Tag: UK

They’re Changing Guard at Cabinet Office | Sherpas in Blue Shirts

Stephen Kelly, the UK government Chief Operating Officer (COO) is to step down from his role in November to become CEO of Sage, the UK software company. Kelly was appointed Government COO back in 2012. He has played a key role in the Cabinet Office’s efficiency agenda since 2011, when as Crown Commercial Representative, he managed the government’s relationship with IT suppliers such as Oracle, SAP and Microsoft.

Kelly has been the driving force behind a team that has implemented government policy to overhaul the way the UK government does business with the private sector as well as generate internal efficiencies. This has led to £14.3 billion of efficiency savings in 2013-14 against a 2009-10 baseline:

  • The biggest saving by far, £5.4 billion, has come from improving the government’s commercial contracts, including the new Crown Commercial Service which is overhauling central government procurement. Other efficiency measures have included:
  • £4.7 billion from reducing the size of the civil service by 16% since 2010, and reforming civil service pensions
  • £3.3 billion by tackling inefficiency through large scale projects
  • Over £200 million by going digital—moving more services online, improving the citizens’ online experience and also overhauling technology spend, e.g. £62 million was saved by merging government websites into GOV.UK.

Measures for efficiency and reform have included centralization, shared services, creating public sector mutuals and joint ventures with the private sector to make more of government assets and capabilities.

Centralization and shared services: In the past few years, the Cabinet Office focus on centralization and shared services has seen the creation of the G-Cloud, the consolidation of government back office shared service centers into ISSC 1 and SSCL, and the creation of the new Crown Commercial Service that is to provide centralized procurement and managed services.

Joint ventures: These have included:

  • Axelos: a JV with Capita to increase the sale of the government’s best practice methodologies such as ITIL and PRINCE2
  • SSCL: with Steria, to initially consolidate a number of government back-office shared services but to offer other shared services in the future to public and private bodies

Mutuals: The move towards mutual organizations partly owned by their employees — At the time of his appointment in 2012, Kelly had successfully spun out the government pension body, MyCSP into an independent mutual company. He has since overseen the setting up of over 100 public services mutuals.

UK Government Mutuals

SMEs: Increasing small medium sized (SMEs) organization’s share of government contracts by mandating that large suppliers subcontract part of their work to SMEs.

The government efficiency measures will continue after Kelly’s departure but the style of implementation is likely to change with a new appointment. Many large suppliers will be hoping for a softening of approach towards them.

The general election due in 2015, is also unlikely to lead to major change. The entities might morph into something new, as we have seen with the change of Government Procurement Service (and its predecessors) to the Crown Commercial Service, but the thrust of activity is expected to stay the same whether or not a different party gets into power.

We will not know how successful some of these measures will be for a while, e.g., will the mutual model lead to improved productivity as the Cabinet Office hoped it would, or will the government generate some revenue from its JVs as well as see improvements in services. The involvement of large service providers with experience in this type of work is with the end in mind. For example, Steria, the government’s SSCL JV partner, has been running NHS SBS shared services for many years.

Kelly leaves just as the government is recruiting for a new post, a chief executive officer (CEO) for the Civil Service, most likely to whom, Kelly would have reported. The CEO post is the evolution of the role that originally started as something of a government CIO/head of e-government back in the mid-noughties. Several reincarnations later, it shows the government’s approach to reform increasing in maturity, to have a central driver to reduce expenditure, make more of assets and improve management of suppliers. The results of the general election is unlikely to affect this, even if some aspects of policies change along with titles and personnel.


Photo credit: Nieske Vergunst

Multi-country RPO Engagements on the Rise | Market Insights™

RPO Annual Report 2014, I2

Multi-country RPO (MCRPO), including both global (multi-continent) and regional (multiple countries on the same continent) deals, is beginning to take hold because it addresses some of the fundamental challenges associated with managing and optimizing a global talent pool. But buyers need to understand and implement key best practices to ensure the success of global RPO.

Visit the report page

Soames of Serco and the Plummeting Profits | Sherpas in Blue Shirts

Today is a big day for Serco as Rupert Soames OBE takes the helm as the new CEO of the British outsourcing giant. Soames is coming on-board following a turbulent year for Serco. Found to have overcharged the Ministry of Justice for its offender electronic monitoring services, Serco was barred from new UK government contracts, until the matter was investigated and settled. The settlement cost Serco a charge of £111m. The UK government also demanded a major change of organization and senior management to allow Serco to compete for its tenders again. To add to its woes, a change of government and policy in Australia saw Serco’s revenue from one of its largest customers, the Australian Department of Immigration and Border Protection, decline too.

On Monday, April 28, just days before the new CEO was to take up his post, Serco gave an unexpected profit warning. Unsurprisingly, the next day, shares in the company plummeted by 19%, and there is press speculation about a rights issue. Serco had already set expectations for lower organic revenue growth and profitability in 2014 when the latest profit warning came on April 28. At the end of 2013 the company reported a margin of 5.6%, which was a 68 basis point decrease compared with the prior year. The company is already restructuring, having reported related costs of circa £15m in 2013. Workforce reduction is also on-going. It reduced its workforce by 400 in 2013.

Serco has also disposed of a number of businesses, some at a loss:

  • UK transport maintenance business – net profit of £23.2m
  • Occupational health business – net loss of £3.9m
  • Ascot College – net loss of £0.1m.

It is against this backdrop of strained relationships and declining profits that Soames takes the helm. Another challenge that he faces is to close the gap that has opened up between Serco and its competitors. For example, Capita, its biggest rival, has been winning major contracts as well as making new investments in technology through acquisitions. Neither company has been quick to embrace the latest technology but Capita appears to have changed tack recently to bolster its IT services capabilities. Since March 2014 Capita has acquired:

  • AMT-SYBEX which provides mobile technology and data management capabilities
  • Updata for its network connectivity services
  • Network Technology Solutions, an IT security reseller and managed services provider.

Another competitor, Agilisys, has invested in front-office process automation tools.

The new CEO faces a number of challenges from day one, but it is not all bad news. In 2013 Serco had a revenue of £5.1bn up 7.8% at constant currency. This represented a healthy organic growth of 5.9%. Furthermore, in 2013 it achieved contracts wins to a value of £3.7bn despite the on-going issues with its relationship with UK central government.

After the Ministry of Justice contract debacle, Serco had to go for a CEO who brought more than just good business acumen. As well as a successful track record as CEO of Aggreko, Soames brings with him good connections with the establishment, being the grandson of Winston Churchill, and brother to Nicholas Soames, Conservative MP. While Soames is positioned well to rebuild the company’s relationship with the UK central government, the painful task of restructuring the company will have to continue. We expect more divestments which may include some of its many joint ventures. We also expect Soames to continue Serco’s strategy of diversification by pushing into other sectors such as retail, and other geographies such as the Middle East, where it has won a number of contracts recently.


Photo credit: zeitfaenger.at

The Changing Delivery Location Landscape of the UK Contact Center Market | Sherpas in Blue Shirts

To participants in and watchers of the UK contact center market, it’s obvious there are many changes afoot. These include the third-party service provider landscape, the nature of outsourcing deals, and the maturity of buyers.

One of the key changes Everest Group is seeing is in the locations UK buyers are leveraging for their contact center activities. Let’s examine the contributing elements.

Offshoring

UK companies only offshore 10-15 percent of their contact center work, which in actual job numbers equates to 70,000 to 90,000. Consider this quantity in contrast to the U.S., which offshores greater than 25 percent/400,000 to 500,000 contact center jobs – a comparison we make given English as the common delivery language – and the fact that offshore locations offer 70-80 percent cost arbitrage advantage over locations in the UK There are two clear reasons for the limited share of contact center offshoring from the UK:

  • Increasing buyer maturity often leads to increasing openness to move from outsourcing to offshoring. But as adoption of outsourcing in the UK has been relatively narrow due to comparatively lower buyer maturity levels, offshoring uptake has also been limited.
  • UK buyers place heavy emphasis on cultural and accent similarity, and native English language speakers. Although the U.S. has comfort level with the Philippines as a key go-to destination for contact center delivery, the UK has not yet found its “Philippines.” Indeed, while India still has the majority of offshored UK contact center jobs, pure voice delivery has decreased over the years, with buyers increasingly leveraging the country’s capabilities for non-voice contact center services such as website, e-mail, and chat support.

UK contact centers

However, the forward-looking view on offshore locations for the UK contact center market is much more promising. There is increasing acceptance of South Africa as a delivery location for voice-based and domain specific delivery (e.g., insurance), due to accent similarity and strong cultural affinity. Recent market activity, such as the Serco-Shop Direct deal, WNS’ acquisition of Fusion, and Capita’s purchase of Full Circle are indicators of this affinity. We expect India to continue its uptake of non-voice contact center services from the UK.

Onshoring/Nearshoring

Contact center work within the UK is moving to low-cost locations in Northern England and to other areas such as Scotland and Northern Ireland. While there is still a higher concentration of contact centers in Southern England (the Greater Thames region), this is more of a legacy effect rather than the result of new or recent activity. The new/greenfield activity is largely moving contact center work up north to Liverpool, Leeds, Manchester, and Newcastle-Gateshead in England, Glasgow, Edinburgh, and Kilmarnock in Scotland, and Belfast and Londonderry in Northern Ireland, driven by:

  • Lower operating cost
    • Salary: Locations in Northern England (e.g., Liverpool) offer 5-10 percent savings over established locations in Southern England (e.g., Twickenham), and locations in Scotland and Northern Ireland (e.g., Glasgow and Belfast) offer 10-15 percent savings
    • Real estate cost: Real estate rentals in the northeast (e.g., Newcastle) and northwest (e.g., Liverpool) are 10 percent lower than in the south of England (e.g., Twickenham); and rentals in Northern Ireland are 30-50 percent lower than locations in England
  • Sizeable agent pool: Birmingham and Leeds, for example, have considerable talent pools (40,000-70,000 experienced contact center agents)
  • Lower attrition and unemployment: Established locations (e.g., south of England) have higher contact center attrition and unemployment rates relative to other regions in the UK, thus influencing movement to areas north of England
  • Government incentives: Most less-established locations in the UK offer multiple incentives programs, such as employment and training grants, for contact centers. This makes their value proposition competitive, especially for greenfield operations. For example, Northern Ireland provides a one-time incentive of GBP 3,000-7,000 per job created in this sector

UK Locations leveraged by leading service providers

UK contact center locations

Everest Group believes that while onshore/nearshore delivery of UK contact center services will continue to remain the predominant model over the next three to five years, offshoring will grow faster. Buyers’ comfort with the offshore model, particularly with alternatives to India, such as South Africa, for voice-based services is likely to increase. Cost pressures are liable to propel buyers to adopt offshoring and other low-cost delivery alternatives, such as less expensive locations within the UK Finally, the market movement toward multi-channel contact center delivery capabilities, resulting in higher usage of web, chat, and e-mail customer support, will further support the growth of offshore delivery.

Request a briefing with our experts to discuss the 2022 key issues presented in our 12 days of insights.

Request a briefing with our experts to discuss our 2022 key issues

How can we engage?

Please let us know how we can help you on your journey.

Contact Us

  • Please review our Privacy Notice and check the box below to consent to the use of Personal Data that you provide.