From:	Baroni Limited [baroni-limited@tiscali.it]
Sent:	20 April 2007 07:49
Subject:	Baroni Limited - Offshoring Newsletter' - 12/07

Importance:	High
Sensitivity:	Confidential

Fear of Losing Control Over Compliance Inhibits Financial Outsourcing
LogicaCMG Study Finds That Ever-Increasing Compliance and Regulation Issues are Tying-Up CFO Resource.  The burden of handling compliance and regulatory issues has become a major obstacle to outsourcing finance and accounting (F&A) business functions, according to research among UK CFOs by Logica CMG, a leading business consulting and IT services company.
Increased regulation and emphasis on governance was identified by CFOs as the most significant barrier to outsourcing.  Only 7% currently outsource any F&A functions, with 68% stating that the burden of current financial regimes is holding them back.  The severity of sanctions as a result of a regulatory infringement is an overriding factor in the CFO's desire to retain direct control of their finance function.
Kevin Radley, UK COO & finance director at LogicaCMG, commented: 'CFO time is being tied up with the management of work that could potentially be outsourced.  They are currently dealing with day-to-day tasks when time could be spent focusing on medium and long-term issues.  This could leave companies short of resource to manage mission critical business opportunities.  The number of recent M&A deals, and the prevalence of approaches made by private equity companies mean that CFOs need time to develop and defend their business position. They need to be focusing on the future not managing the minutiae.'
Over 50% of the CFOs questioned had outsourced at least one area of their business, and a further 19% planned to use outsourcing in the near future as a means of reducing costs.  But the same CFOs are 66% less likely to outsource their own finance and accounting function than they are to outsource other business areas, citing regulation and compliance as the restricting factor.  The large amounts of financial management resource devoted to compliance and regulatory issues, combined with day-to-day work means that senior finance executives' time for other mission critical activities is limited.
'CFOs face a difficult choice.  There is general acceptance at board level that outsourcing is a very valuable business tool.  Our research has found that outsourcing is on the agenda of 84% of leading UK companies and companies that outsource their F&A functions have shown savings of up to 35%.  CFOs who introduce outsourcing have more resource and time to manage the increased regulation and compliance demands.  But concerns over the loss of direct control and existing work load pressures are stopping them from making the change,' added Radley.
The research involved interviews with 50 of the UK's FTSE 350 companies.  Further face-to-face interviews were then carried out to get qualitative insight in to the data.  Most CFOs agreed that many payroll and general finance activities were ideally suited to outsourcing, with only 31% saying that they would not consider this option.  With 21% saying that they have plans to outsource their F&A function in the foreseeable future; this could still become a leading area of cost savings for companies.	

 	
 Top Stories	
 	
Outsourcing of R&D Set to Increase
The cost and complexity of the innovation process are encouraging companies from a wide range of sectors to transform the way they carry out research and development (R&D), according to a new Economist Intelligence Unit survey.  The proportion of companies with at least some of their R&D activity taking place overseas today is 65%, but that figure is predicted to rise to 84% in three years' time.  Similarly, 64% of organisations say that they currently outsource part of the innovation process to external organisations, but this proportion is also expected to increase in the next three years, to 75%.
KPMG Global Survey on outsourcing
Despite the fact that outsourcing is now a widely accepted business practice, KPMG survey brings to light some problems which companies claim to be suffering from regarding their outsourcing arrangements:
* 42% of outsourcing arrangements are not supported by a formal strategic measurement framework.
* 42% of organisations believe their sourcing contract has definitely improved financial performance.
* 27% said it has definitely improved their competitiveness.
* 72% of customers reported that they do not have, or share with their service providers, criteria for measuring the success or failure of their sourcing arrangement.
* As many as 59% of organisations interviewed either tracked benefits for IT projects at an elementary level, or did not track benefits at all.
* 79% of respondents did not accurately know the costs of selecting a service provider.
* 14% of respondents said they had a significant misalignment of financial and commercial expectations with their service provider.
Survey: Eighty-five% of CIOs said they found their jobs fulfilling
Based on CIOs responses, the report saw evidence of a mature outsourcing marketing, one in which 80% said they were leveraging outsourcing now and 48% predicted that their outsourcing spending would increase in the next year.  Still, only 10% said that their original outsourcing goals had been met, leaving significant room for improvement. Offshoring relationships proved much more satisfactory to CIOs.  67% said that their offshoring relationships had met or exceeded expectations, up from 60% the year before.  95% said that their offshoring spending would stay the same or increase.
Canadian companies bullish on Asian investment: survey
Commenting on the survey results, APF Canada President and Co-CEO Yuen Pau Woo said, 'Overall, companies are very bullish on Asian investment.  The 85% of respondents expecting to boost their Asian holdings substantially or moderately in the next five years is the highest in the eight years the Foundation has undertaken the survey.  Most of these, 69%, expect to add to their investment during the next 12 months, the same level as last year.  Not one of the companies surveyed expected that they would reduce their Asian activities over the next five years.' 
Circuit City awards $775M IT outsourcing pact to IBM
The Richmond, Va.-based consumer electronics retailer Circuit City Stores Inc. has awarded a $775M outsourcing contract calling for IBM to run much of its IT operations over the next seven years.  Circuit City officials said they expect the pact will let them cut IT costs by 15% over the life of the contract.
GSK moves data management to India
GlaxoSmithKline (GSK) has announced plans to outsource all its data management and medical trial and regulatory reporting functions to India in a deal said to be worth over £10m (€14.7m).
Intel's first fab in Asia to be established in China
Intel Corp. said its first silicon wafer-fabrication plant in Asia would come up in the north-eastern Chinese city of Dalian.  A Los Angeles Times report said the $2.5 billion microchip manufacturing plant would begin production in 2010.  It would employ about 1,500 workers, once the plant is operational.	
 	
 Service Provider News	
 	
SOA Adoption to Soar from Increased IT Spending
New analysis from consulting company, Frost & Sullivan, IT spending among enterprises in Asia-Pacific is growing rapidly.  Asia Pacific SOA Readiness Survey finds that the Asia-Pacific market is at the right stage for the adoption of SOA technologies.  SOA adoption expects to increase by 40% in the next two years as all major software vendors have been altering and creating software to suit the needs of an SOA framework.
CSC signs $40M contract extension with UK Health Department, $386M in other contracts
Computer Sciences Corp. announced $386M in previously unannounced contracts in the UK, and separately announced a $40M information technology outsourcing contract extension with the UK Department of Health.  CSC will continue to provide infrastructure and application support services to about 4,500 health professionals at the Department of Health in the UK under the extension.
Lockheed lands US Justice IT contract
The Justice Department awarded a federal Most Efficient Organization a $388.8M contract to perform agency IT services, and Lockheed Martin Corp. will be its major industry subcontractor providing IT operations, infrastructure and security services.
Satyam signs multi-year deal with Applied Materials
Satyam will provide application development, maintenance, and support (ADMS) plus business transformation core technology services to Applied Materials through a managed services delivery model.
Cognizant Partners with Salesforce.com
Salesforce.com has paired with Cognizant in a consulting and regional alliance that may enhance their ability to penetrate further into SMB and larger organizations.  As part of the alliance, Cognizant will incorporate Salesforce.com's on-demand CRM apps and the Apex on-demand platform into its business and technology consulting services.
ADP to increase head count in India
US-based Automatic Data Processing Inc has decided to spin off its brokerage services division into a separate publicly traded company.  As part of this, its Indian subsidiary, ADP Pvt Ltd will be shifting 500 of its employees at its Hyderabad centre to the new entity.  'They will be handling software development and BPO services for the new brokerage company Broadridge,' said Gary C Butler, president and CEO of ADP.
CPA prefers India as offshore site
IP services provider, Computer Patent Annuities Limited (CPA) has announced the setting up of IP services delivery centre in India.  CPA said that India has been an offshore destination for business process outsourcing (BPO) for many years and statistics show that India is a preferred choice for both knowledge process outsourcing (KPO) and legal process outsourcing (LPO).  As the LPO trend continues, it plans to move into new markets, outside of the IP arena and with another announcement set for the coming months.
Xchanging seeks £150M in London IPO - source
Xchanging has announced its plans to raise about £150M by launching its initial public offering on the London Stock Exchange in April 2007.  Part of the funds raised will be used to finance acquisitions primarily in countries, such as Italy, France, and Asia as well as to enhance Xchanging's existing business.  Under the terms of the IPO, Xchanging is also likely to create a new holding company in London.  Xchanging management is expected to sell its 8% stake, while General Atlantic Partners is also considering divesting some of its holdings in the company.
BT sets up new node in Chennai, India
BT has announced the activation of a new multi-protocol label switching (MPLS) node in Chennai.  The new node, a part of BT’s 21st Century Network (21CN) programme sets up IP backbone in India and expands the services to its customers, BT said in a statement.	

 :: To subscribe, unsubscribe write to Baroni-limited@tiscali.it ::
: Glad to have your comments Baroni-limited@tiscali.it ::
Copyright © 2005; Baroni Limited. All rights reserved 
 
Baroni Limited
68 Penwortham Road
Sanderstead, Surrey CR2 0QS 	Office: +44 (0)20 8660 6457
Fax: +44 (0)20 8645 9297
Email: jonathan-harrison@tiscali.it
Website: Baroni-Limited.com	

VAT Number:          814 6408                                 Company Registration Number                    4741496
              Registered Office: 10 – 14 Accommodation Road, Golders Green, London, NW11 8ED
**********************************************************************
This document and any attachments may contain information that is confidential and is intended only for use of the recipient(s) to whom it has been addressed.
No person, without written confirmation of their contents, should rely on the contents of this eMail. This eMail and the information it contains are supplied in good faith but the Company shall not be under any liability in damages or otherwise for any reliance the recipient may place upon them.

Furthermore, this document is sent for information and/or negotiating purposes only and shall not have the effect of creating a contract between the parties.

If you have received this eMail in error, please notify the sender(s) immediately by telephone. Please destroy and delete the message from your computer. Any form of reproduction, dissemination, copying, disclosure, modification, distribution and/or publication of this eMail is strictly prohibited save unless expressly authorised by  the sender(s).  Thank you for your co-operation.
**********************************************************************