Tag Archive | "outsourcing"

It’s time we started pushing our own agenda rather than everybody else’s

Sometimes you really do have to ask yourself if you really understand what’s going on in some people’s minds. And just how much the people in charge of some fairly major institutions really understand the impact of their decisions.

Firstly DVLA, that government outpost at the far end of the M4 whose desirability as a posting is apparently only exceeded by the Commonwealth War Graves Commission. They have just awarded a £100m contract for a new Vehicle Excise Duty system to Capita. That is not an issue in itself, of course, but Capita re one of those who use a lot on non-EU resources to deliver their projects to keep their costs down. All well and good, but this is our money they’re spending, and even my shaky grasp of macro-economics says that it must be better to spend it within the UK if we are to grow the UK economy.

This also flies in the face of a recent survey by SOCITM, looking at the long term costs of outsourced projects, that shows that “when comparing the costs for any service, most elements will be more expensive if outsourced.” Which is something some of us uninformed IT professionals have been saying for years; framing a deal that delivers a genuine saving over a long term is very difficult indeed. Quality invariably suffers, and the savings are rarely delivered.

But hey, it looks good on the balance sheet, and who cares about what happens in ten years, it’s this year’s budget we have to worry about.

The other undesirable monolithic institution making worrying noises is the Scottish Parliament. Their beloved leader Me Salmond, (aka “Wee ‘Eck”, although my own epithet would be rather more punchy) recently came up with the slightly deranged idea that he wants to allow unlimited immigration into Scotland to overcome the lack of skilled workers.

Luckily the immediate response from the real Government down in London was fairly unequivocal. They didn’t quite say “Don’t be such a blathering fool” but they got about as close as you can get in politician-speak. Although one possible outcome should Salmond succeed in his plan would be border posts between Scotland and England. Now there’s an idea.

But I digress. The key point is that neither of the above examples takes any notice at all of the long-term health of the country. DVLA presumably tendered for a solution to the problem of marrying tax discs and insurance policies – on the face of it a trivial IT exercise, but I don’t know the detail and it may well be vastly more complicated to do. But that doesn’t mean that whoever came up with the solution is the best supplier to implement it. HMG keeps saying that it wants 25% of procurement to go to UK SMEs, and the DVLA seems not to be interested in that approach.

As for Salmond, we can allow for the fact that he’s a politician and hence only interested in next week, but if his country hasn’t got enough skilled workers, how about training the ones you have rather than shutting them off from any opportunities for all time by importing a new workforce over their heads? I suspect he could find a lot of people willing to work for £24,000 a year hiding in the highlands if he looked.

It really is time we started pushing our own agenda rather than everybody else’s.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited

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Psst! Want to buy a consultant?

Following on from last week’s musings on middle management and their approach to hiring people, I’ve been following a conversation in another place about how to go about outsourcing and/or building shared service centres. This was being led by a group of senior managers, mostly freelance ones as it happens, and mostly working in the public sector. And what really worried me was the lack of awareness of the issues they are facing.

Firstly there seemed to be a blind assumption that outsourcing saves money. Unless it’s done very carefully indeed, it doesn’t. What you make up in bottom line savings you lose out in increased supervisory time and generally reduced levels of service. There will still be a saving, but it won’t be anywhere near what you think if you cost in all the factors.

For example, I remember a public body close to a previous client of mine who outsourced a whole department. They claimed they would make a significant cut in routine expenditure by doing so. Except they not only outsourced the service, they handed over all the staff they used to employ as well. Under TUPE rules, which prevent any loss of terms and conditions, and an existing agreement about future pay rises, I couldn’t quite see where the savings came from. Plus they had to employ a few extra senior guys of their own to oversee the outsourced service.

Bonkers, isn’t it.

Anyway, getting back to the point, this discussion evolved to the point where the members though they should lobby HMG to be allowed to provide an expert outsourcing consultancy. That, on the face of it, is an excellent idea. It is, after all, pretty much what I was saying last week, that you need real expertise to get these things to work as advertised.

But hang on a minute: if these guys have held senior positions in the public sector as they claim, they can’t have failed to notice the presence of the OGC procurement guidelines (for which read “hard and fast rules”) about how high value contracts should be let. These are so esoteric, they’re almost worth a whole book to themselves. For example, there has to be an open tendering process. Fair enough but the way that works is that you are not allowed to discuss the requirement with potential suppliers because that gives them an unfair advantage when bidding for the work…

Say what? You are required to formulate an ITT for a potentially multi-million pound piece of work without doing any market research to find out what questions you need to ask? Surely not, but that’s what the rules say. Of course there are ways around this – employ an external consultant to ask for you perhaps – but it does add a whole new layer of complexity to an already difficult task. And complexity, as we all know, equates to costs. So even smaller savings than were hoped for.

So for them to get this work they have to go into open competition with a few other minor players, small companies like Accenture and IBM.

Or, of course, they go for the consultancy role and take over the management of the outsourcing procurement and execution programme. But tarry, you, the law hath one more hold over you.

To get an HMG contract you have to go complete a Pre-Qualification Questionnaire or PQQ for short. This is meant to show you are able to take on the work. The only problem is that the PQQ has certain parameters and rules of its own. You have to demonstrate previous deliveries of the same piece of work or something damned close to it (although, interestingly, it doesn’t stipulate that these should be successful deliveries…). You have to have cash reserves equal to three times the total value of the contract. You can’t join up with a like-minded group in a formal or informal collaboration and aggregate your assets to meet this one either. There are many more similar constraints.

All in all, you can see why the otherwise excellent idea of these guys is going to bump into some pretty insurmountable obstacles. And what really worries me is that they haven’t realised it yet…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited<

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Online accountants can save costs by making use of the cloud

From a cost perspective, it’s definitely becoming easier for online accountants to start up their own business.

The cost of online technology has tumbled dramatically since the Cloud came onto the scene and this has led to a reduction in business IT overheads.

Joe Drumgoole, an Irish Cloud entrepreneur, recently explained to a group of accountants that the Cloud has led us to an almost asset-free business. It now costs next to nothing to set up a company infrastructure. Office applications such as DropBox, Gmail and Google apps, and online accounting packages like AccountsIQ, have revolutionised the business world.

When considering the cost of buying off-the-shelf software applications, accountants also need to take license and maintenance fees into consideration. Customised Cloud software offerings aim to provide SMEs with an alternative to the traditional packages that not only reduce costs but also cut maintenance.

Contractor accountants could find themselves in for a busy year as more and more companies look to outsource some accounting functions. The Admiral Group provides outsourced IT support services to SMEs and they predict outsourcing will witness rapid growth this year as companies try to reduce their administrative costs.

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What skills shortage?

We keep hearing about the skills shortage in IT in this country. A lot of the justification for work being outsourced and offshored, for example, is justified on the grounds that the clients can’t find the people they need in the UK, so simply have to go elsewhere for them. And as I predicted some time ago, the level of work being offshored is creeping up, not only in numbers of jobs but in the seniority as well. Helpdesks have long gone, as have standard coding roles. Now we’re seeing DBA, BA and PM work going the same way.

So why are one in six of our UK resident IT graduates out of work then? I think there may be two things at work here (unlike those graduates…)

Firstly the reason is not a lack of skills; it’s a lack of money. And, to a lesser extent, a lack of vision.

We cannot possibly have that many qualified people out of work because they can’t do the job. Also, of course, the public sector has been shedding staff at an ever-increasing rate, so the pool of experienced people is steadily growing. Finally there is a still a high number of experienced freelance IT people out there who haven’t worked for many months.

As always, the client is looking to take money off the bottom line. Outsourcing is a very good way to do this, so having made the decision to outsource a key business function – in itself a dubious and very short-term move, may I add – they look for the cheapest option. That will not be the UK-based workforce who, oddly enough, prefers to charge a living wage for their work, but an offshore operation with a much lower labour rate. QED.

Except they aren’t actually cheaper, when measured over a year or two. OK, I speak only from personal experience and some apocryphal tales from co-workers, but the story is quite consistent. Firstly what you get is not what you wanted, at least not the first time round. A huge amount has to go back to be re-worked. Plus there is often a habit of not correcting the faulty code, but re-writing it. It may be more accurate but it is also a lot slower. Then, when it does work, trivia like in-line comments, error-handling and security controls are often below par, so if a problem does occur the recovery is more complex than you may realise..

So by the time you get a robust working product you have spent a large chunk of the money you were hoping to save. This is a bit of a shame. I mean, it’s almost like the business driver for the outsourcing company is to maximise their revenue, not service the client’s requirements. Surely not.

The other reason is the one I mentioned last week. If you only look inside your own industry for staff, regardless of how relevant that industry experience is to the job in hand, then obviously you will be looking at a much smaller pool of candidates. Even within apparent monoliths such as banking, you get the same apartheid; you may have five years in Investment Banking but we deal with Derivatives so sorry, you’re simply not qualified.

So combine the two and the much heralded but completely mythical UK Skills Shortage is actually a self-inflicted wound. And not only self-inflicted but self-perpetuating, since we don’t have the people coming in at the bottom to fill these roles who, in five to ten years, would be the ones in the middle management positions making it work. Damn, we’ll have to outsource them as well…

So clearly there is a skills shortage. Sadly it lies not with the workers, but with the management.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited<

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My new year resolution

Is not to lose weight (a lost cause, I fear) or cut down on booze (shudder), but something that’s far better for the heart rate: to stop being get annoyed with Recruitment Agencies any more. I will try to see them as being more like my dog; smart by the standard of his peers, keen to do well but not really sure how to achieve it. The reason being that having cunningly avoided the worst of the snow by being terminated three weeks before Christmas – serve me right for delivering the project early! – I start the New Year looking for the next challenge.

This means I’m back in the commoditised world of modern agencies, where speed is of the essence and box ticking is the required skill. And that is why most of the time my 30-odd year career is being assessed by someone with a job history measured in months and that has successfully managed to avoid any contact with IT at all. Still it’s not their fault, so no point getting worked up about it, is there?

One positive thing I have done is to get my CV reviewed by a couple of people who know about such things. I thought it wasn’t too bad, to be honest, and followed all the usual recommendations, but clearly not. Nobody said so explicitly but I got the feeling they all thought it a bit clumsy, a bit wordy and just a little unfocussed. Come to think of it, that describes me pretty well so what’s the problem…

Anyway, it’s had a revamp and it’s being rewritten to suit each role I’m applying for to ensure I’m highlighting the relevant bits of my skills. And it seems to be working. I’ve even had agents call me back on receipt, which is almost unheard of.

It’s also encouraging that there seem to be a lot more jobs out there right now. Mind you, every single one is demanding that you have a million year history in their business and nobody else need apply. That’s fair enough in finance, which is a world of its own, and some of the regulated industries, but quite often it is a terribly blinkered way of looking at it.

The worse culprits are the Public Sector. These are organisations that are looking at having to make savage savings, they need to get the best value from every penny they spend, and they need to explore all sorts of alternatives to survive the year.

So what do they do?

Firstly, they outsource their recruitment to people like Commensura, who are very good at supplying standardised bulk skills like cleaners at minimum effort (and usually minimum rate), but hardly appropriate for finding a specialist. Then they offer some frankly mad rates, either way under market rate or well above it. Then worst of all they exclude everyone who isn’t already in a Public Sector role. Which I think is unforgivable.

Think about it. One of the key things they can do is to share services, consolidate common functions and infrastructures and even outsource some areas so as to minimise overheads and maximise economies of scale. That is not a trivial exercise, and it’s not something that most public bodies have really tried (there are some notable exceptions, of course). So why do they think they have to disregard people with extensive business knowledge in this area and that have made it work, simply for doing it in industry. Apart from having to understand the dead hand of OGC procurement policy – which is easily learned in a day or so – those people are exactly what they need. But will they hire them? Nope, let’s stick with people who know all about how we work now and nothing about how we can work better.

And going back to the professionalism of the average agency. I just got an email from one of the big ones. Do I fancy applying for a Help Desk role paying £15 an hour on a three shift system in North Yorkshire? I may have to think about that one….

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited<

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Contractor accountants’ clients chasing less late payments

Companies are now taking slightly less time to settle their invoices than they did in quarter 3 last year, according to Experian.

Experian’s research shows that, on average, companies settled their bills 22.61 days late last quarter, instead of the 23.17 days they took in the comparable period last year.

Micro businesses, those with just 1 or 2 employees, settled up the fastest in Q3 taking an average 19.43 days. Companies with 500 or more employees are still the slowest payers, but they registered the best improvement level. In the third quarter of 2009, the largest firms were taking 39.33 days to pay up and this has now reduced by just over 4 days to 35.31 days.

Sector wise, the largest improvement was in Spirits, Wines and Tobaccos where the average settlement period reduced by 3.23 days to 15.95. Overall, the fastest paying sector is still Agriculture, Forestry and Fishing and is the only industry to settle less than 10 days late. The slowest payers are to be found in the Postal and Telecoms sector with an average settlement time of 39.13 days beyond agreed terms.

On a regional basis the South West showed the best improvement whilst Yorkshire, the North West and Scotland all recorded worse late payment times than in the corresponding period last year.

Meanwhile, large companies that try to persuade suppliers and contractors to reduce their costs are coming under fire. Serco, the outsourcing giant, demanded a 2.5% cash rebate from almost 200 of its suppliers. They did however retract the demand after receiving much criticism from business groups and politicians.

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Could public sector cuts benefit small businesses?

It’s not all doom and gloom in the business sector. In fact some firms believe that they will profit from the government austerity measures.

Admittedly many businesses are going to lose public sector contracts, but the job losses could well create outsourcing opportunities. Last week, the government announced that £236bn of public sector contracts would be made more accessible to SMEs. In a bid to ensure that 25% of public sector contracts do in fact go to smaller businesses and limited company contractors, all government departments will be required to publish details of all the contracts they award, and how many go to small firms.

The coalition is also looking into a more open framework to tackle the closed procurement system which generally means contracts are awarded to preferred bidders which are usually bigger organisations.

Other good news came recently when figures were released showing the economy grew at twice the expected rate in quarter 3. Experts say a double-dip recession is less likely as data from the ONS showed the economy is growing at the fastest rate for 10 years.

However, these figures do not take into account the public spending review and the impact it will have on the country.

Nevertheless, the better than expected picture could encourage investors to start thinking about expanding their portfolios. The stock market can seem to be contradictory in times of economic crisis. In 2009, the UK was in recession and yet the stock market rose by around 30%.

Before contractor accountants rush out and pile all their money into stocks and shares, they may want to consider talking to a specialist financial advisor.

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Will the UK Visa cap cause more functions to be outsourced?

There’s been a lot said recently about clamping down on the amount of migrant workers allowed to enter the UK. Despite this, the latest CIPD/KPMG Labour Market Outlook report suggests that as the UK labour market improves, so does the employment demand for migrant workers.

600 employers took part in the survey and 45% of them said they have experienced difficulties in recruitment. Engineering, IT and accountancy positions are hardest to fill and consequently 17% of employers intend to hire migrant workers during Q3. 21% have recruited migrant workers in the last 3 months and of those workers, 37% came from outside the EEA.

Offshore outsourcing also seems to be making a comeback with 9% of private sector enterprises intending to offshore jobs over the coming 12 months. India is still the most common offshoring location, followed by China and Eastern Europe. Call centres, IT and finance are amongst the most likely functions to be outsourced abroad.

The public policy adviser from the CIPD, Gerwyn Davies, pointed out that it will take time to train British workers to fill the positions currently being occupied by skilled migrant workers. He believes that the proposed migration cap should be phased in gradually so as not to harm our competitiveness.

There is currently a temporary visa cap on all new Tier 1 applicants and applications for Tier 2 visas are limited by the issuance of Employer Sponsorship Licences. The permanent cap on UK visas will be introduced next April.

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Audit Commission to go, but is that a sensible move?

The Audit Commission is to be scrapped, Eric Pickles, the communities minister, announced last Friday.

The commission employs about 2,000 people to monitor the performance and accounts of public sector bodies. The government claims that shutting it down will save around £50m a year.

This move is likely to benefit the private sector as councils and other public sector bodies will be able to tap into the open market and appoint their own external auditors. By outsourcing audit expertise, the government hopes to cut back on the centrally imposed bureaucracy and costly auditing, thus saving money for council tax payers.

The National Audit Office is to set up a new auditing framework to ensure public sector bodies are still subjected to robust auditing.

Pickles said that the Audit Commission is no longer a watchdog looking after the interests of the taxpayer; rather it has become a creature of Whitehall. This new plan goes together with proposals to create an army of local people who will hold local bodies to account when it comes to spending tax and delivering value for money services.

The Audit Commission, probably understandably, is less than optimistic that this new approach will work. Michael O’Higgins, the Commission’s chairman said the department had more than fulfilled its aims since it was set up by Michael Heseltine and the Tory government in 1983.

The ACCA believes the move will prove costly and lead to inconsistencies in local government reporting. The head of public sector at the ACCA, Gillian Fawcett, pointed out that although a lot of the Audit Commission’s work is currently contracted out; the commission ensures that reporting is consistent.

Whilst this move will undoubtedly benefit some private sector accountants and contractor accountants, the general feeling on the street is that the work will go to the larger accounting firms rather than smaller local businesses.

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Another confusing week…

The client’s Head of IT asked me to comment on a paper he’d received from another part of the Group recently, talking about outsourcing their back office functions to save money.

Fascinating read, and clearly someone has been taken in by the sales pitch. For one thing, they’re planning on moving all the staff across, leaving no local management in house. That seems a touch suicidal for a start. Then they say the staff, protected by TUPE rules, will retain their current pay and conditions, including no redundancy and already agreed annual increases for three years.

So where, exactly, do the savings come from?

Also looking at the two providers in question, and having worked with both at various times… Let’s just say I could think of only one who could possibly be a worse choice. Needless to say the comments were less than flattering with a strong suggestion that my client does not ever consider taking the same route – or if they do, to do it properly!

Then I read that Siemens are balloting “contractors” over strike action. Surely some mistake – they aren’t contractors, they’re employees supporting an outsourced arrangement and being threatened with a pay freeze. I can think of quite a few people who would welcome a pay packet to be frozen, much less whine about it not going up.

That big network contract is still unsigned as well, with an absolute deadline that turned out not to be one. I’ve lost the will to live on this one, to be honest. If you can’t trust the sales team to come up with an accurate and supportable deal, what chance have you got? More meetings tomorrow to discuss the options, but I’m getting to the point where I suggest the client walks away and starts again. At least they have a fully worked design for next time round.

And finally got some workable numbers back from the new project time recording work. Oh look, time spent on projects that aren’t due, no time spent on things that are supposed to be urgent, variations between estimate and actuals of up to 1600% (seriously…). The Project Managers weren’t a bit fazed, though. Early days, not sure the guys are logging time properly yet, give it some time…

Having worked at quite a few client sites over the years, some good, some bad, one (naming no names!) absolutely awful, I’ve long been conscious that UK’s middle management isn’t quite at the leading edge these days. On the evidence of the week just gone it looks like I’m slowly being proven right.

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