Accenture acquire Brazilian supply analytics firm Gapso

Management consultancy Accenture, announced last week it had acquired the Brazilian supply chain analytics firm Gapso. The merger will see the Brazilian firm’s operations integrated into Accenture’s Analytics division.

Analysts have suggested the decision by Accenture to purchase Gapso will benefit the firm in two ways. The first is that it will provide a solid foothold for the company in the rapidly growing Brazilian market, allowing the firm to explore opportunities in the region’s lucrative mining, oil and gas and agricultural sectors.

As well as opening up Latin American markets, the purchase of Gapso also points to the future of supply chain management and Accenture’s role within it. Gapso specialises in using data and advanced analytics to solve complex supply chain and logistics challenges. Accenture’s purchase of Gapso sees the firm acquiring a team of skilled data scientists, analysts and developers, suggesting the consultancy is keen to explore different approaches to supply chain management.

This position is strengthened further when you consider that less than 12 months ago Accenture acquired i4C Analytics, an Italian provider of advanced analytics software programs.

Rodolfo Eschenbach Accenture’s Digital lead in Latin America, said: “Accenture are happy to be extending its analytics reach in Brazil through the acquisition of Gapso.”

“By combining Accenture’s and Gapso’s broad analytics skills and capabilities, Brazilian companies in the natural resources and agribusiness industries will have access to the best data scientist talent and solutions in the market for driving real, data-driven, operations outcomes at scale. When businesses harness, optimise and analyse their data for insight, value in the form of improved productivity or a competitive advantage can be realised,” he said.

Oscar Porto Gapso’s Business Director, was quoted saying: “Over the past twelve years, Gapso has curated an impressive team of analytics experts and capabilities that enable faster and better outcomes in connection with a client’s most critical logistics issues.

“By joining Accenture, we will be able to build on our achievements and engage in a more powerful, broader-scope of analytics conversations with clients. I’m proud of the Gapso team and I am looking forward to taking our methodologies further and continuing to disrupt the resources and agribusiness industries through insight-enabled decision-making.”

Robotics in the supply chain will enhance humans, not replace them

The mind of the machine

Could automation actually lead to humans enhancing their skills, and ultimately enable them to perform their job functions better?

Could robots replace humans in the supply chain?

Discover how Jon Gibson (Head of Logistics at global supply chain consultancy Crimson & Co) believes the growth of robotics and automation in the supply chain will actually enhance the role humans play, not replace them.

Recently, the government announced its intentions to be at the forefront of driverless technology following the approval of a new code of practice, which will be launched in the spring allowing for testing of autonomous cars. While supporters have been quick to champion the benefits of driverless technology, in terms of road safety, emissions and congestion, there are notable concerns, particularly the knock-on effects for the British supply chain industry.

Last year, a report by the Confederation of British Industry (CBI) underlined the importance of strengthening the British supply chain industry, which could potentially add a further £30bn to the British economy. A key factor within this report focused on addressing the skills shortage which exists amongst British supply chain firms, notably the need for greater STEM graduates inducted into the industry.

In light of an industry skills shortage and the growth of robotics, there have been suggestions that this could be the beginning of the end for humans across supply chains, but Gibson does not believe this to be the case:  

“If removing humans is about driving up productivity through standardising processes, improving design and sharing components across different products, it could be argued that this has always been the case in the supply chain industry. When looking particularly at the emergence of driverless cars, yes, it will mean changes to the industry but to suggest this is the start of a new era in which humans will be rendered effectively useless across the supply chain is very wide of the mark.

“Essentially, the introduction of robotics can do two things – firstly, it can replace humans. Secondly, it can make them do their jobs better. Examples of where humans might be replaced could be for tasks that require greater accuracy, such as precision cutting, or in instances where there is a need to process vast amounts of data. Processes like these are traditionally very labour intensive, so from a budgetary perspective it’s understandable why organisations pursue this route. It can also improve safety while reducing the chance of human operating error, risk of thefts, as well as the need to address wage inflation.

“What is often misunderstood is how robotics can assist humans in doing their jobs better – barcode scanning for example, reduces human error, providing huge cost savings to a business. In reality, organisations automate their supply chain to improve cost efficiencies. This might be to address issues with skills and labour shortages or align budgets – it is not always at the expense of people.”

Gibson continues: “Ultimately, we are likely to see an evolution of roles and responsibilities. For instance, machinery will need to be maintained and this could result in retraining and reskilling staff to do this. Also, in the event of an error occurring during the production line, humans need to be on hand to address this. As we get better at analysing operational effectiveness it will become clear that organisations will need to strive for a balance between automation and human involvement across their supply chain – there is no one size fits all.” 

Is Apple the industry’s whipping boy when it comes to supply chain culpability?

Prompted by a post on Procurious by Kate Nicholl, I sat down and watched the BBC’s Panorama program that discussed some disturbing practices in the much-lauded supply chain of Apple, the worlds most valuable company. The BBC Panorama investigation originally aired Dec 2014, it has since been shown in Australia on ABC’s Four Corners.

The show highlighted that while Apple does a fantastic job of maintaining positive customer relationships, the same cannot be said for those working in the organisation’s supply chain.

Shortly after the original broadcast – Apple senior vice president of operations Jeff Williams sent an email to UK Apple employees stating that both he and CEO Tim Cook were: “deeply offended by the suggestion that Apple would break a promise to the workers in our supply chain or mislead our customers in any way”.

The program sent workers undercover to expose some troubling practices at a factory of a major Chinese supplier (Pegatron) and further down the company’s supply chain by investigating the dangerous, illegal and environmentally worrying tin trade that is occurring in the Bangka region of Indonesia.

The documentary has been criticised by some of being sensationalised and biased against Apple. However, its findings are truly concerning.

Some of the breaches of Apple’s supplier responsibility are listed below:

Concerning findings at Pegatron factory in China

  • Government issued personal identity card were illegally taken from workers.
  • Factory dormitory rooms were overcrowded. Despite making a commitment to only housing 8 staff members per dorm, the documentary shows examples of 12 people being crammed into these very dormitories.
  • Workers are working up to 16-hour shifts.
  • Workers are working up to 18 days consecutively.
  • Workers are so exhausted that they are falling asleep on the assembly line prompting significant health and safety concerns.
  • Workers are routinely working more than 70 hours a week. Apple’s standards state workers work no more than a 60-hour week.
  • Juveniles are working overtime and night shifts despite Apple’s commitment to the contrary.

Concerning findings in the company’s supply of tin included:

  • The detrimental impacts of tin mining sediment on local coral reefs.
  • Illegal tin operations are supplying the companies that Apple buys tin from.
  • These illegal suppliers are utilising child labour.
  • Safety conditions in the tin mines are incredibly dangerous.
  • Workers operate under the constant threat of landslides and death.

Clearly these are complex issues and it’s difficult to determine exactly were Apple’s responsibility begins and ends.

The Industry’s Whipping Boy

Apple and indeed many Apple fans have been quick to point out that the company is being held up as the whipping boy for an issue that permeates across the entire tech industry. Apple’s competitors are all likely culpable of the same indiscretions. I believe however there are legitimate reasons as to why Apple bears the brunt of these accusations.

The sheer size, value and market penetration of Apple means that our collective eyes focus on it. Our expectations of Apple are higher than those of their competition. Apple reported profits in excess of 39 billion dollars last year and the company is valued at half a trillion dollars. As the former US presidential candidate Ralph Nader points out in the documentary, there is no one better positioned to eliminate these sorts of practices than Apple.

Apple also spends a large percentage of its marketing budget positioning the company and its supply chain as sustainable. If the company wants to ride the brand benefits of being perceived as sustainable, surely it must expect some criticism when it is discovered that its commitments are not being followed through.

Keep the criticism constructive

It’s easy to over react to these sorts of programs and proclaim that you’ll never buy another Apple product. The fact of the matter is that as long as consumers want the price of their devices to remain low and as long as company’s like Apple are answerable to shareholders, they will continue to chase the lowest production costs which will unfortunately, more often than not, carry an environmental or human rights cost.

While I think it’s our obligation to continue to hold a spotlight to and criticise organisations like Apple, our criticism needs to remain constructive and cannot be done without mentioning the steps these companies are taking in their commitment to supply chain sustainability.

Last year Apple carried out 633 audits that covered over 1.6 million workers, a 40 per cent increase on the previous years figures. The company is open and transparent with its commitment to supply chain sustainability and what it expects from its suppliers. It also admits that while progress is being made, there is still a long way to go and that supply chain sustainability is something that the company needs to revisit constantly.

An issue of implementation

The most concerning elements of the documentary for me were the means that Pegatron had gone to appease Apple’s sustainability efforts without actually changing its operations.

The documentary shows that employees were ‘coached’ in how to fill out shift request forms (documents used in Apple’s supplier auditing process). Employees that did not respond by saying they were happy to work long shifts, night shifts or shifts where they must remaining standing, were told to fill in new forms, and failure to comply resulted in expulsion.

Another workaround developed for the benefit of Apple’s auditing process is the renaming of ‘overtime’ on employee pay checks to ‘bonuses’, thus hiding the amount of overtime employees have been forced to work.

To me, the Panorama documentary points to a fundamental breakdown in the implementation and execution of Apple’s sustainability project. While the commitments are in place on paper and efforts to implement them have been made, the company has not yet (and I stress the word ‘yet’) managed to instil these practices within its supply chain. If the evasive practices Pegatron has implemented to falsify Apple’s auditing documents are anything to go by, the road to implementing these measures will be a long and challenging one.

What are your thoughts on Apple’s supply chain? Where does its responsibility end? Is it fair that Apple bears the brunt for the whole tech industry? How does your organisation implement sustainability measures in its supply chain?

The UK High Street – terminal decline or natural change?

Another traditional high street store has announced store closures due to falling revenues and profits – is this the latest step in the terminal decline of the UK high street?

Is the UK high street in decline? Thorntons in the news

UK chocolate retailer Thorntons has reported a fall in revenues for the six months to January 2015 of 8 per cent to £128.2m. This comes hot on the heels of the pre-Christmas profit warning issued by the company and the closure of just under half of its stores.

Thorntons has suffered from falling sales and unprofitable stores for a couple of years and made the decision to move more of its sales to other outlets and retailers. This move has since been compounded by the announcement of the loss of shelf space at two major UK supermarkets.

High-profile casualties

Thorntons are far from alone. According to a report issued by PwC, there was an average of 16 shop closures per day in the UK in 2014. Coupled with a reduction in the number of new shops opening, this is leaving many high streets full of empty units.

In the past year alone, a large number of high-profile names have either been forced to close high street stores or have collapsed entirely. Phones4U and La Senza both collapsed last year, while 2015 has already claimed its first big victims in Bank, USC and Austin Reed (all fashion retailers) and Radio Shack in the US.

Why is this happening?

For many, the main cause is seen as the out of town retail parks, complete with free parking and everything in one place. However, even these shops aren’t immune to the changing environment.

The Office of National Statistics retail statistics have shown an average 12 per cent increase on online sales to the same period the previous year throughout 2014.

Many organisations have failed to keep up with the pace of the digital economy. Poorly designed shops with unclear offerings, poor customer service and unsuccessful marketing just don’t cut it against the convenience of shopping online and having everything delivered to your door.

Organisational Benefits

It’s not just the consumers who are benefiting either. There are major positives for organisations and supply chains for having an online operation. Not having to run a high street store means reduced overhead costs and monthly outgoings and the ability to be located in low-rent areas.

With fewer staff required, the goods or services can be offered at a lower cost, as companies require less mark-up to make a profit. Stock can also be ordered in bulk, further reducing costs, while at the same time ensuring that there is sufficient stock to cover customer orders.

Hope for the Future?

All is not lost though. Many consumers still want shops that they can visit and often, the convenience of online shopping is outweighed by the risk of not getting what they want first time, or not being able to see what it is they are buying.

It is widely felt that organisations that successfully merge the two worlds of digital and physical shopping can help to save the high street. For example, the John Lewis Group now offers ‘click-and-collect’ to any of their department stores or Waitrose supermarkets for online orders.

Special offers can be sent to a smart phone when customers are in store, while augmented reality (think Google Glass) can be used to show you what a sofa would look like in your house. The companies who can tailor their offering best will be the ones who populate the high streets of the future.

So, terminal decline? Probably not. Natural state of change? Arguably yes. And it looks as though it will be for the better.

Read on for the other procurement and supply chain stories making the headlines.

MoD spent £33 million on ‘botched’ defence procurement outsourcing

  • The Ministry of Defence (MoD) must “sharpen up” its reform of procurement, after “throwing away” £33m on botched changes.
  • This follows a report from the National Audit Office (NAO), Reforming Defence Acquisition, which examined the MoD’s plans to improve the skills of Defence Equipment & Support (DE&S) staff, its systems and the way it interacts with the armed forces.
  • The NAO concluded that improving the performance of DE&S remained the most challenging part of the department’s strategy, although progress has been made. “There is now a clearer separation of responsibilities between the commands, which request equipment, and DE&S as the organisation responsible for delivering the equipment,” the report said.
  • It also outlined how the department had spent two-and-a-half years and £33 million trying to implement its preferred option of a government-owned, contractor-operated (GoCo) model to reform DE&S, before it was deemed undeliverable and halted in 2013.

Read more at Supply Management 

Will a new UK law eradicate supply chain slavery?

  • Whether it is high street fashion, bedding from a department store or eggs from a supermarket, few British shoppers would stop to ask whether slave labour was involved in making their goods.
  • Yet forced labour often lurks along the supply chain as a product and its individual parts are manufactured, packaged and distributed in a process linking multiple suppliers in many different countries, business ethics experts say.
  • Globally, the International Labour Organisation estimates that 21 million people are victims of forced labour. In Britain alone, the Home Office (interior ministry) says up to 13,000 people are forced into manual labour, sold for sex in brothels, or kept in domestic servitude, among other forms of slavery.
  • A government-backed draft law aims to tackle exploitation by requiring businesses in Britain to disclose what action they have taken to ensure their supply chains are slavery free.
  • The clause will provide guidance to companies about the kind of information they could disclose. However, the Home Office said firms will not be told what must be included, and that it expects disclosures to differ from company to company.

Read more at Reuters

SLG’s SCOR expert recognized for supply chain leadership

  • Satellite Logistics Group (SLG), a leading supply-chain solution provider for the beverage industry, announced today that Dan Swartwood, the company’s vice president of process and technology, has been named one ofSupply & Demand Chain Executive magazine’s 2015 Pros to Know.
  • The annual Pros to Know Awards recognize select supply chain executives who have helped their clients, companies, or the supply chain community at large to prepare for the significant challenges in the year ahead.
  • “This honor highlights the many thought-leaders who are helping to shape the Supply Chain industry and advance Supply Chain as a respected discipline in the enterprise,” said Barry Hochfelder, editor of Supply & Demand Chain Executive. “Their efforts in developing the tools, processes and knowledge base necessary for Supply Chain transformation, and in promoting new approaches to supply chain enablement, have earned them a place on this year’s Pros listing.”
  • Swartwood has guided a number of U.S. and international companies in various industries through the methodologies and has seen the results firsthand. On average, opportunities for improvement equate to two to six per cent of revenue.

Read more at PR Newswire

Apple under scrutiny in Labor’s tax loophole crackdown proposal

  • Large international tech companies operating in Australia such as Apple and Google could come under increased fire over their local tax treatment under a new proposal by the federal Labor Party to clamp down on loopholes.
  • In what Shadow Treasurer Chris Bowen described as an “opening salvo in the battle of ideas”, Labor’s first major policy announcement in opposition is to introduce a range of measures to stop billions of dollars of tax from bleeding offshore.
  • “This announcement today sets a blueprint for Labor’s approach in office,” Bowen told reporters in Canberra on Monday. The federal opposition’s tax package, which has been costed by the independent Parliamentary Budget Office, is worth AU$1.9 billion over four years in additional revenue.
  • It includes tightening of the so-called “thin capitalisation” rules, which allow companies to offset profits against debt servicing costs in high-tax jurisdictions such as Australia to reduce their taxable income.

Read more at ZDNet

Drones still useful in supply chains despite FAA regulations

  • Last week the Federal Aviation Administration published its rules and regulations for the oversight of drone usage within the United States. Many will and have argued that these rules are too restrictive for companies such as Amazon or Google to truly take advantage of the technology. The basic parameters of the guidelines set by the FAA:
    • Drones must be less than 55 lbs in weight
    • Can only fly during the day in good weather
    • Must not fly close to airports
    • Cannot fly faster than 100mph
    • And must be within visible site of the operatorLast week the Federal Aviation Administration published its rules and regulations for the oversight of drone usage within the United States. Many will and have argued that these rules are too restrictive for companies such as Amazon or Google to truly take advantage of the technology. The basic parameters of the guidelines set by the FAA:
    • On the surface these restrictions severely limit the dreams of the likes of Jeff Bezos. One of the great opportunities for drones within the supply chain and particularly with the delivery side is the ability to enhance the last mile portion. The last mile is always a challenge since you have to break down the orders to the individual level. Drones seem to offer an affordable and flexible solution – but not if the FAA rules are in place. This does not mean there are not some use cases that supply chains can take advantage of immediately:
    • These include: Asset monitoring and remote delivery… read more over at ZDnet

What can board games teach us about procurement?

I was listening to a HBR podcast a couple of weeks ago and it highlighted several parallels between games and business strategy…

We have probably all played Monopoly at one time or another (it was a Christmas staple in my household)… Well, when it was first designed it was meant to be a teaching tool to teach players about the evils of monopolies and private land ownership (property is theft?!). As such this article discusses what can we learn from the modern version of Monopoly…

The article also suggests that other board games centre on creativity, innovation, teamwork, empathy, and resource management but also emphasize outcomes more closely resembling the collaborative wins that have become so desirable within and between organizations.

  • Pictionary comes to mind as clearly requiring observational and empathy-based skills
  • Cluedo (or whodunit) helps sharpen our deductive-reasoning skills.
  • Trivial Pursuit, especially when played with teams, can teach us the value of diverse knowledge sets

Next I want to talk about Game theory. We teach game theory on our advanced negotiation programs and one of the takeaways is to understand the type of game for negotiation you are in. From a business point of view companies can succeed spectacularly without requiring others to fail. And they can fail miserably no matter how well they play if they make the mistake of playing the wrong game.

The game of business is all about value: creating it and capturing it, at the Faculty we take our clients through the value matrix, a tool designed to help business and procurement speak the same language, HBR talked about a value net to identify customers and who the players are. There is a tinge of Porter’s 5 Forces (unsurprisingly really) to it but it’s worth a read. Take a step back, consider who the players are in your procurement or organisation, and then decide on the type of game you want to play.

Talking of strategy, according to My Purchasing Centre: Over 95% of purchasing or supply management organizations do not have a long-term strategic plan

Many of the plans that are completed are done once, and then put away in a ring binder or on a hard drive – never to be referenced again. My Purchasing Centre provides some tips on creating and living the strategy:

  • Create a vision and mission statement that aligns with the organization’s vision and mission
  • Be bold and make sure people realize that you are aiming for supply management not traditional bureaucratic purchasing.
  • Try to gain a broad consensus and gather input from surveys, one-on – one meetings, research and as many employees, suppliers and customers as possible
  • Keep it dynamic, up to date and a living document

Finally, I’d like to draw your attention to this particular article that examines the strategic decisions surrounding extending the scope of procurement. It suggests that there are three main questions that need to be asked:

  • How will your customers and procurement staff collaborate?
  • Do your procurement professionals have sufficient category expertise to add value?
  • Are there enough skilled procurement professionals within the team to handle the volume of buying?

The article goes onto say that until recently the answers to these questions have been routine: policy, process, technology, hiring, and training. However, the reality of execution is more complex.

However some of the learnings can be applied into designing our internal strategies for greater collaboration with the business. For example, it mentions that strategy documents comprising more than 50 pages in length rarely resonate with the internal stakeholder.

I think the key thing with all strategies is applicability; rarely does one size fit all. In today’s volatile environment where economic, political and technological change runs rife, greater flexibility and agility is required in our strategic choices – making the games we decide to play and enter into all the more important.

Thanks for reading. You can subscribe directly to the sources I have identified here and nothing is my copyright. If you wanted to discuss more, please feel free to contact me via Procurious, or follow me on Twitter @gdonovan1971.

Article by Gordon Donovan

Are direct and indirect spend classifications relevant any more?

Direct vs indirect procurement

Like many before me, I started out in procurement without knowing much about what procurement actually was. One of my meetings in my first week as a graduate procurement analyst was with the head of direct spend. I entered his office with no idea of what direct spend was and left an hour later no more enlightened.

After the meeting I Googled indirect and direct spend and although I thought it seemed like an odd way to classify spend, proceeded to use the terms for the next decade of my career.

However, I recently found myself revisiting the oddities of these terms and questioning why we use them at all.

As business models and procurement operations continue to change and diversify, I feel that addressing spend as either direct or indirect is has become far less relevant.

In order to consider this more fully, it’s worth reviewing the following definitions from CIPS around direct and indirect materials.

Direct materials

Materials that are converted or processed to make the finished product.  In category management in a manufacturing business, the most basic classification of categories is between direct and indirect materials.  As direct materials usually account for a greater share of total spend, and affect the quality of the final product, direct materials are usually seen as the more demanding of the two groups.  Indirect spend includes stationery, printing, office supplies, pest control, telephone costs etc., while direct materials will be whatever is used to create the finished product.

Indirect material

Goods which are purchased to support the operation and which are not converted into finished products or resold.  Many manufacturing organisations separate direct materials, which are raw materials from ‘indirects’ such as cleaning, MRO supplies, travel, catering, printing, stationery etc. which are needed to support the operation.  Many indirect acquisitions are low value and low risk and so lend themselves to simple acquisition systems and e-Commerce, such as online ordering through catalogues.

Two things jump out at me about these definitions and their relevance to modern procurement:

The first is that both definitions seem to be trapped in our industrial past – in that they only address firms that manufacture actual products. So, while I think these classifications would have held some relevance during the industrial revolution, I question whether they still stand up in today’s service driven economy?

Is direct more important?

The second concerning part of these definitions is the importance CIPS has attributed to each of these areas.

The CIPS definition suggests that “As direct materials usually account for a greater share of total spend, and affect the quality of the final product, direct materials are usually seen as the more demanding of the two groups”. It follows then, that direct procurement is the more demanding of the two groups.

I would argue that this is a huge generalisation.

We live in a service driven world

Look at banks, investment firms, lawyers, consultancies and tech organisations, these companies now make up a huge percentage of our economy but don’t produce a clearly defined, manufactured product. I would suggest that for these firms, indirect spend is infinitely more complex, demanding and risky than direct spend. Do they even have direct spend?

I guess what I am suggesting here is that while these classifications may have made sense in the past, they now seem like an antiquated way to classify spend.

Do we really think that a spend classification that groups pest control and advertising spend together has any real relevance in today’s procurement landscape?

C-Suite reluctant to stick their head in the Clouds

UK businesses are reluctant to stick their head in the Clouds, says KPMG.

A global study of almost 2,100 contracts covering deals worth £7.8 billion suggests that Cloud-based services are failing to capture the popular imagination of UK businesses.  It also suggests that organisations are increasing the level of IT services they outsource to improve service delivery, with many investing budgets saved over the past few years on HR, sales and finance support.

Published by KPMG, the 8th annual ‘Service Provider and Performance Satisfaction’ study includes detailed analysis of current corporate IT spend in Britain, by examining more than 330 UK-based contracts.  It reveals that 71 per cent of UK organisations are spending a mere 10 per cent, or less, of their IT budget on Cloud services. Many organisations are also continuing to rely on ‘tried and tested’ outsourcing models and the survey shows that favoured destinations for IT support services remain India (51 per cent), Poland (8 per cent) and South Africa (8 per cent).

Asked why they are reticent about employing Cloud services, the top 3 reasons cited by UK C-suite respondents centred around data location, security and privacy risks (26 per cent), concerns over regulation and compliance (16 per cent) and cynicism around the ease with which Cloud services can integrate with legacy IT systems (15 per cent).

“Despite widespread acceptance that Cloud services offer access to the latest technologies, and make IT more accessible, adoption remains relatively sluggish.  While concern about the security risks surrounding new technology is understandable it may also be disproportionate, as Cloud options are just as safe as other outsourcing solutions.  Of course, investors and stakeholders will welcome caution on the part of the buyers, but they also want to see innovation, meaning that UK plc will need to find the right balance to remain competitive,” says Jason Sahota, director in KPMG’s Shared Services and Outsourcing Advisory team.

The survey goes on to reveal that, despite the economy picking up, some companies across the UK are still nervous when it comes to committing to long-term investments.  Asked about their IT outsourcing plans for the next two to three years, just 43 per cent said they plan to increase spending.  This figure contrasts with 77 per cent, this time last year.

However, where budget has been set aside for outsourcing, it is clear that organisational thinking is maturing.  When the survey was first undertaken, respondents focused primarily on cost savings as their reason to outsource – but this year’s survey shows that the search for quality improvement (20 per cent), access to skills (16 per cent) and a desire to reduce the time it takes to ‘get things to market’ (6 per cent) are driving the rationale behind IT outsourcing decisions.

The findings also suggest that satisfaction levels remain high in the UK, with 77 per cent of respondents reporting that they are comfortable with the support they receive.  Worryingly, however, the research shows inconsistencies in how businesses are approaching integration and governance of the services they outsource.  The majority (70 per cent) said that their IT function currently performs the role of service integrator, whilst only half (50 per cent) have partially met the expected benefits of service integration and management.

Sahota concludes: “As IT forms an inseparable part of the wider business strategy in many organisations, technology decisions are now rarely left to the CIO alone.  It means that, with the potential for conflict over the choices being made, organisations should dedicate a greater level of investment towards governance than they may have in the past.  If they fail to do so as they move towards more complex delivery models, poor governance can impact their ability to provide quality services, increasing risks around cost, service quality and delivery.”

China removes world’s leading technology brands from approved state purchase lists

China blocks tech brands

A Reuters report released on Friday has confirmed the Chinese government has implemented procurement restrictions on its agencies preventing them from buying US produced technology products.

The report outlined that US Companies like Apple and Cisco no longer appear on the list of approved technology vendors Chinese government agencies can purchase from.

But Why?

Two theories exist as to why these steps have been taken. The first relates to security concerns that have arisen between the US and China, particularly pertaining espionage activity between the two countries.

In 2013, the now exiled, Edward Snowden released a series of leaks that suggested the US government routinely accessed the internal data of US owned companies to gather intelligence on other nations.

Snowden also accused the NSA (an organisation he used to work for) of intercepting routers produced by Cisco that were being shipped to China and inserting surveillance devices inside that would relay data back to the agency.

Cisco remains adamant that it was unaware of this practice, however the Chinese government, with good reason, responded by removing all 60 of the previously approved Cisco products from its purchasing list.

The spying allegations prompted serious privacy concerns from the Chinese who, if the allegations are true, have every right to minimise the impact such espionage.

Tu Xinquan, the Associate Director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing highlighted Chinese concerns over the espionage allegations. “The Snowden incident, it’s become a real concern, especially for top leaders. Some sense the American government has some responsibility for that; (China’s) concerns have some legitimacy” he said.

An interesting side note that must be mentioned when discussing this case is that Chinese owned Huawei; the world’s largest network equipment provider, is banned from bidding for US government contracts over similar concerns that the firm may use its technology to spy on US government interests.

Protecting Local Interests

The second potential motivation for removing foreign companies from the approved supplier list is to strengthen China’s domestic tech industry.

IDC (a market research and advisory firm) suggests that the Chinese ITC sector is set to grow by 11.4 per cent to $465.6 billion USD in 2015. China’s technology sector is currently trailing the US both in terms of maturity and product capability, however it is understood to be catching up rapidly.

The Reuters report quotes an unnamed executive of a western technology firm who claims “There’s no doubt that the SOE segment of the market has been favouring the local indigenous content,” He went onto claim that the Snowden security concerns were merely a ‘pretext’ to support the development and growth of the Chinese technology industry.

Close the Windows

Despite these claims, Chinese government officials have pointed to weak product guarantees and poor support offered by foreign firms as the driving reason as to why the products have been removed from the list.

In 2014 the Chinese government announced that its offices would no longer be allowed to purchase any technology that runs the Windows 8 operating system, a move that was prompted by Microsoft electing to suspend support for Windows XP, a system used most in Chinese government offices. According to Chinese news agency Xinhua, the government was keen to “avoid the awkwardness of being confronted with a similar situation again.”

Whether the motivations for this move were based on security concerns or out of a desire to protect and promote local industry, we’ll likely never know. However, Chinese officials do seem to have created a policy that will support the growth and development of Chinese owned tech firms. Furthermore, it seems that US government policy, combined with the Snowden leaks, has provided ligament justification for making such moves.

Zero Hours Contracts have “protected UK from European unemployment levels”

Recently-released figures show the number of people reporting to be employed on a Zero Hours Contract has risen to 697,000. That’s 2.3 per cent of the workforce, in 2014…

We’ve been provided expert comment from Christian May, Head of Communications and Campaigns at the Institute of Directors – here is what Christian has to say:

“There doesn’t appear to be much difference between the Coalition and the Labour Party when it comes to Zero Hours Contracts. All parties now support a tough clamp down on the use of exclusivity clauses, and the IoD led the charge in calling for this change during the consultation process. After all, it’s the flexibility that makes these kind of contracts so valuable to the labour market and there’s nothing flexible about restricting and controlling an individual’s freedom to seek work.

“Given the consensus that now exists on ending the exploitative use of exclusivity clauses, what remains of the debate is largely semantic. Those who wish to hold up Zero Hours Contracts as a symptom of an unfair economy will continue to do so, but they must appreciate that for hundreds of thousands of workers and employers these contracts represent an extremely attractive proposition. Despite efforts to portray all those on such contacts as exploited, the truth is that there are plenty of engineers, contractors and professionals whose willingness to be flexible adds significantly to their market value and, therefore, their earning power”.

Christian adds: “It’s also worth remembering that a flexible labour market, of which Zero Hours Contracts are a vital component, has protected the UK from European levels of unemployment. Indeed, the UK’s labour market has been singled out for praise by the OECD. The alternative is a rigid labour market and high unemployment. 

“With a focus on best practice and a commitment to ending the use of exclusivity clauses, Zero Hours Contracts will remain, for some people, an attractive and convenient way into work.”

Negotiations needn’t be tricky – how to best prepare

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Negotiation is a critical skill, not just in business, but also in our personal lives. Whether it’s readjusting contract terms with a supplier, discussing your next pay raise or organising where to go on your upcoming family holiday, the way we negotiate has a direct impact on where we’re headed in life.

However, entering into a negotiation situation can be a daunting thought. For many of us, the word negotiation is closely linked with feelings of awkwardness, compromise and conflict. We feel often feel ill equipped to manage the unknown, especially when negotiating with someone more senior, more powerful or more stubborn than ourselves.

With this in mind, I’d like to share with you a series of articles and propose some steps that will help you to prepare for your next negotiation.

Over the coming weeks, I’ll address what you can do to better understand the person you are negotiating with and why you should always consider external interests when you are preparing for a negotiation. But today’s topic centres on how to personally prepare and position yourself for a successful negotiation.

By failing to prepare, you are preparing to fail

The most successful negotiators have a clear understanding of what they want to achieve during a negotiation. If you can’t succinctly sum up what you want out of a negotiation, how can you possible hope to achieve it?

One strategy that can help to focus your efforts in this phase is to make a list of what you want, but also why you want it and why you think it’s reasonable that should you get it. Doing this in advance of your negotiation will help you to clarify your thoughts and provide you with answers to some of the tough questions that are likely to surface during the discussion.

Move beyond the dollars

When you are establishing what it is you want from the negotiation, it’s important to keep an open mind and think beyond mere dollar figures.

While monetary benefits are undoubtedly important, they needn’t be the sole determinant of success in a negotiation. Ask yourself what would constitute a good outcome for you. Could working from home or having the flexibility to spend more time with your family provide a similar level of happiness to a higher salary? If so, introduce these points into the discussion.

It’s important to keep your financial goals in mind and to push for them; however, good negotiators understand there are a number of ways to arrive at a good outcome.

Understand there may be more than one good outcome

As is often said, there is more than one way to skin a cat. When preparing to negotiate, try to think of a number of outcomes that you would deem to be acceptable. If you want, you can rank these outcomes in order of preference, but by understanding that the negotiation could have a number of good potential outcomes, you increase your chances of reaching an agreement.

If you enter into a supplier negotiation with a single viewpoint of what you consider to be an acceptable outcome (20 per cent price discount for example), you close yourself off to finding other innovative, potentially more lucrative solutions. Furthermore, any result other than your single viewpoint will feel like a failure. Looking at your interests (and those of your company) more holistically will naturally give you more flexibility and increase your chances of reaching an agreement that fully satisfies both parties.

Understand your walk away point

While negotiating is meant to be about reaching agreement, sometimes it is best not to. Not reaching an agreement allows you to explore other, potentially more lucrative options.

To this end, it’s important to take some time to understand your walk away position and to be prepared to put it into practice.

In their best selling book ‘Getting to Yes’ Roger Fisher and William Ury put some structure around this process and introduce the concept of BATNA (best alternative to a negotiated agreement). Your BATNA essentially outlines what will happen if you fail to reach an agreement during the negotiation.

In order to fully understand your BATNA, you need to understand what your next best options are. This requires a good understanding of the external market. What would another employer pay you? What price and service level would a competing supplier offer this product or service for?

By understanding your BATNA and walk away position, you enable yourself to make an informed decision about what the other party is offering. This process goes a long way in determining the balance of power in the negotiation.

What other tips have you got for preparing for a negotiation? Share them below and stay tuned for next week, when we delve into the steps you can take to better understand the person you are negotiating with.