‘Go Long,’ Says Ingersoll-Rand with Outsourcing Contract Extension

Posted by Ann All on September 25, 2008 at 11:11 am

One of life’s oldest and truest truisms is that there are exceptions to every rule.

As I wrote back at the beginning of the year, while shorter outsourcing contracts with multiple suppliers have largely supplanted lengthy contracts with a single large provider, the latter kinds of deals do still occur.

One of the latest examples: a 10-year, $551 million extension of Ingersoll-Rand’s outsourcing contract with Affiliated Computer Services. As Computerworld reports, Ingersoll-Rand will move the IT operations of Trane, Inc., a company it acquired in June, to ACS.

Several factors I cited in my earlier post appear to be in play here. Gartner has predicted that some early adopters of multi-sourcing will consolidate their suppliers to reduce service integration costs and also to benefit from stronger relationships. Longer contracts also tend to work better for companies seeking some kind of business transformation, says Charles Collier, managing director of EquaTerra.

While Ingersoll-Rand’s relationship with ACS, begun in 2002, got off to a rocky start, it now seems pretty solid, based on comments from Ingersoll-Rand CIO Barry Libenson. He says he sees no difference between Ingersoll-Rand’s internal IT employees and the ACS team assigned to his company. ACS account managers “work pretty hard to make me successful,” he says.

Libenson admits that many of the early mistakes in the relationship were on Ingersoll-Rand’s end. His company didn’t understand “the level of complexity and the resources needed on our side in managing the relationship,” says Libenson. (That’s a common mistake, as I’ve written before.)

Cost is always a consideration in outsourcing relationships. ACS offered financial incentives to Ingersoll-Rand for the contract extension, the article notes. And it also included provisions that will enable Ingersoll-Rand to shorten the contract life, if desired.

With the uncertain economy, it won’t be a surprise to see more providers offer similar deals to their clients to lock them into longer deals. Of course, the economy may actually improve providers’ business. In a recent survey, Forrester Research found that demand for outsourced services is growing.

Gartner forecasts the global market for outsourcing will exceed $1 trillion in 2012

“The global market for Telecom Operations and Management Systems alone will grow steadily, from $74.6 billion in 2008 to $96.8 billion in 2012,” (2) stated Kamlesh Bhatia, Principle Research Analyst, Gartner, Inc. “We expect to see vendors begin to take a more vertical approach to address this multi-billion dollar market. Customers too are increasingly considering domain expertise and innovation in their buying criteria along with traditional implementation cost considerations”

Gartner, Inc. “Outsourcing Worldwide, Forecast Database”, by Kathryn Hale, Robert De Souza, Robert H. Brown, Kurt Potter, and by Norbert J. Scholz, Kamlesh Bhatia and Chiaki Morikawa, June 25, 2008.

SoftServe, Inc. Expands with Acquisition of Alvion Ukraine

Lviv, Ukraine / Sep 08, 2008
SoftServe, Inc. has just announced the acquisition of business intelligence services and ETL specialist Alvion Ukraine, a transaction that adds significant technical expertise and new market opportunities to the leading multinational software development and consulting company leveraging the superior technology education and human resources of Ukraine.

Acquiring this extremely attractive asset, SoftServe aims to add to its resource pool the top-notch talent and experience in the areas of web development and online analytical processing that would help in servicing the global customers more efficiently. With ongoing commitment to delivering the highest level of development outsourcing, SoftServe takes this important step in order to strengthen its staffing capabilities and broaden the technical expertise and also to expand its development base to southern part of Ukraine.

According to the company’s top management, this acquisition will allow SoftServe to increase the rate of growth. “The reason behind the deal is SoftServe’s goal to expand its service offering for clients, and to gain excellent expertise in ETL technology and on-line customer support,” says Taras Vervega, SoftServe’s EVP, Business Development. “We are confident that this move within our growth strategy will serve to provide greater business value for our clients, and pay off in the nearest future.”

Soon after acquisition, Sevastopol-based Alvion will be integrated into the structure of SoftServe’s distributed development organization in Ukraine. Also, the service offerings will be incorporated into SoftServe’s robust portfolio, allowing the existing Alvion’s clients to benefit from client partnerships that the leading outsourcing organization has established through the years together with improved processes and best project management practices.

In 2008 SoftServe has been recognized by Global Services 100 among the top 10 elite offshore outsourcing vendors based on leadership, innovation, and outstanding performance. Microsoft has recently announced SoftServe 2008 Central and Eastern European Partner of the Year (Mobility Solutions).

Outsourcing and Intellectual Property

September 11, 2008 Outsourcing activities often touch upon Intellectual Property issues. Most of the outsourcing destination countries experience low or inexistent Intellectual Property law enforcement, despite the fact that most of these countries do have intellectual property laws enacted by the national governments. Such issues can be tackled by: 1) Always sign NDA with the outsourcing provider. NDA, sometimes in the local language, and under the local jurisdiction [ or both in the local jurisdiction of the outsourcing provider and in the local jurisdiction of the outsourcing buyer ] should be signed and checked for legal validity. This is especially important for companies which heavily rely on IP within their business model. Even though you might not achieve the desired results with legal actions as in Europe or US, you can severely risk Outsourcer’s activities by legal action, thus inciting the Outsourcer to respect NDA. 2) Check the background of your outsourcing provider. Any international consultancy or a law firm with worldwide presence can check the business background of almost any company in the world. Of course, such due diligence is going to be costly, but such procedure will ensure you are working with a reliable and integrity-driven outsourcing provider. Even spending US $50K is worth for the company with annual turnovers of $1m. 3) Make sure your outsourcing provider is not working with your competitor. Even the most sophisticated and expensive outsourcing providers have problems building Chinese walls for information exchange among their employees. 4) Allow your outsourcing provider to use VPN to track or process extra-sensitive data. Many internet providers in developing countries might have hackers working within their teams, checking all the traffic in and out.

Multi-National Companies Embracing Learning Services Outsourcing

Strategic Impact, Cost Reduction Are Key Market Drivers

DALLAS–(BUSINESS WIRE)–Although labor cost savings is a factor, companies – particularly large, multi-national firms – are outsourcing employee training to retain focus on strategy and achieve tangible business outcomes, according to a new Everest Research Institute study.

The Institute’s study, Learning Services Outsourcing (LSO): Accelerating the Learning Curve, examines a “quietly” growing but strong market in which companies adopting LSO typically gain more than 15 percent direct cost savings and, in some cases, savings in excess of 30 percent. Even more significant, companies are using LSO to produce tangible business results, such as quicker time to market. The study includes analyses of the LSO market and key business drivers, buyer trends, transaction characteristics and buyer case studies. An analysis of the supplier landscape is also available.

“Multi-national companies are a driving force behind LSO adoption as they look to standardize the learning function across geographies while remaining sensitive to local cultures and requirements,” said Monica Barron, Vice President, Research. “With the increasing use of e-learning and the global reach of a growing LSO supplier base, companies are achieving these goals – and more importantly, producing measurable improvements – by outsourcing enterprise-wide learning.”

The LSO market is moving beyond the pioneer stage as evidenced by established suppliers expanding capabilities to include or expand LSO offerings. According to Barron, the market will expand further as buyers become more aware of the benefits of learning outsourcing.

Highlights of the LSO study include:

Manufacturing, high-tech and the banking/financial services/insurance industries are the leading adopters of LSO.
The majority of LSO buyers are companies with more than 15,000 employees with multi-country presence; therefore, about 60 percent of LSO transactions cover multiple countries.

Companies are successfully outsourcing both Human Resources-led training and development functions as well as line function-owned learning.

To date, more than two-thirds of LSO deals have originated in North America; however, demand from Europe and Asia-Pacific-based companies is rising.

Among offshore delivery options, India is the most common delivery location. In the majority of LSO deals, the technology component is also outsourced. Key drivers for technology bundling in LSO deals include buyer demographics, supplier strategy and learning technology advances.

E-learning is the most common mode among many delivery options, with most companies using a blended approach.
To read more about the findings of the Learning Services Outsourcing: Accelerating the Learning Curve and other Human Resources Outsourcing (HRO) research studies, an extract of the report is available at www.everestresearchinstitute.com. To purchase the report or receive more information about other research services, please e-mail info@everestresearchinstitute.com or call +1-214-451-3110.

For more information about the Institute’s outsourcing services, please visit www.everestresearchinstitute.com, e-mail info@everestresearchinstitute.com or call +1-214-451-3110.