http://www.sourcingfocus.com/index.php/site/newsanalysis en paul@sourcingfocus.com Copyright 2013 2013-01-17T17:14:50+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/A_cheeky_little_innovation_in_outsourcing_/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/A_cheeky_little_innovation_in_outsourcing_/#When:16:14:50Z Yesterday a news story did the media rounds concerning a high-paid US software developer outsourcing undisclosed work to China. This example represents one of the most resourceful and innovative uses of outsourcing available and should be commended, if not for the violation of multiple company practices. The story was that the software developer had outsourced his own workload to a contractor based in Shenyang, China. The cost of this undisclosed sub-contractor for the software developer was less than one fifth of his own wage, leaving the developer with a free day, spent apparently in this case on viewing cat videos. This action was discovered after an audit surrounding fears of a security breach following the discovery anomalous activity on the company’s network. An analysis of the employees computer revealed his day-to-day activities while he outsourced his work-load: 9:00 a.m.—Surf Reddit, watch cat videos 11:30 a.m.—Lunch 1:00 p.m.—Ebay 2:00 p.m —Facebook and LinkedIn 4:30 p.m.—Send end-of-day e-mail update to management 5:00 p.m.—Go home The reaction to the discovery by the company saw the termination of the developer’s employment, this is clearly a missed opportunity; the correct response to this discovery would be to give the developer a seat on the board and a raise. The practice of the worker should be taken on board with the company moving to outsource all work of this type to the Chinese contractor. Based on this one example, the company at worse could expect to make cost savings of 80 percent through outsourcing work carried out by the developer, other developers carrying out the same work, and similar job positions, with greater savings presumably available from economies of scale. The amounts to be saved are not inconsiderable with the developer earning a six-figure salary. Just as the developer increased his available free time, so to would the employer increase savings (although the developer’s use of his savings made invested in cat clips might be best avoided). You might ask yourself was the work carried out poor in quality, ineffective or inferior? No, in fact the work carried out by the Chinese developer was viewed to be of a high standard, with the employee viewed as being a talented individual. The developer’s performance reviews including descriptions of the coding as being “clean, well-written”, he had even been described as “the best developer in the building”, despite the actual ‘best developer’ not even being in the same continent. Rather than delivering a poor quality service, the Chinese contractor delivered a high end service. Copying the practice of the unnamed developer does pose difficulties. The original outsourced action was brought to light because of security concerns and these issues would still exist. While issues common in outsourced services including security would exist, other common obstacles including control and transparency hardly seemed to be present in the delivery of the original ‘in-house’ service anyway given the employees ability to outsource his entire job, and issues of a reduced quality in service would seem to be a non-issue given the reviews of the work provided. The developer found an effective third-party to which he outsourced his work to, he delivered the service that he was paid for as an employee. It is a failure of the company to carry out a wide reaching procurement that should be focused on. This example should be leaped upon and paraded to demonstrate the efficiencies of outsourcing. Sectors, Media, telecommunications & technology, Topics, ITO, Procurement 2013-01-17T16:14:50+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/privacy_failings_hits_nhs_trusts_in_the_pocket/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/privacy_failings_hits_nhs_trusts_in_the_pocket/#When:12:45:54Z . Last June Brighton and Sussex University Hospitals NHS Trust received a fine of £325,000, after patent medical records appeared on hard drives up for auction on the Internet. This week saw a fine of £175,000 after confidential employee details were displayed on Torbay Care Trust’s (TCT) website. It appears that the NHS is in dire need of a revised data protection policy. The publishing of details including NI numbers, DOB, names, sexuality and religion of 1,373 staff members was directly uploaded by the Trust itself. The sensitive information compiled as an Excel spreadsheet remained on the Trust’s website for a total of 19 weeks. The data was only removed when a member of the public raised the issue, by this point the data had been seen more than 300 times. The head of enforcement, Stephen Eckersley, at Information Commissioner’s Office (ICO), who issued the penalty fine, said “Not only were they giving sensitive information out about their employees but they were also leaving them exposed to the threat of identity fraud”. The Trust recognised that it had failed to establish effective data privacy within its systems, TCT chief executive, Anthony Farnsworth, said: “This was an organisational issue, in which the absence of sufficient checks within our processes made an error possible”. The data breach of last June also occurred due to incorrect operational procedures as the Trust, which saw more than 252 hard drives removed from premises instead of being correctly destroyed. Like any public sector organisation who handles sensitive data, the NHS need to rapidly establish effective data protection, partially at a time when the service is looking at migration of services and data to cloud based platforms. In both of these cases during this year, failing occurred due to a lack of due diligence. Sectors, Media, telecommunications & technology, Public sector, Topics, ITO 2012-12-04T12:45:54+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/unhealthy_practices_in_nhs_procurement/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/unhealthy_practices_in_nhs_procurement/#When:16:22:26Z           In the governments quest to improve the efficiency of the National Health Service and improve cost-savings in a time of recent recession and cuts, the privatisation and outsourcing of services has become a popular fix-all. However recent reports and major case examples are demonstrating that the NHS is failing in carrying out effective procurement.  In the latest report published by global professional services organisations Ernst and Young, a trend showing a divergence in supplier prices being paid by different hospitals was discovered, with millions of pounds being wasted by the failure of NHS trusts to effectively communicate and negotiate strong and effective contracts. The failure of contract negation and project governance has been seen before in the failure of the Lorenzo digital record contract with CSC. While CSC carried out numerous account errors, the failure of the project was compounded by the NHS’ failure to employ effective governance and the inclusion of damaging targets weakened service levels. Nigel Clifford, CEO at Procserve, commented on the report saying: “Ernst and Young’s recent report has highlighted the fragmentation and lack of sharing in NHS procurement, leading to some hospitals in England paying more than they need to for medical supplies. This is bad news when funding pressures are being felt in the health sector.” While the report identified weaknesses in how the NHS carried out procurement, the development of the National Police Procurement Hub (NPPH) was identified as a good example of driving value for money and ensuring that individual forces receive value for money from one main procurement system driving highly negotiated contracts. As the NHS moves to outsource greater numbers of services with one in five NHS patients now treated by private firms, the risk of ineffective handling of contracts becomes more prevalent. It is clear that the public sector is well placed to drive strong procurement contracts and outsource key services as demonstrated by the work of other departments but it is clear that best practice has not yet been employed within all areas. Sectors, Public sector, Topics, ITO, Procurement 2012-11-27T16:22:26+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/royal_mail_profit_privatisation/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/royal_mail_profit_privatisation/#When:17:41:57Z                 In a release today half-year operating profits for Royal Mail reached a total of £144 million, the report also confirmed the companies move towards privatisation, saying: “Obtaining external capital is a key part of the transformation process as we become a more parcels-focused business and make the investment in technology to do so.” Reports released over the weekend had raised expectations that the release of half-year results would stimulate the public services’ move towards privatisation if clear profits were displayed. In the release today, parcel revenue, which represents almost half of the total group’s mail, had increased by 13 percent, while a range of stringent cost cutting measures have helped to improve overall profits. Royal Mail has also moved to compete in online shopping delivery, signing Amazon as a customer and partnering with Chinese based ZJS with an eye on expanding into overseas markets. The turnaround within Royal Mail has been sizeable given that the group had posted a loss of £41 million in the half year to last September. The postal service has also seen sustained years of poor results and negative headlines relating to poor service. The delivery of increased profits by the Royal Mail had been a key condition of the go-ahead of the company’s planned floatation next year. The publication of strong profits is expected to further boost investor interest surrounding the Royal Mail. While the group has been boosted in recent years, the road towards profitability has seen job cuts, sorting centre closures and opposition towards the move towards privatisation from postal unions. In reaction to the publication of the report, Dave Ward, the deputy general secretary of the Communication Workers Union, said that a move towards privatisation would damage the service through competition, adding: “We don’t want competition at any cost. Closures, bullying, cost cutting and privatisation will destroy the industry. We’ll stand up to protect it.” The current success of Royal Mail in transforming its services, taking on large clients and competing with rivals after a sustained slump has seen government support placed behind the companies bid for floatation. Michael Fallon Minister for Business said: “These results from Royal Mail are encouraging, showing how Royal Mail staff and management together with the Government’s reforms have put the company on the road to sustainable health and long-term viability. Parliament decided, via the Postal Services Act 2011, to inject private capital into the company in order to secure the future of the universal postal service. The structure and timing remain open, but Government is committed to doing that to ensure the ongoing viability of the company.” The Royal Mail included a statement underlining the need for Whitehall to sign off on the privatisation however the government is already believed to be planning to promote the group to potential buyers during 2013. Sectors, Media, telecommunications & technology, Public sector, Topics, Procurement 2012-11-13T17:41:57+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/bt_wi-fi_launches_new_windows_mobile_app/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/bt_wi-fi_launches_new_windows_mobile_app/#When:08:58:50Z BT has announced that its wi-fi hotspot numbers have passed over 7.5 million across the world, as it launches a new BT Wi-fi access app making it easy to find a wi-fi hotspot in the UK and to login from a Windows Mobile device. The new app, which will be available on the Windows Phone Store is the fourth BT Wi-fi app to launch. It follows the success of iOS, Android and Blackberry apps, which have now passed over two million downloads by BT Broadband customers. BT Broadband customers have free and unlimited access to the largest wi-fi network in the world. The numbers include more than 65,000 in Birmingham and Leeds, around 72,000 in Manchester, Edinburgh and Sheffield, and more than 59,000 in Liverpool, Brighton, Bristol and Cardiff. 2012-11-13T08:58:50+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/outsourcing_in_the_us_election_debates/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/outsourcing_in_the_us_election_debates/#When:14:02:29Z                 Outsourcing (the American for offshoring) has become a frequent tool of attack in the recent US election debates. However, the debate does seem to have helped in clarifying the difference between the relocation of services (offshoring) and the more general contracting of services to an external company (outsourcing). In recent debates Obama has criticised Romney’s record in offshoring services and jobs to China, including the offshoring of holdings and investments in companies involved in such practices. The Republican party have also been quick to point to Obama’s hand in transferring jobs and investment programs overseas.  In the October 16th debate at Hofstra University Romney rounded on Obama, saying: “You also have investments in Chinese companies … You also have investments through a Caymans trust”. Romney said that enterprises looked to China as an attractive offshoring destination compared to the US, and as such jobs will continue to be created in the more attractive location. Both Obama and Romney have clarified on the differences of outsourcing and offshoring. Romney senior adviser Eric Fehrnstrom, said: “Outsourcing is what the Obama campaign does when they hire an outside telemarketing vendor to provide telemarketing services,” adding, “Offshoring is the shipment of American jobs overseas”. Obama touched on the common misunderstanding in passing, saying: “If you’re a worker whose job went overseas, you don’t need somebody trying to explain to you the difference between outsourcing and offshoring”. Outsourcing has been used as a negative point in the US election campaign by both candidates. With jobs and the economy ranking as top election issues by voters, both candidates have focused negatively upon outsourcing as a practice. Both candidates focused upon China, with Romney labelling China as a tax manipulator while Obama spoke on closing tax advantages to offshoring destinations, mentioning China.  As mentioned the blanket use of terminology has been focused upon and the differences between offshoring and outsourcing have been touched upon within mainstream media, however these instances have been rare. Outsourcing is a word that is generally thought to hold negative connotations. The common business occurrence of offshore services, and the value investments that come to the shores of the US has been avoided, as has been the link between outsourcing and the billions of dollars of investment that it generates for the US economy.    Sectors, Public sector 2012-10-25T14:02:29+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/uk_government_moves_to_blacklist_poor_outsourcers/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/uk_government_moves_to_blacklist_poor_outsourcers/#When:12:12:19Z The UK government has begun to classify outsourcers involved in public sector contracts, with those classified as ‘high risk’ effectively blacklisted from contracts. This comes Nick Buckles is expected to appear in front of the Commons’ home affairs committee today, in order to explain the failure of G4S in delivering on the Olympic security contract. The enactment of the blacklist comes as economic pressures have forced the public sector to seek better efficiencies. Cabinet Office minister Francis Maude has sought to secure better value from all future government contracts. Already two IT companies have been written off from tendering for future public sector contracts. Fujitsu was classified as ‘high risk’ after a £900 million terminated contract to provide electronic patient records according to Financial Times sources. The drive for private sector style attention to contracts and the willingness to ban poor outsourcing firms has been headed by Bill Crothers, formerly of Accenture and now chief procurement officer. With the government prepared to blacklist outsourcers such as G4S who fail to deliver on contracts, today’s meeting will be closely monitored due to the public interest in the case and the multiple contracts that G4S is involved in. The company is a major supplier to the government, involved in contracts including police services, prison services and welfare services. Keith Vaz, chair of the home affairs committee, said: “G4S admitted to the committee earlier this summer that they had presided over a humiliating shambles at the Olympics,”  “It’s important that we look at their record across the board when awarding new contracts.” Give the multiple contracts that G4S is currently involved in, and the contracts it has tendered for, It would be surprising for the company to be fully blacklisted, perhaps and smaller penalty or a period of greater oversight is a more realistic outcome to Whitehall’s investigation.  Sectors, Media, telecommunications & technology, Public sector, Topics, ITO 2012-09-11T12:12:19+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/august_reveals_extent_of_global_economic_slowdown/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/august_reveals_extent_of_global_economic_slowdown/#When:10:31:42Z August was a month of economic gloom, with reports of slowdown in China and increased instability in Europe. Rising expectations of Greece’s expulsion from the Eurozone and difficulties arising in Spain have further compounded economic uncertainties.  China has reported a slowdown in manufacturing, with August placing figures at a nine-month low. The official Purchasing Managers’ Index (PMI) which measures manufacturing activity, measured as reading of 49.2 for the country, the lowest seen since a drop in November 2011. China’s economy also reported the lowest annual growth figures in three years during the second quarter.  Europe also reported reduced PMI figures, with average PMI reading below 50 for the 17 countries employing the euro. A PMI reading of below 50 shows contraction in manufacturing output. The UK also reported decreased productivity with a PMI score below 50. August also saw reports of European server market slowdown, with Gartner reporting a decline in revenue of 2.9 percent in the second quarter. Gartner analyst Jeffrey Hewitt said that in regards to server sales that, “In terms of revenue growth, only Asia/Pacific and the United States produced growth for the quarter, all other regions declined.” A survey from the EEF manufacturers’ association showed that the UK’s overall manufacturing output had entered into its lowest level since the end of the last recession in 2009. The survey comes after both the British Chambers of Commerce and the CBI devalued their growth forecasts for 2012 with the Office for Budget Responsibility expected to follow their prediction. Lee Hopley, the EEF’s chief economist, said, “overall confidence appears to be draining away.” As the economic outlook in Europe continues to remain bleak, outsourcing contracts are reducing in quantity. In KPMG’s pulse survey, support services contracts were not being renewed so readily, as businesses demand costs savings and become more prepared to wait for clear evidence of efficiency before embarking on outsourcing contracts.  While outsourcing contracts are being impacted upon by the global economic downturn, businesses as well as bunkering down and reducing expenditures, are also turning to the outsourcing of services during difficult times, where cost-savings are readily apparent.  Sectors, Retail & Consumer, BFSI, Utilities, Public sector, Manufacturing & Construction, Topics, Procurement, Mergers & Acquisitions 2012-09-04T10:31:42+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/finding_the_balance_between_promoting_and_safeguarding_innovation_appl/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/finding_the_balance_between_promoting_and_safeguarding_innovation_appl/#When:10:31:04Z The recent court rulings in both South Korea and the USA regarding the legal battle between Samsung and Apple, over the infringement of patents, shows the current court based battlefields of technology companies. The balance between the promotion of innovation and the safeguarding of patent infringement is being tested in the fallout of recent events. The court decision in South Korea ruled that both sides had infringed on each other patent designs, with both Samsung and Apple, banned from selling some of their products, with both sides receiving relatively small fines. Last Friday a Californian court ruled in favour of Apple, judging that Samsung had infringed on all but one of Apple’s patents with an imposition of a $1 billion fine.  The amount of patents and the scale of breadth of which they are able to cover is a genuine risk to promoting innovation. While Samsung’s rebuttal to the US patent decision, as giving, “one company a monopoly over rectangles with rounded corners”, doesn’t justify the similarities in both design and code of Apple and Samsung products, it does highlight the point, that patent laws in countries including the US are becoming overly restrictive. Arguments against heavy patent laws can focus on restrictions to innovations which build on a template design, licenced to another holder, or that patents are able to be enforced on a blanket technology or design. Supporters of a powerful patent system say that such a system ensures innovation, preventing slight modification of patented designs rather than forward thinking improvement. Horace Dediu, mobile analyst at Asymco, said “Samsung is already more consciously avoiding copying”. The impact of the court ruling will be seen over the following months, as other Apple rivals such as HTC, Sony and Lenovo, wait to see if further legal action will follow. The hidden winner of the patent rulings may emerge as Microsoft, with the original design of the Windows Phone secure in the background of patent disputes and in position to innovate with the release of its new operating system.  Sectors, Media, telecommunications & technology, Topics, ITO 2012-08-30T10:31:04+00:00 http://www.sourcingfocus.com/index.php/site/newsanalysisitem/reliance_on_technology_sees_the_impacts_of_it_flaws_grow/ http://www.sourcingfocus.com/index.php/site/newsanalysisitem/reliance_on_technology_sees_the_impacts_of_it_flaws_grow/#When:11:55:28Z As dependency on IT systems and services increases, so too does the threat of system flaws of incorrect maintenance. Recent months have seen multiple examples of highly expensive failures from flaws within IT infrastructure. The need for establishing best practice for IT stability is painfully evident.  Recent public data protection failings while often the fault of human error, have been exacerbated by poorly implemented technology.  When technology is used on a daily process by global companies, often involving huge amounts of revenue, failures can have a huge impact. Examples such as the recent technical failures of the Nasdaq stock exchange during the floatation of Facebook shares demonstrate the impact of IT glitches. The technical issues saw the potential loss of millions in business and Nasdaq have had to offer as much as $40 million in compensation to investors after trading was delayed by half an hour.  Last week saw two incidents of IT failures that resulted in million pound losses in both cases. Manganese Bronze Holdings who specialise in making London black cabs lost £3.9 million in profits from IT accounting errors. The company said that system errors had “led to the over-statement of stock and under-statement of liabilities in the financial statements of previous years.” The company declined to mention the supplier of the IT system responsible for the fault. The announcement of the IT failure saw the company’s stock crash by 36 percent. Accidental trades made by Knight Capital were revealed to be caused by dormant software which activated when a new system was installed. The fault resulted in a $440 million loss for the trading firm. Bloomberg reported that “once triggered on August 1, the dormant system started multiplying stock trades by one thousand.” As financial systems become more dependent on IT services it is vital that these services are maintained properly. While technology advancements occur rapidly, rapid upgrading can cause instability as demonstrated by the losses sustained from Knight Capital’s implementation of new software. The establishment of clear guidelines and best practice guides for safely employing and upgrading technology is vital to achieving security and stability. With the recent examples of large scale losses resulting from failed technology industry guidelines now have an added urgency.    2012-08-20T11:55:28+00:00