Nieveen expresses his dismay at what seems to him an increasing army of jobs and products being outsourced from abroad.  Mr. Nieveen discusses the practice of Canadian Worms being brought into the United States and sold to do the fishing work that American Worms "are just unwilling to do."  Under the guise of light-heartedness, however, Mr. Nieveen gives great insight into domestic resentment for the larger practice of outsourcing.  Salt Lake Tribune Reports:

We are all being invaded by Canadian nightcrawlers and this administration would say it is because American worms refuse to go fishing. Jobs no other worms will do are being done by the Canadian worms.

Read More: Outsourcing Worms

Reversing Trends: Indian Airliners Outsource With Western Providers

In an interesting twist on the conventional outsourcing model, a number of Indian airline carriers are beginning to outsource their aircraft maintenance work in an effort to keep down maintenance costs.  The practice has become widespread in the western world, but up until recently Indian airliners relied upon their cheap labor to overcome any technological disadvantages.  That seems to be changing as a number of Indian airliners have signed contracts with much larger and better established airlines such as KLM and Lufthansa.  Whether this move is caused by the increasing cost of labor in India or because of initial technological limitations will prove an important point in future debates over the end game of maintenance outsourcing.  The Financial Express Reports:

Kapil Kaul, head of Indian subcontinent, Centre for Asia Pacific Aviation (CAPA), said, “Low-cost carriers look at high utilisation of their assets by outsourcing maintenance work. This enables them to maintain a lower headcount, conserve start-up capital and outsource to majors with core competence in maintenance like KLM, Lufthansa and Singapore Airlines.”

Read More: No-frills airlines see 25% savings by outsourcing maintenance

Debate Among Executives Reveals Deep Divisions Over Outsourcing

A recent debate over outsourcing at the Call Centre Executive Forum last week revealed the deep division in western corporations over the benefits and costs of outsourcing.   Executives from Prudential, Nationwide and Kwik-Fit Financial Services revealed markedly different positions on the subject even within the same financial industry.  While Prudential has indicated that they will forge ahead with plans to develop and Indian call-centre despite minimal concerns for a public backlash, Nationwide indicated no plans for outsourcing whatsoever while Kwik-Fit Financial Services said that their past experience with the process was quite negative.  Alan Brown, operations director at Kwik-Fit fleshed out his companies difficulties with the process further drawing out the increasing difference of opinion among executives regarding the effectiveness of outsourcing. PersonnelToday.com Reports:

Despite the enthusiasm and education of Indian staff, Brown said, there were huge variations in quality standards, inexperienced local management, cultural differences and a disproportionate amount of management time spent on the Indian centre.

"It didn't fulfil our cost savings. The 40% to 50%  never materialised. I would say it is nearer 20%," he said.

Read More: Financial sector divided on offshore outsourcing

Article Outlines Pro-Offshorers Argument

A recent report by Atomic PR lists "Four Big Lies" about Offshoring.  While the company certainly presents a single-minded pro-offshoring viewpoint many of the arguments are quite legitimate.  The article lists the four lies as follows, Offshoring is a Threat to America, Offshoring is a Recent Development, It necessarily compromises quality, and finally that western nations can stop the practice. While the article may dismay some because of its evident bias and the way figures are misconstrued, it is for all an important insight into the arguments of pro-offshore outsourcers within the western world and globally.  BusinessWire Reports:

China, Russia and India may be gaining jobs, but is America losing out? The fact is that companies that have outsourced work abroad have created efficiencies that led them to hire twice as many workers here in America as their non-outsourcing counterparts. According to a recent Dartmouth study, outsourcers are job creators here in America. Since 1992, the U.S. lost 361 million jobs, but gained 380 million jobs back, for a net increase of 19 million jobs.

Read More: Four Big Lies About Offshoring

2005 Study Indicates Increased Security and Quality Concerns in Outsourcing

A recent report which surveyed 300 corporate technology-decision makers indicated that just 28 percent of organizations believe that IT outsourcing can provide major cost savings.  Additionally, the study revealed a number of underlying concerns in the minds of potential outsourcers.  Over half of respondents indicated that a loss of internal knowledge was a major disadvantage of outsourcing, while another 41 percent indicated that lower service quality was a major concern.  Potentially the most worrisome statistic for outsourcing companies is the fact that such concerns were significantly lower just two years ago when only 23 percent indicated service quality as a major disadvantage.  While this survey seems somewhat of an outlier statistically, it does coincide with the recent trend seen in many large companies who are bringing IT work back in-house.  Such news raises more questions about the sustainability of outsourcing and its long-term effects on western business. vnunet.com Reports:

'For many organisations, cost is no longer the most significant benefit,' he said. 'Outsourcing has matured and, over time, perceived cost savings can be eroded by increased management time and poorly-envisioned contracts.'

Read More: Outsourcing out of favour

Report Shows In-House IT and IS Work Increasingly Inefficient

A recent report released by Gartner Consulting and The Yankee Group indicates that growing competition from external service providers is currently squeezing the margins in a number of large and mid-sized companies.  Gartner has pointed to companies' IT departments as a particularly bloated area where significant costs can be cut.  The report indicates that as the service quality achieved through outsourced IT providers improved it will be increasingly cost-inefficient for companies to retain their IT and IS work in-house. RED HERRING Reports:

“Our advice to IS leaders is that, although they have some very difficult decisions to make over the fate of their department, they need to act now as the transition will take a number of years,” Mr. Mahoney said at the Symposium ITxpo in Barcelona.

Read More: Outsourcing Gains Momentum