Almost 1 in 4

people hate

outsourcers.

It’s time

to change

their minds.

proving the value ofoutsourcing

Taking place the day after the European Outsourcing Association(EOA) Awards, this event will feature highly interactive breakoutsessions, key case studies and ample networking opportunities.

To register to attend and for sponsorship enquiries please contact

Natalie Milsom on +44 (0)207 292 8689 or nataliem@noa.co.uk

KERRY HALLARDDirector of Communications NOA

PUBLISHERSBuffalo Communications Ltd44 Wardour StreetLondon W1D 6QZ+44(0)20 7292 8680EDITOR-IN-CHIEFKerry HallardBUSINESS DEVELOPMENTNatalie MilsomCREATIVE AND DESIGNjkharveydesign.co.ukIMAGESistockphoto.com with individual copyright as stated

© Buffalo Communications Ltd

Staff writers

PAUL CORRALLEditor sourcingfocus.com

GLENN HICKLINGCommunications Manager Buffalo Communications

The portal for the sourcing industry

Outsourcing Yearbook 2012This Spring edition of the Outsourcing Yearbook 2012 is dedicated to this year’s flagship campaign from the NOA – Outsourcing Works.

What is Outsourcing Works? Outsourcing Works is the biggest collective movement from the UK outsourcing industry, aiming to prove outsourcing really does work. The importance of outsourcing’s perception should not be underestimated. Bad PR can discourage good business, and so it is vital to gauge opinion and educate. Through dedicated research and national campaigns, the benefits of outsourcing can become conventional wisdom. But Joe Public seems anti-outsourcing currently, as fresh NOA research will show you…

Outsourcing Works when relationships are attuned Outsourcing by its very nature is a collaborative exercise and maintaining relationships between the involved parties is essential for expectations to be met. Interactions involved should be consistent and abundant throughout any outsourcing venture in order to reap the maximum rewards. Outsourcing Works best when partnership is balanced; this supplement gives some advice on the finer points of maintaining a fruitful outsourcing relationship.

Outsourcing Works when you think long termA constantly evolving economic climate, fuelled by the pervasion of globalisation, means that interesting times lie in store for outsourcing as an industry. How will outsourcing develop during these turbulent economic times and what do suppliers have to do to keep on top?

We hope you find the supplement useful.

Kerry Hallard

Director of Communications, National Outsourcing Association

Welcome to Outsourcing Works

We are amidst a double-dip recession and the UK economy needs all the help it can get.

The outsourcing industry has matured and according to research from Oxford Economics, it now represents the second largest contributor to UK GDP (second only to the UK’s financial services industry). Despite this, outsourcing as an industry is facing major challenges.

We, as workers within it, all know outsourcing to be a dynamic and varied profession, which touches all aspects of business life. However, it is largely the unsung hero. And rather than entering a period where we can show our true worth, we are likely to enter a difficult time, and our industry could fall into disrepute.

Outsourcing can really help businesses improve services, drive efficiencies and focus on core competencies. We need to better communicate this, and prove this, to encourage more growth. Although there is much mention of outsourcing in the UK media, there is little supporting information about the value outsourcing delivers.

At the National Outsourcing Association we believe the time is right to come out and stand up for our industry and really show its value.

Now we can all do this in isolation, but we all know that has minimal impact. As such, we believe that coming together and pooling our strengths and ideas will have significantly more impact and could really change the perception of outsourcing among Government, buyers, press and employees, as well as the public. This in turn will deliver growth and stability to the sector.

The cornerstone of the campaign is fresh and credible research which proves the value of outsourcing. The research

will be commissioned following consultation with all NOA members and will be undertaken by a leading research house or business school. A full research report will be available for all members to use in their own marketing activities. A significant PR programme will be run on the research results and a partnership programme established to maximise reach with other trade bodies.

Outsourcing Works will prove itself to be the biggest, collective movement the UK outsourcing industry has undertaken to date. Together we are set to educate the entire business community about the benefits of outsourcing through, academic research and real life examples, we will prove that outsourcing really works.

The first step in changing perceptions is to determine the ‘as is’ state. To that end, we commissioned a public opinion poll to find out not just what the man on the street thinks about outsourcing, but to get a handle on how much they know about our industry already.

The next step will be to educate them on the value the outsourcing industry adds. So the next wave of research will seek to empirically, as well as anecdotally, prove the value we bring, not just at corporate level, but national level too.

For that we’ll need your help. By banding together, we can enhance the reputation of outsourcing, make our industry better understood, and it will grow.

We need facts, figures and case studies. We’ll publicise them through national news channels and events. To discuss how you can contribute to the biggest PR campaign the UK outsourcing industry has ever known call me at + (0) 20 7 292 8699 or email Kerryh@noa.co.uk

Outsourcing Works. Let’s shout about it.

OUTSOURCING WORKS

Author: Kerry Hallard

5sourcingfocus.com 5

* Magic Quadrant for CRM Service Providers, Europe , Matthew Goldman, Ed Thompson September, 28, 2010 ** Forrester Research Inc. “The Forrester Wave ™: EMEA Applications Outsourcing, Q4 2010”-

Dec 20, 2010 *** IDC, MarketScape: Worldwide Public Sector Business Consulting 2011 Vendor Analysis Doc #229541, August 2011.

The Magic Quadrant is copyrighted 2010 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner’s

analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not

advise technology users to select only those vendors placed in the “Leaders” quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner

disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Outsourcing from IBM

IBM, the IBM logo and ibm.com are trademarks of International Business Machines Corporation in the United States, other countries or both.

© Copyright IBM Corporation 2012. All Rights Reserved. 112509 (03/12)

Our clients tell us that cost reduction and

containment is still crucial, but increasingly they

are also looking at opportunities for growth and

need to know that their IT can manage new

business opportunities quickly when they come.

But to become a smarter business they need first

to ensure that their infrastructure, applications and

processes are smart.

For example, if they are looking at employee

mobility to increase productivity and give

employees greater flexibility, clients need to know

first that their solution will work and confidential

data will be secure.

Similarly, if clients want to move cloud computing

from a pilot project to full implementation, they will

want to know that system integration is assured

and service level agreements will not be degraded.

Focus on your core business while driving innovation

and efficiency with industry-leading outsourcing and managed

services for business processes, applications and infrastructure.

IBM can help with these and other business and IT issues.

We can help you outsource a single element or the full scope of

your IT infrastructure, applications or business processes estate.

We integrate the best of local and global delivery to offer our

clients the most efficient mix to suit their business demands.

We work with all sizes of companies and are dedicated to our

clients’ success.

We use our own extensive business consulting services,

experience from our own successful transformation, and

knowledge from hundreds of outsourcing engagements to help

clients gain new efficiencies and business process improvements.

Leading analysts recognise this. IBM is a leader in:

> Magic Quadrant for CRM Service Providers, Europe*

> Forrester Wave™ EMEA Applications Outsourcing Q4 2010**

> IDC MarketScape for Worldwide Public Sector Business

Consulting 2011 Vendor Analysis***.

WE HAVE HELPED HUNDREDS OF CLIENTS ACROSS THE WORLD.

WE WOULD LIKE TO HELP YOU TOO.

Please contact nigel_white@uk.ibm.com if you would like to know more.

Outsourcing has an image problem. It’s a dirty word, in many peoples’ eyes.

Research commissioned in April by the National Outsourcing Association confirms that outsourcing has an image problem. It is very much maligned because it is misunderstood. Statistics from the research show that the public do not believe that outsourcing is a major contributor to the UK economy. This fresh NOA research highlights the public misconceptions of what outsourcing even is, let alone what benefits it brings, and details scenarios in which the public would warm to the concept of outsourcing….

According to the “Public Perception of Outsourcing” research a staggering 80% of the general public do not think the sourcing industry is helping UK PLC. This is in spite of research last year stating outsourcing to be the second biggest contributor to GDP – weighing in with 8%, only a nose behind the 8.1% from the finance sector. On top of that, outsourcing contributes £14 billion in business taxes, and outsourcers hand over £21 billion in income tax. The general public does not currently believe that outsourcing helps the British economy, with only 19% believing that outsourcing can help get the UK out of recession.

And still the public think we do not do our share. The public don’t like us, because they don’t understand us – nearly a quarter (22%) of the public list outsourcing as a profession they dislike. That’s up there with estate agents, which is traditionally one of the most despised professions around.

Perceptions of outsourcing focus on cost-cutting (65%), job losses (53%) and various examples of offshoring such as call centres and manufacturing.

Onshore outsourcing barely pricks the public consciousness – only 27% recognised “a local computer company providing IT support to small businesses,” as an example of outsourcing.

The National Outsourcing Association’s Outsourcing Works campaign aims to enhance the reputation of our industry; to right misconceptions and highlight the sterling contribution outsourcing makes to UK PLC. The mission is to prove the value of outsourcing to both businesses and consumers alike. To engender trust and help the industry further grow …

Through the “Public Perception of Outsourcing” research we now know what it will take to develop that trust. The public have laid some scenarios that would make them more amenable to outsourcing:

70% want evidence of how many UK jobs are created by • outsourcing

69% want proof of how much outsourcing positively • contributes to the UK economy

55% demand less wasting of taxpayers’ cash in public • sector contracts Outsourcing Works. We know that. For our industry

to grow, Joe Public needs to know too. To do this, we need our members’ support. Through

adversity comes opportunity. We must unite to make our industry better understood. Increasing understanding and appreciation of the value we add will be a positive step for everyone involved in outsourcing. More buyers. Less protesting. Less objection handling. Warmer attitudes…

Help us prove Outsourcing Works by giving us your evidence, both anecdotal and qualitative. It will form part of a huge research project and PR campaign that the NOA will roll out throughout 2012.

The Public Perception of Outsourcing

OUTSOURCING WORKS

Author: Kerry Hallard

7sourcingfocus.com 7

Populus polled 2,053 GB adults online between 5th and 9th April 2012. Results have been weighted to be representative of all GB adults. Populus is a member of the British Polling Council and abides by its rules. For more information see www.populus.co.uk

Based on what you have heard or understand about the term “outsourcing”, to what extent do you agree or disagree that outsourcing benefits the UK job market/economy?

To what extent do you agree or disagree that outsourcing can help get the UK out of recession?

Which of the following do you think describe an example of outsourcing?

A fifth (19%) of respondents agreed that outsourcing can help get the UK out of recession, with just 3% agreeing strongly. A little under two fifths (37%) disagreed, whilst 45% had no opinion. Men (22%) were more likely than women (16%) to agree that outsourcing can help get the UK out of recession. Over 65s (20%) aside, the younger the respondent, the more likely they were to be positive about the ability of outsourcing to help get the UK out of recession (22% of 18-24 year olds compared to 11% of 55-64 year olds).

A major bank opening a call centre in India (58%) and a sports brand setting up a factory in China (47%) were most likely to be believed to be an example of outsourcing. In fact, these are both examples of captive offshore projects, proving that offshoring and outsourcing are intrinsically linked in the minds of the public. A classic example of true outsourcing, ‘a local computer company providing IT support to small businesses’ was not recognised by nearly three quarters of respondents. This question proves that while the public may not like outsourcing, most of them do not properly understand what it is.

KEY: NET: Agree 20%Strongly agree 3%Slightly agree 17%Neither agree nor disagree 44%Slightly disagree 18%Strongly disagree 18%NET: Disagree 36%

0 20 40 60 80 100

KEY: NET: Agree 19%Strongly agree 3%Somewhat agree 15%Neither agree nor disagree 45%Somewhat disagree 19%Strongly disagree 18%NET: Disagree 37%

0 20 40 60 80 100

A fifth (20%) of respondents agreed that outsourcing benefits the UK’s economy, whilst over a third (36%) disagreed. 44% had no opinion. Men (24%) were more likely than women (16%) to agree that outsourcing benefits the UK economy, and younger people tended to be more likely than older people to be of this opinion (27% of 18-24 year olds falling to 12% of 55-64 year olds and 20% of those aged 65 or over).

0 20 40 60 80 100

None of these 15%

Lastminute.com selling holidays on the internet 6%

Hiring an accountant to help with getting your tax return right 14%

A local computer company providing IT support to small businesses 27%

A government department buying software licenses from a French supplier 32%

A sports brand setting up a factory in China to manufacture trainers offshore 47%

A major bank opening a call centre in India 58%

8 sourcingfocus.com8

ConclusionSo outsourcers are not quite as despised as politicians and bankers, but as professional reputations go, ours needs work. Attitudes to outsourcing are poor, as the associations to offshoring, cost cutting and redundancies are so strong. Only 20% of the UK population believe that outsourcing helps our economy is a scandalous figure, considering that our industry employs many thousands of people onshore. There is much work to be done in educating people that outsourcing is not all about India call centres and manufacturing. The public has spoken, and they want evidence that outsourcing creates jobs, contributes positively to the economy and doesn’t waste hard earned taxpayers’ cash. This is evidence that we must unite to provide – by making the public understand the value of outsourcing, we can make all of our lives easier.

What words do you associate with outsourcing?

Which of the following do you think would make outsourcing more acceptable to you?

It is disappointing that the words most strongly associated with outsourcing have negative connotations in the mind of the UK public. Cost cutting (65%) job losses (53%) and India (45%) returned some of the highest scores. 4% of respondents associated the word “trust” with outsourcing – there is much work to be done in boosting this figure.

To warm to the concept of outsourcing,the public want evidence of its impacton a macro-economic level. Rather thanthinking selfishly, and wanting evidenceof how much cash outsourcing savesthem personally, most people want tosee how it benefits the nation as a whole.Therefore, the next wave of OutsourcingWorks research should focus on thebenefits that outsourcing brings to UK PLC.

0 20 40 60 80 100

None of the above 15%

Pride 1%

Courage 2%

Trust 4%

Fear 10%

Wasteful 11%

Disgust 13%

Rip off 16%

India 45%

Call centre 48%

Job losses 53%

Cost cutting 65%

0 20 40 60 80 100

None of these 18%

Proof of how much more an iPad

would cost without outsourcing 8%

Getting a job in outsourcing yourself 14%

Proof of how much more your TV license would

cost if the BBC didn’t use outsourcing 17%

Less wasting of taxpayers’ cash

in public sector contracts 55%

Proof of how much outsourcing positively

contributes to UK economy 69%

Evidence of how many UK jobs

are created by outsourcing 70%

9sourcingfocus.com 9

According to Alexander Yeats, former principal economist of the World Bank: “If one returns to the question of how big is global production sharing, the answer clearly is ‘very big’.From the historic concept of the division of labour, outsourcing has evolved to become a commonplace business tool which is used by major corporations to SMEs, in every industry, across all horizontals. In a world more dependent on global relationships especially during times of austerity – outsourcing addresses the demand for faster, cheaper and better services.

NV ‘Tiger’ Tyagarajan, president and CEO of Genpact, said: “Despite turbulence still roiling the global economy, these are times of hope for outsourcing. Success will come to those who know how to play the game by the new rules and don’t adopt a bunker mentality.”

It is during the late 1980s and early 1990s that outsourcing truly became recognised as an operational strategy. It is also during this period that the pace of globalisation has accelerated mainly due to the exponential growth of information technology and global markets. This has allowed for the outsourcing of more and more strategic processes as firms identify and focus on their own core competencies. The global supply pool is available for all firms of different sizes in various sectors. In view of that, these days, outsourcing is seen as a changing paradigm that affects the whole value chain.

However it seems that global uptake of outsourcing has also encouraged negative connotations. More than trade or international financial flows, outsourcing has become the particular target of critics and defenders of globalisation alike who cite that the offshoring of jobs and an increase in unscrupulous capitalism fuel a global society where the rich get richer and the poor get poorer.

Economists and analysts both believe this to be false. Outsourcing not only helps to ease the pressure of the recession worldwide but also creates many new jobs especially for a new

group of employees – young upwardly mobile graduates.Sid Pai, Director and Managing Partner of ISG, said:

“Outsourcing helps combat recession – whether in the West or in India – by allowing for a more efficient allocation of work from a cost perspective, thereby freeing up employees whose jobs can be outsourced to either immediately (or with training) assume positions of higher economic value and productivity.

“Moving of the work to the worker rather than the worker to the work is the basic tenet of globalisation. The reverse would mean large scale migration. If globalisation is defined as a more efficient spread of work – and opportunity – across nations, then outsourcing is the services euphemism for ‘trading’ of goods.”

Ganesh Pai, senior vice president at MphasiS, said: “Our society is changing very quickly and 2012 is the year where business needsto catch up. The fact that so much is happening, so fast, means that some companies could take years, even decades, to re-align themselves. This is why the value of outsourced services – includinginfrastructure, business processes and application development– will be essential.”

Ultimately it will be interesting to see if the growing globalisation of the world economy will lead to a parallel increase in globalregulation regarding outsourcing – and whether that would be good or bad for world economic growth and equality. As Lee Kuan Yew, former Prime Minister of Singapore, said: “Suppose the Americans said – ‘You can’t outsource’ – but theJapanese, Germans, British, French outsource, so their goods and services are cheaper. If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” you’re putting yourself out of business.” Globalisation means that outsourcing superpowers can change. India and China have reapedrewards from opening up their economies to the world, so therewill always be a new player wishing to emulate their success. Thereare clear opportunities for the UK here, to position itself as a globalstrategic hub – the home of knowledge management and bestpractice.

Outsourcing and globalisation

Author: Paul Corrall

15sourcingfocus.com10 sourcingfocus.com

Less is more:

streamlining your SLA An ELEXON and Logica case study

Like most commodities, electricity is produced, sold into a wholesale market and then resold to consumers. Contracts are made for each half hour between generators who produce the electricity, and suppliers, who sell it on to commercial and domestic consumers.

ELEXON is at the heart of the UK’s electricity supply and distribution industry. It administers the “Balancing and Settlement Code”, which governs the wholesale electricity balancing and settlement arrangements for the UK. This touches some 27 million customers and every company in the electricity energy market.

For over 12 years, Logica has partnered with ELEXON in a variety of BPO and ITO capacities, creating the IT infrastructure to help ELEXON cater to the changing customer needs of the future.

During 2011, ELEXON and Logica decided to review and rationalise the considerable number of SLAs in their original contract with the underlying objective of reaching “a common agreement on a clearly defined set of service levels for all client services, which are: measureable, within our direct control and underpin our commitment to continual service improvement.”

This is how we did itWith both organisations committed to the SLA rationalisation, we held a series of collaborative workshops to determine all SLAs were still relevant to the current and future service requirements and in proportion to the mission criticality of the activities measured. A particular focus was the impact of a service level failure on ELEXON’s customers.

The result was the decision to reduce the number of SLAs from 155 to 40.

The dispensable – The SLAs that were no longer relevant Most of the SLAs we decided to remove tended towards reporting or providing information. We agreed to measure them as KPIs instead, as KPIs can still give a good indication of the health of the service whilst validating that Logica delivers on their obligations. Here are two examples:

Process of new or updated Registration Data. Target: 100% of valid • new or updated Registration Data within 1 working hour of receipt

Notify the Client of any failure by SAA to provide FAA with information • in accordance with the Service Description. Target: By 11:00 hours of the Working Day that the information was not received

RELATIONSHIPS

Sara Titmuss, Elexon Commercial and Procurement Manager

Paul Buxton, Logica Client Service Director – Utilities

12 sourcingfocus.com

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The NOA Lifecycle Model provides a reliableframework to guide companies through theoutsourcing process

Outsourcing is more popular than ever as a strategic business choice. According to the TPI Index, last year the 2011 Total Contract Value (TCV) reached $95bn, an increase of 3% over the previous year, and the highest annual result since 2005. Outsourcing has also increased its profile in the media in 2011, up 11.2% year-on-year. If you are outsourcing, there is now more pressure to get it right than ever before.

An understanding of the NOA Lifecycle is central to the success of an outsourcing strategy and highlights what is considered currently to be generic best practice in each of the key stages of the Lifecycle: Strategic Leadership, Relationship Engagement, Transition and Change, and Relationship Management.

Strategic LeadershipAny sourcing decision begins with a consideration of the strategic needs of the organisation, it is important that the success of the current sourcing strategy is known within the context of overall strategic goals. At this stage key plans and governance are established that will provide sound foundations for the strategy to be developed. From the very beginning, an outsourcing venture should consider how the strategy will affect the real end user.

2011 NOA Award Winner for Outsourcing Professional of the Year, Shamus Rae of KPMG, said: “It is extremely important that an outsourcer develops a strategic leadership development plan and a strategy for execution. The strategy should clearly articulate not only the vision of the execution but also the values by which the team will live. I put strategy and values as equal importance.”

Relationship EngagementThis is a crucial stage in the Lifecycle, as the client must take exceptional care in choosing the most appropriate supplier. Both the client and the supplier must be sure they are correct for each other and it is vital that the client and supplier are a good cultural fit.

The two organisations will be working together on a daily basis and employees may be seconded to the partner organisation as part of the contract. It is imperative that business values and culture are aligned. When both parties are fully satisfied that they are a good match, contract negotiations can begin.

2011 NOA Award Winner for Academic Achievement, Anu Biswas of HML, said: “The Relationship Engagement stage of the NOA Lifecycle model sets the tone for any outsourcing relationship. If outsourcing is being chosen as a long-term strategic solution, both the company appointing the outsourcer and the outsourcing firm itself, need to share their business strategies with each other at the earliest opportunity. Long-term strategic partnerships will only succeed if both firms are trying to travel in the same direction and are engaged at the most senior level.”

Transition and ChangeTransition is when the outsourcing strategy is implemented. While suppliers may have had experience in similar projects before, every outsourcing venture is different and needs to be tailored as such. Communication between the key parties is also crucial.

Those implementing or affected by the change should communicate their progress and any difficulties that may arise, so that all parties can adapt as necessary. It is also important that the organisation considers an exit strategy at this stage, as very often businesses do not consider this until far later and face exit difficulties. Any legal issues that may arise, such as those regarding intellectual property, should also be considered.

Rebecca Scholl, Director Market Strategies of ACS, said: “A general lack of communication in the transition and change phases is a common mistake. Providers should take the lead in communicating often and clearly with all stakeholders involved to ensure alignment of all parties – particularly during the transition phase.”

Relationship ManagementRelationship management is the longest stage in the Lifecycle and it is where the benefits of the strategy come to light. The goal of this stage is to ensure that expectations are met, through robust governance and effective management of any issues that may arise.

Too often, the benefits of outsourcing are not tracked effectively, and so it becomes unclear how successful the venture has been. Therefore, it is important to use the appropriate software and analytics, as well as conducting qualitative interviews.

Chris Scoggins, CEO, National Rail Enquiries, said: “We look for long term relationships where the supplier works towards our success in the knowledge that our success will also be theirs. We achieve this by maintaining a close relationship with our suppliers, at all levels, especially outside of the day to day service delivery. We involve our suppliers in shaping our strategy and use their expertise to help improve our services.”

To view the full NOA Lifecycle please visit www.noa.co.uk

Staying on track with the NOA Lifecycle

RELATIONSHIPS

Author: Paul Corrall

14 sourcingfocus.com

Awards

BOOK YOUR TABLE NOW!Visit our website www.noa.co.uk for more information

THE LAW SOCIETY, LONDON 27TH JUNE 2012

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