Future of Outsourcing

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INDEPENDENT PUBLICATION BY 11 / 09 / 2016 #0401 raconteur.net Freelancing is on the rise, offering mutual benefits for gig workers and employers UK companies reshoring call centres are adding value, raising standards with a British workforce Six top trends driving global expansion and reshaping the outsourcing industry SOFTWARE 'ROBOTS' CUT COSTS AND BOOST PROFITS ON-DEMAND GIG WORKERS SATISFY A GROWING NEED BRINGING CUSTOMER SERVICE BACK HOME GLOBAL WIND OF CHANGE THAT KEEPS ON BLOWING Robotic process automation is transforming outsourcing with virtual workers 02 03 06 08 FUTURE OF OUTSOURCING Consumer Brand Outsourced Solutions A new generation of consumer brand services 'Leading innovation and vision' for more information visit www.ceutagroup.com Although this publication is funded through advertising and sponsorship, all editorial is without bias and spon- sored features are clearly labelled. For an upcoming schedule, partnership inquiries or feedback, please call +44 (0)20 8616 7400 or e-mail info@raconteur.net Raconteur is a leading publisher of special-interest content and research. Its publications and articles cover a wide range of topics, including business, finance, sustainability, healthcare, lifestyle and technology. Raconteur special reports are published exclusively in The Times and The Sunday Times as well as online at raconteur.net The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be repro- duced without the prior consent of the Publisher. © Raconteur Media RODRIGO AMARAL Freelance writer, based in Madrid, he specialises in the international economy, emerging markets and insurance. DAN MATTHEWS Journalist and author of The New Rules of Business, he writes for newspapers, magazines and websites on a range of issues. SIMON BROOKE Award-winning freelance journalist, who writes for a number of international publications, he specialises in lifestyle trends, health, business and marketing. CHARLES ORTON-JONES Award-winning journalist, he was editor-at-large of LondonlovesBusiness.com and editor of EuroBusiness. HAZEL DAVIS Freelance business writer, she contributes to The Times, Financial Times, The Daily Telegraph and The Guardian. ROB LANGSTON Editor of MENA Fund Manager, the monthly title for the Middle East and North Africa asset management industry. DISTRIBUTED IN PUBLISHED IN ASSOCIATION WITH BUSINESS CULTURE FINANCE HEALTHCARE LIFEST YLE SUSTAINABILIT Y TECHNOLOGY INFOGRAPHICS raconteur.net/future-of-outsourcing-2016 RACONTEUR PUBLISHING MANAGER Senem Boyaci DIGITAL CONTENT MANAGER Lorna North HEAD OF PRODUCTION Natalia Rosek DESIGN Samuele Motta Grant Chapman Kellie Jerrard PRODUCTION EDITOR Benjamin Chiou MANAGING EDITOR Peter Archer CONTRIBUTORS Source: National Outsourcing A ssociation 2016 Brexit could open up more offshore deals Britain's vote to leave the European Union could impact the outsourcing sector more than most, but early signs are of a robust response OVERVIEW CHARLES ORTON-JONES I f all British sectors were as buoyant as outsourcing, our new chancellor would be swinging from the chande- liers of Number 11. Contracts worth £3.91 billion were signed in the first half of the year, a rise of 19 per cent year on year, according to the ar vato Outsourc - ing Index. Local government spending on outsourcing almost doubled in the same period. Plus there are wonderful new technologies to talk about, such as robotic process automation, which is a new field in the sector. All blue skies and sunshine? Not quite. The vote on June 23 for Britain to leave the EU triggered a mass of questions for the industry. Few sectors straddle borders like outsourcing. Industry veterans can navigate the back streets of Bangalore and Brati - slava with their eyes shut. Brexit may mean Brexit, but what is the industry facing? First up, outsourcing seems to have carried on with business as usual. No hysterics. That is borne out by transac - tion numbers and investor confidence. Alex John, partner at international mergers and acquisitions consultants Livingstone, which works heavily in out - sourcing deals, says: "We are not seeing any drop in investor confidence. In fact, we are seeing good levels of investor in- terest, from both UK and overseas inves- tors. The present view on Brexit seems to be that the UK economy is weathering the storm extremely well and therefore re- mains a good market for investment." When Brexit actually occurs we may see a few changes. Trade with the EU will depend on the deal struck. We have no idea what that deal will be. We do know that the UK will lose a large number of trade agreements with the rest of the world, currently enjoyed under the EU umbrella. Reverting to World Trade Organi - zation rules, with no additional deals, is an option in many cases. The downside is that tariffs may be higher. And there might be areas of conflict and lack of legal clarity. The UK will also need to decide whether to participate in the Transatlantic Trade and Investment Partnership, which covers law enforcement and equal treatment of overseas parties. Since the UK will be trying to replace 53 preferential trading agreements currently held by the EU with the rest of the world, it may need to prioritise certain markets. India is a prime jurisdiction. The UK is the largest G20 investor in India and India invests more in the UK than in rest of the EU combined. A fortnight after the Brexit vote, then-business minister Sajid Javid f lew to Delhi to meet the Indian commerce minister and finance minister, both of whom confirmed India would be keen to start work on a deal as soon as possible. The Indian private sector echoed this. Confederation of Indian Industry direc - tor general Chandrajit Banerjee spoke enthu- siastically of an An- glo-Indian free trade deal: "With Britain's departure from the EU, India will have to negotiate a free trade agreement with the UK which may be easier to accomplish at a bilateral level… This could well be the best era for our industries to collaborate." The new department for Brexit will need to resolve some tricky issues. For example, the physical location of data is a hot ques - tion in outsourcing. Mark Turner, vice president of IT delivery at T-Systems, the corporate customer arm of Deutsche Telekom, explains: "Location is now a key question for UK CIOs [chief in - formation officers]. Brexit will have pushed the accelerator, but the direction of travel was already set by the worries surrounding the reach of US jurisdictions. This will more than likely lead to an increase in offshore outsourcing in order to compensate for less freedom of movement of skilled workers into the UK "UK companies that only operate in the UK are looking for data centres located in the UK, whereas companies that operate in Europe and need to adhere to Europe - an data security rules want to locate their data in Europe. Three years ago, CIOs didn't care where their data was as long as it was safe; now location is central to deci - sion-making." The onshoring-versus-offshoring debate will be renewed by Brexit. Trends may be counter-intuitive. For example, a lack of free movement might result in more offshoring. Robert Barbus, operations director for the Slovakia-originated Soitron Group, says: "Brexit may make it difficult for skilled Polish and other EU-CEE [central and east - ern European] IT workers from gaining work permits in the UK. Equally for on- shoring businesses, which depend on staff from within the EU, it's most likely the CEE region, including Slovakia, Czech Republic and Bulgaria, will find it hard to gain visas, and the cost of gaining work visas may not make this form of outsourcing viable. "This will more than likely lead to an in - crease in offshore outsourcing in order to compensate for less freedom of movement of skilled workers into the UK." Obviously no one can say what Brexit will look like. As a result, we'll see a more cau - tious approach to outsourcing – not fewer deals, but simply higher risk management. There are signs this is already happening. Simon Scarrott, business development director of Timico Technology Services, says: "As uncertainty in the business and IT market remains post-EU referendum, we are seeing more companies turning to fixed-priced outsourcing contracts as they look to control their budgets and derisk the purchasing process." The outsourcing industry has a proud histo - ry of flourishing in the face of perverse trade deals, legal bureaucracy and political uncer- tainty. Brexit may throw up challenges, but so far there is no reason to think the industry won't simply march on regardless. Share this article online via raconteur.net 0 20 40 60 80 100 IMPORTANCE OF OUTSOURCED ACTIVITIES IN 2020 (%) SURVEY OF UK OUTSOURCING BUYERS, SERVICE PROVIDERS AND SUPPORT ORGANISATIONS 10 30 50 70 90 Data analytics Digital transformation Outcome-based contracts Artificial intelligence Robotic process automation As-a-service models Offshoring Reshoring Backsourcing BUYER SUPPLIER more significant less significant more significant less significant £3.91bn of outsourcing contracts were signed in the UK in the first half of the year, up 19 per cent on 2015 Source: arvato 2016 84% increase in local government spending on outsourcing over the same period Source: arvato 2016

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