FAO Insight
NelsonHall's F&A Outsourcing Insight newsletter provides commentary and insight on key F&A outsourcing industry developments and vendor actions which impact your sourcing decisions.
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Latest Edition: January 2012
Contains commentary and insight from NelsonHall analysts on key F&A outsourcing industry developments that impact your sourcing decisions
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Capgemini Awarded Energy and Carbon Data Management BPO Contract by Tesco
Capgemini has been awarded an energy and carbon data management BPO contract by Tesco.
Services to be provided by Capgemini include:
- Collecting, processing, and reporting of energy usage and carbon emission data from Tesco operations worldwide
- Technology systems administration
- Support in matters of sustainability data from Capgemini's Sustainability CoE.
The BPO service, which uses CA Technologies' ecoGovernance software product, is named BPO Sustainability Service and is part of Capgemini's Supply Chain Management BPO portfolio.
The client, Tesco, intends to become a zero carbon emission firm by 2050. The contract with Capgemini will help measuring its current energy usage and carbon emissions.
Tesco is the third largest retailer in the world. It is headquartered in the U.K.
Analyst comments:
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CSC Partners With Aria Systems on Billing SaaS Offering for European Online Businesses
CSC has unveiled CloudBill, a billing and subscription management offering for online businesses in Europe. The offering is based on Aria Systems' SaaS billing application, hosted by CSC.
Services to be provided by CSC around CloudBill include:
- Consulting
- Systems integration.
Analyst comments:
SaaS offerings are now becoming more mainstream for the delivery of e-commerce services and moving beyond their origins in support of gaming and software distribution.
They are also becoming more sophisticated. For example, specialist e-commerce support services company Digital River have expanded their capabilities recently launching a high-capacity order management platform as well as becoming approved as a provider of cross-border payments in Europe.
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Indra Awarded €5.1m SAP Implementation Contract by Enel Green Power
Indra has been awarded a €5.1m SAP Finance implementation contract by Enel Green Power, the renewable energy subsidiary of Italian Electricity company, Enel.
Services to be provided include:
- Upgrade and roll-out of SAP financial and logistics modules across Enel Green Power subsidiaries in Spain, Portugal, Greece, France, USA, Canada and Mexico
- Management and support of the organization's SAP applications in Brazil, Costa Rica, El Salvador, Guatemala and Chile
- Integration of global SAP systems with Corporate SAP finance and logistics mdoules.
Analyst comments:
Enel Green Power, like many other organizations, is aiming to move to a "global management model" facilitating consistent and more rapid measurement and consolidation of its financials across geographies and well as strengthening the accounting functionality available. This approach is increasingly important in the effective management of a heterogeneous portfolio of subsidiaries in potentially challlenging times.
This drive for consistent and accurate measurement is currently a major driver within F&A outsourcing as well as within ERP implementations.
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arvato Awarded 3-Year Logistics Service Contract by Sony Music in the U.K. & Ireland
arvato has been awarded a 3-year logistics and fulfillment contract by Sony Music UK.
Services to be provided by arvato include:
- Warehousing and logistics services for Sony's MyPlay Direct on-line store
- Direct to consumer (D2C) distribution including returns management in the U.K. & Ireland.
Services will be provided from arvato's distribution facility in Milton Keynes.
Analyst comments:
Sony Music has been a major BPO client of arvato since 2009 when it signed a six year European logistics and order to cash contract for inventory management, distribution services (Europe, Export world, B2B, D2C); reverse logistics; sales order admin and customer service and F&A BPO services (accounts payable, accounts receivable, VAT management, stock accounting, intercompany invoicing).
Under the terms of the new 3-year contract, arvato will transfer all Sony MyPlay Direct distribution and warehousing activities from the existing distribution hub in Sweden to its Milton Keynes center. The Milton Keynes center processes both Direct to Consumer and B2B orders and was acquired from Universal as part of a 5 Year distribution outsourcing contract signed in 2008. Staffing levels at the center are expected to remained largely unchanged, with arvato making use of scale efficiencies to process the additional volumes stemming from its contract with Sony Music.
arvato's largest multi-process BPO client, supported by 1200 FTE's is Microsoft - for whom it has developed and currently operates its online stores across 31 countries and in eleven languages as well as handling marketing, customer service, payment processing and fulfillment.
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Cognizant Announce Automated Coupon Redemption Offering
Cognizant has announced a Automated Coupon Redemption SaaS-based offering for the retail and manufacturing sectors. The offering is part of Cognizant's IntelliStore and was designed together with Intelligent Clearing Network a SaaS ISV, whose software allows to deliver digital and paper coupons through PoS.
Features include
- BI and reporting capabilities including a dashboard for coupon analysis by store, category, active coupons, most popular coupons and other
- Push technology to mobile phones.
Cognizant highlights that in 2010, usage of digital coupons grew by 41% in the U.S., allowing savings of ~$1.2bn.
Analyst comments:
Although this service is currently offered as a SaaS service, it has considerable potential to be also offered in BPaaS form, with a number of major retailers already outsourcing their coupon promotion and redemption services.
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CGI Awarded ERP System Implementation Contract by Canadian Healthcare Shared Services Provider Plexxus
CGI has supported Plexxus, a shared-service organization supporting 11 Greater Toronto Area (GTA) member hospitals in the design, build, implementation and management of a SAP-based ERP system covering finance and supply chain management.
Plexxus will operate the Integrated Technology Solution (ITS). University Health Network was the first Plexxus member hospital to start using this the platform in late November. The remaining hospitals will implement the solution in phases carrying into late 2012.
Analyst comments:
CGI has been working with Plexxus since the original launch of the ITS project design phase in July 2010. When completed in late 2012, CGI's roll out of the SAP ERP solution will enable Plexxus to provide its 12 hospital members with supply chain (strategic sourcing, procurement, logistics), finance (general accounting, accounts payable, capital projects and assets accounts, funds and grants management), master data management and reporting services.
Plexxus is a not for profit shared services organisation created by its 12 members which include: Mount Sinai Hospital, North York General Hospital, Toronto East General Hospital and University Health Network and Women's College Hospital.
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Serco Awarded Support Services Contract by Anglia Support Partnership (ASP)
Serco has been chosen to operate the Anglia Support Partnership (ASP). Serco was the remaining single bidder to the tender after Sodexo was appointed reserve bidder. Serco is to submit final proposals for approval by 19 January 2012 leading to award of the contract to run ASP shared services to the U.K. health sector as a partner.
The services provided by ASP, and to be delivered by Serco, include:
- Finance
- Payroll
- Recruitment
- IT
- Estates and facilities services.
ASP is owned by six NHS Partners:
- Cambridgeshire Community Services NHS Trust
- Cambridgeshire and Peterborough NHS Foundation Trust
- Peterborough Primary Care Trust
- NHS Cambridgeshire
- Norfolk Community Health and Care NHS Trust
- Norfolk Primary Care Trust
ASP is hosted by Cambridgeshire and Peterborough NHS Foundation Trust with the Trust's Chief Executive and Board being ultimately accountable for it. The effective running of ASP is overseen by a Partnership Board.
ASP has ~65 contracts for the provision of support services to the Trust and partners, as well as 49 other public and private organisations. Its 2010 revenue ~ £34m. ASP currently employs around 620 members of staff who would transfer to Serco. Service transfer would be expected to take place in April 2012.
Analyst comments:
The full details of the award are yet to be released but it is expected to be worth ~£400m over ~10 years.
More than 70 suppliers had originally expressed interest in this contract. ASP whittled down the list to four including Capita and MITIE Group but only Serco, and Sodexo made it to the final shortlist.
This is a significant win for Serco, its biggest backoffice services contract in the health sector. The deal brings Serco into direct competition with NHS Shared Business Services (SBS) which is the JV between the Department of Health and Steria. In terms of market penetration, SBS is ahead of ASP. It currently provides services such as F&A, procurement and family health to >130 NHS organizations compared with ASP's 49 clients. Until now ASP has focused on service delivery to trusts in the east of England but Serco's partnership could see the organization widen its target market.
Demand for shared services in the health sector is increasing with many trusts looking to improve the efficiency of their back office services.The planned changes to the NHS by the government is also contributing to the increase in demand and particularly for services that can be run independently of whatever form the organization of the NHS will take following its restructuring. Independent service provisioing reduces risks to service continuity.
In another development that shows the increasing competition in this market, in December, Logica was awarded a renewal of its payroll and HR government framework agreement. The scope of the framework was extended to include F&A systems provisioning and it was opened to the health sector.
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WNS Partners with SEEInfobiz to Enhance O2C Offering
WNS Holdings has announced a partnership with software developer and consulting service provider SEEInfobiz to enhance its F&A offering. WNS will integrate SEEInfobiz's web-based e-fulfilment order-to-cash platform within its current range of F&A offerings.
The SEEInfobiz platform provides:
- Automated statement delivery
- Customized messaging on statements
- Email campaign management
- Multilingual statements
- Integration with social media
- Online statement analysis.
In addition, SEEinfobiz will provide technology consulting service to WNS.
Analyst comments:
WNS has been seeking to strengthen its platform based O2C offering for B2C customers and this partnership will it is hoped, realise new opportunities in target markets such as Telecom, Banking, Insurance and Utilities. The SEEinfobiz partnership provides WNS with a SaaS based customer service management application that supports integrated e-billing, e-invoicing, e-statements, and e-payments across multiple channels (inc. email, web, mobile, fax, SMS) and multiple formats (pdf, excel, XML etc).
WNS anticipates making further investments in tools that support the automation of O2C processes.
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Aditya Birla Minacs Partners With PSGI for Onshore Chargeback Capabilities
Aditya Birla Minacs has partnered with Profit Solutions Group Inc (PSGI), a New York based chargeback and accounts recievable management and consultancy firm
Minacs' client base will now have access to PSGI's onshore and onsite expertise in improving chargeback recoveries/deduction processes and reducing revenue dilution.
Analyst comments:
The partnership signals Aditya's push to expand its presence in the U.S. retail sector. Suppliers to the retail industry (manufacturers, wholesalers and distributors) have in recent years seen the scale and complexity of chargebacks and deductions in the sector grow significantly as retailers have sought to maintain their cost competitiveness whilst minimising the impact of rising commodities prices.
PSGI specializes in helping suppliers to analyze the validity and accuracy of deductions claims in order to minimise revenue leakage and increase the cash flow. With supplier margins in the retail industry already significantly impacted by the purchasing power of the largest retailers, such revenue leakage has a huge impact on the bottom line. PSGI will seek to leverage Aditya's scale and technology expertise to enable delivery of its services to a growing client base.
NelsonHall FAO Insight: December 2011
Contains commentary and insight from NelsonHall analysts on key F&A outsourcing industry developments that impact your sourcing decisions
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Accenture Awarded F&A BPO Contract by The Hartford
Accenture has been awarded a finance & accounting (F&A) BPO contract by The Hartford.
As well as F&A BPO services, services to be provided by Accenture include management and technology consulting from Accenture Finance & Risk Services on simplifying and standardizing processes and tools to add efficiencies and performance improvements.
Analyst comments:
Take up of F&A BPO in the insurance sector is still somewhat unusual. There is a strong transformational focus in this outsource and the choice of BPO partner is no surprise: The Hartford has been an Accenture client since 1995 for a range of services including systems integration and consulting.
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iQor Awarded BBC Collections Contract Renewal as Subcontractor to Capita
iQor has been awarded an £80m, 8-yr sub-contract by Capita acting as prime contractor of a consortium that will administer the BBC TV Licensing service. iQor previously held a contract directly with the BBC.
Services that iQor will continue to provide include collection of TV Licensing fees.
The new contract will commence on July 1, 2012.
Analyst comments:
This is the second renewal of iQor's contract with the BBC, the last renewal havng been awarded in 2005. BBC has now consolidated separate contracts with Capita, iQor and CSC into a single master contract led by Capita.
The contract awarded to Capita for ~£560m over 8 years represents a cost saving of over £220m (~30%) for the BBC over the life of the contract. The annual value of iQor's own contract is expected to be down by a similar percentage relative to its previous contract with the BBC. However this in part reflects the growing proportion of BBC TV license payers who are now paying via direct debit or using self-serve channels such as the BBC website.
- Total BBC licence fee revenue collected has risen over the past three years, from 24.7m licenses issued and £3.4bn in revenues in 2007/08 to 25m licenses and £3.6bn in 2009/10
- Collection costs (which include call centers, field force, detection and over the counters services) have risen at a similar level, from £87.3m in 07/08 to £93.8m in 09/10 (equivalent to 2.6% of license fee revenue).
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Capgemini Awarded €42m F&A BPO Contract Extension by International Paper
Capgemini has been awarded a 5-year €42m F&A BPO contract extension by International Paper (IP).
Services to be provided include management of the following process areas: order to cash, procure to pay, record to analyze and treasury services.
Capgemini is supporting IP's primary markets and manufacturing operations in North and Latin America, Europe, Asia and North Africa with services delivered by 480 personnel out of Krakow (Poland), Nanhai (China) and Guatemala City. Capgemini is supporting seven languages.
Analyst comments:
Capgemini's relationship with IP extends back to 2003, when the then Capgemini acquired two of PwC BPO's nearshore and offshore delivery centers, in Krakow, Poland and Guangzhou, China. At that time the two centers employed 350 staff primarily delivering F&A outsourcing services to Dairy Farm out of Guangzhou and to IP out of the Krakow center.
IP's original F&A BPO contract with PwC dates back to 1999. The 5-year contract renewal announced today will see Capgemini's outsourcing relationship with International Paper extend to 15 years and IP's own history of F&A outsourcing extend to 19 years.
Given the increasingly competitive market for F&A BPO services and the cost of new client acquisition, Capgemini's renewal of the IP and Danfoss contracts this year is a cause for real optimism about F&A BPO. With the cost and efficiency savings targets of 2nd and 3rd generation BPO contracts proving challenging for all vendors, Capgemini's mix of near and offshore delivery centers, process optimization and innovation will however be crucial to maintaining or indeed increasing contract margins in its BPO business.
2011 has been another successful year for Capgemini's F&A BPO business with 5 new signings and 4 renewals or contract extensions. In July 2011, Capgemini announced a new 13 year F&A BPO contract with Algar in Brazil and in March 2011 a 7-year €15m F&A BPO contract renewal by component manufacturer Danfoss. These contracts are being primarily served out of Capgemini's delivery centers in Poland, China, India and Guatemala.
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Accenture Awarded 5-Year Multi-Process BPO Contract Extension by Enbridge Gas Distribution
Accenture has been awarded a 5-year F&A BPO contract extension by Enbridge Gas Distribution Inc. This extends until 2017 the existing contract which was signed in 2007. Terms of the agreement were not disclosed.
Services that Accenture will continue to provide from its global delivery network include:
- Order to cash activities related to billing, payment processing and collections functions
- Related customer management services
- Other back office services including HR activities.
Enbridge Gas Distribution is a subsidiary of Enbridge Inc. In 2010, Enbridge Inc generated revenues of $15bn. Enbridge is organized into four principal SBUs: Liquids Pipelines (2010: $1,672m revenue), Gas Distribution ($2,611m), Gas Pipelines, Processing & Energy Services ($10,518m) and Sponsored Investments ($326m). Gas Distribution consists of the company's natural gas utility operations, the core of which is Enbridge Gas Distribution Inc. (EGD) which serves 2m residential, commercial and industrial customers, primarily in central and eastern Ontario as well as northern New York State. This business segment also includes natural gas distribution activities in Quebec and New Brunswick.
Analyst comments:
Accenture will deliver services to Enbridge Gas Distribution via its Accenture Utilities BPO Services (AUBS) unit. AUBS serves ~9 clients in North America (the largest being BC Hydro). Much of AUBS activity is related to billing and customer care services. However, AUBS also offers IT services, HR, F&A and procurement services to the wider utility community.
Accenture's relationship with Enbridge dates back to 2002 when ~1,100 employees from the CustomerWorks Partnership facility jointly owned by Enbridge and BC Gas transferred to Accenture. At that time the facility provided billing and customer care services to various BC and Enbridge divisions. Since that time there has been extensive offshoring of non-customer facing activities.
This third generation outsource continues its trend of 5-year agreements.
This is a small contract in terms of revenue, but interesting in that this new managed service from Capgemini is likely to be highly attractive to many organizations.
Few BPO service providers are currently offering an energy and carbon data management service - another vendor in Europe is Logica - but we expect it will feature more commonly within vendors' broader BPO portfolio over the next few years.