Guy Kirkwood's BPO Backchat
25 feb 2004
I was reading Peter Cochrane's latest column Uncommon Sense (incidentally a great name for a column), and he started by saying,
"For some reason the last six weeks have seen me running at a pace close to that of 1999/2000, with daily international travel and communication on the fly."
This is a good thing. Not wishing to count chickens or tempt fate, we at Antiphon towers are also being rushed off our feet. Stay tuned for news next week - if it happens.
24 feb 2004
Capita has been awarded a two year, GBP125m claims administration contract by the UK DTI. 1250 people will TUPE from the incumbent Aon to Capita to administer all miners' personal injury liability claims.
This is an interesting deal. Not for its size, but for the fact that the client has changed supplier.
As the first BPO deals, now five years old, come up for renewal, it is vitally important that clients maintain momentum. It actually doesn't matter whether clients use the same supplier or change, as long as the market does not see many firms bring the processes back in-house.
20 feb 2004
Gartner has revised its forecast for EMEA. Revenue will grow from USD169 billion in 2002 to USD230 billion in 2007. Process management services will grow fastest, as demand for outsourcing rises.
In related news, Gartner also predicted that the number of businesses starting new outsourcing deals will grow by 30% this year.
"If deals are smaller and there are more of them, this opens up the market, creating new opportunities for more vendors, smaller vendors, especially, will have new opportunities to compete in specialised niches."
So says Linda Cohen, Gartner managing vice president. All excellent news, but it will only be a matter of time and money before these emerging vendors are swallowed in an orgy of M&A, says I.
19 feb 2004
Consultancy spending rose by 9.4% last year, helping UK consultants earnings to top the GBP10bn mark for the first time, according to new figures from the Management Consultancies Association.
The rate of growth - twice that recorded in 2002 - was driven in the last quarter of 2003 by outsourcing consultancy services, which grew by 4.8%. The growth reflected the ongoing trend towards outsourcing consulting, which has increased by 28% in the last twelve months and doubled in the last five years.
18 feb 2004
In what appears to be an exclusive piece for silicon.com, Andy McCue reports that the UK's Metropolitan Police is to consolidate numerous ITO and communications deals into one deal worth GBP750m. The exercise is an attempt to cut the cost of maintaining and managing around five separate IT and communications contracts.
This would make much sense, except I cannot think of a firm that is currently strong enough in all areas to be sure of maintaining service levels.
A reduction in cost is one thing, but if the result is a reduction in service, then we'll all suffer.
11 feb 2004
For regular readers of the Backchat, (all three of four of you), you will know that I like Chart of the Day. It provides an inciteful and easily digested look at the markets in the US.
Today's chart illustrates the current "jobless recovery". After a recession ends, the number of nonfarm jobs typically starts to increase until there are 5.7% more jobs 26 months later. This is illustrated by the dashed blue line that represents the average growth in jobs for all economic recoveries from 1954-1990. The current "recovery" (the bold red line) has not coincided with the job growth normally associated with an expanding economy. While there are signs of a strong and improving economy, in terms of job growth, this is the weakest recovery in the post-war era.
Hmmm, let's think here. Strong recovery but no more jobs - could this be the result of corporate America waking up to the benefits of outsourcing?
10 feb 2004
Levi Strauss, the 150-year-old maker of jeans, might have been driven into extinction if the US bill banning outsourcing, which is awaiting presidential consideration, had been law in January. As it is, only shutting down its last US manufacturing plants in San Antonio, Texas, and announcing the closure in March of its three Canadian factories, saved the classic brand.
So concludes Sunanda Datta-Ray in an excellent article for The Straits Times. It is certainly worth reading.
8 feb 2004
The UK foreign secretary, Jack Straw, is concerned for Britons whose jobs have been outsourced but believes changing investment patterns may benefit the UK.
"Investments by overseas firms in Britain has created jobs. Five thousand positions had been created in the UK's financial sector in 2002 alone. India itself is already the eighth largest investor in the UK."
It is good to hear some realistic and thoughtful, emotion-free praise of offshoring. Hats off to Straw.
6 feb 2004
According to Union Network, the UK government is going to publish a report on offshoring in April. I suggest that interested parties should quickly send information and case studies to:
The Rt. Hon. Patricia Hewitt
Minister for Trade and Industry
Department of Trade & Industry
1 Victoria Street
London SW1H OET
5 feb 2004
The Institute of Chartered Financial Analysts of India (ICFAI), is one of the premier academic institutions in India. The ICFAI publishes a monthly finance magazine, The Analyst.
In the forthcoming March 2004 issue of Analyst, the ICFAI is attempting a story on India's BPO Industry - Challenges Ahead.
In this context, I was invited to write about my perceptions as part of the BPO Notes series.
4 feb 2004
EDS' deal with Liverpool Victoria in the UK is another case of an ITO firm turning into a BPO company. Note the title of the press release and note also that almost buried in the fifth paragraph:
"The companies have also announced a six year extension to their existing information technology outsourcing agreement, worth an additional GBP51m in projected revenues."
The fact that EDS is crowing more about a GBP8.15m per year BPO deal than a GBP8.5m per year ITO extension speaks volumes.
3 feb 2004
"Outsourcing is still for losers." That is the conclusion on IT outsourcing reached by Paul Strassmann writing for Computer World.
"Losers were outsourcing more than half of their costs. The returns on shareholder equity for the winners were clustered around low outsourcing ratios; the large losers showed high outsourcing ratios."
If this is true, it could prove disastrous to the BPO market. No company will want to be associated with outsourcing if it gives out the message that this is the last gasp of a dying firm.
Is this implication correct? For anyone who has read my article on win win within a European ITO, this piece does not ring true. Perhaps Strassmann has some other axe to grind? One look at his tag-line probably answers that question.
"Paul A. Strassmann (paul@strassmann.com) was involved in one of the largest IT outsourcing contracts ever made and witnessed how everyone ended up a loser."
2 feb 2004
After being invited to speak at a retail conference in New York last week, the CEO of Sears got himself into all sorts of trouble for "speaking the truth" about offshoring.
Not only did Alan Lacy talk all too frankly about the financial attractions of going offshore, but he also doubled his trouble by unfavourably comparing the intellect and drive of US workers with their overseas counterparts.
"There are four or five times as many smart, driven people in China than there are in the US."
What Lacy learned last week is that candid, open discussion about offshore outsourcing is the new corporate taboo. Nothing will be more politically incorrect this year than expressing interest in offshoring.
1 feb 2004
In good news for the HRO market generally, Hewitt's announcement that its net revenues for Q1 increased 11% to USD532m, is great news. Outsourcing revenues increased 15% and Consulting revenues increased 3%.
What we need to know now, is how does this effect it's European operation. I will try and find out this week.
Oh, by the way, last month's blogs have not suddenly gone out of date, if you missed any, they are worth reading. Also check the archive.