Inhouse technology is no longer an operational prerequisite thanks to outsourcing. Software, servers, internet connectivity and even whole operations like payroll and HR can be sourced from third-parties and branded so neither the customers or employees of the business need ever know these mechanisms reside outside the company headquarters. But the stakes become higher the more established the business is. Employees want to keep their jobs for fear of losing them to cheaper, overseas labour and customers want service levels maintained.
So the fact that the UK’s rail information service, National Rail Enquiries (NRE), served 55 million customers online last year alone and relies on extensive self-service and contact centre service channels but has a core staff of only 21 people is no small achievement. Chris Scoggins, NRE’s CEO spoke to CIO UK about how the organisation has succeeded in outsourcing its entire core, mission-critical passenger and travel information business. “NRE has about 22 suppliers of various services. Everything we do is outsourced. We have 1,500 people in call centres alone, who all work for NRE,” says Scoggins.
“At the centre there is a core team of 21 people who manage the business. The outsourcing of its parts has grown with the breadth of services we offer. We’re always trying to provide new services, so we have taken on more suppliers over the years.” The NRE’s telephone information service was born out the creation of the organisation in 1996 with the privatisation of British Rail. Since then, it has expanded to include automated telephone services and a very successful real-time online train time and journey planning service.
The company answers to service levels set by government and has seen public demand increase 10-fold since its establishment. A significant proportion of its services are highly event driven, due to train service disruption as diverse as extreme weather to major incidents. At the same time, NRE is a ‘virtual’ company with years of experience of outsourcing and managing the supply of multiple, mission-critical IT services.
Therefore, Scoggins is in a good position to offer best-practise outsourcing advice.
"I regard our outsourcing suppliers as part of our team. I encourage my guys at headquarters to manage our relationships with them, because it’s still our brand, so we know best how to manage it"
Chris Scoggins, CEO, National Rail Enquiries
“In areas where we are maturing, like call centres, we have actually gone from four suppliers to two and from six sites to four. Another outsourcing area we are quite well seasoned in is internet service provision.”
Scoggins says NRE has a strategy of maintaining a number of suppliers to effectively play them off against each other and raise the stakes in terms of demonstrating service excellence.
What the experts say
Recent research by Gartner suggests outsourcing is still popular and growing. The market no longer sustains the double-digit growth of five years ago but sustained 5.2 per cent growth last year. The main areas driving this growth are:
IT utility services – consolidation and centralisation of commoditised systems are the main drivers for many organisations.
Global delivery – offshore outsourcing service providers expand capabilities beyond application services into business process outsourcing and infrastructure management.
Renegotiations – many long term deals are coming to their end and Gartner sees a trend towards alignment of outsourced IT operations with the evolution of business objectives as a key drivers, as well as more global capabilities and bringing the IT service cost in line with market-driven pricing.
Gianluca Tremacere, Gartner principal analyst, says European organisations are becoming more sophisticated in their approach to outsourcing. “More organisations are tending towards selecting multiple suppliers. At the infrastructure level, consortia of multiple suppliers are becoming popular and the average number of suppliers companies say they are using is four.
“Cost optimisation is definitely still one of the major drivers. The deals we are seeing now are business executive driven. But deals are still being done in an ad-hoc way. Over 56 per cent of companies we surveyed in April 2006 said they had no formal outsourcing strategy in place, while only 30 per cent did. And very often the time and focus of outsourcing benefits don’t have a top-down management approach; a bottom up one will stifle effectiveness and innovation.”
Tremacere also expects the title of ‘chief outsourcing officer’ and the building of skills within such a role to emerge. This role needs a wide spectrum of skills, including “technology and business know-how, relationship management capabilities and the support of the board.”
Eamonn Kennedy, principle analyst at researcher Ovum said multisourcing had become more fashionable in the last few years, as concerns of vendor-lock in, supplier apathy and market forces have made some CIOs think twice about signing multiyear, multimillion single supplier deals. He says it is important to balance the need to drive value from an outsourcing deal with the supplier’s need to make a profit.
“The danger is that you use too much stick and not enough carrot. Multisourcing places more emphasis on better supplier management and keeping the vendor in tune with long term strategic and operational plans.”
Kennedy says incentivising outsourcing suppliers and playing them off against each other is useful to a certain degree. “There is a certain scepticism within Ovum about claims made about business-based pricing models. The reality is that IT outsourcers are delivering IT services to the client. This relationship needs to be maturely understood by both.
He adds: “There is an extremely diverse range of requirements and single supplier sourcing has not gone away. It still happens and makes sense for some organisations. But at the same time, some are well set up for multiple vendors.”
“We have the maximum number of suppliers we can manage effectively. But also, and perhaps more importantly, we need the right number of suppliers to maintain a competitive market for the services they run. In some areas, we have a strategy to build up a number of niche players in the market, otherwise we are relying on one supplier. A good example of this is Thales. Its entry into building train time information systems means it has the capability to run the live departure board for the NRE website. It operates in a market in which there was only one player previously. And, having demonstrated its service delivery, it now has three contracts with us.”
IT services provider, Thales UK and Britain’s largest rail freight operator, EWS, recently formed a strategic alliance. At the beginning of the year they won the contract to manage and distribute information regarding train service alterations, engineering works and train operating companies’ products and promotions. It also provides information to the NRE call centres, website and other channels including its speech recognition TrainTracker service. Scoggins says: “It is also building the new online journey planner launched this summer and it runs the central national rail communications centre.”
The national rail communication centre is responsible for updating the dynamic content of the UK’s third most popular website – www.nationalrail.co.uk – which receives some 55 million visits a year, as well as updating the four NRE contact centres, which between them answer more than 43 million customer enquiries a year. The centre receives information and then distributes it to various recipients including the BBC and other media outlets, various transport information providers, Network Rail and the train operating companies. The service provided by the Thales/EWS Alliance operates on a 24-hours basis, 365 days per year providing the focal point for the provision of passenger information.
“What we’re trying to do is move toward a number of long term relationships with partners we trust and give more work to,” Scoggins says. “Contracts are aligned to incentives related to achieving our business objectives and it’s up to the supplier to outperform the minimum standard. If they demonstrate they can deliver over and above that then they get more work.”
He says that playing to a supplier’s strengths is essential. “For example, in the call centres, where we have four internet systems, we only use one for each application, whereas they compete for call volumes. Over the history of each contract that effectively means moving those volumes from supplier A to supplier B and back. These contracts last for as long as eight years. So, although service standards are set to rise gradually throughout the contract, if volumes grow we can use competitive encouragement to deliver our services to the customer at the level of best practise. This strategy has improved performance, which is evidenced by the fact that 2005/6 was the best year ever for call-centre service levels and the previous year was the best before that,” he says.
Despite heading up a vast, virtual company Scoggins says there is still pressure to drive business improvement and success.
“That’s what attracted me to the job,” he says. “When I joined there was no real self-service provision for the customer. NRE was a very big, outsourced call centre with virtually no other provision for finding information. I saw this as a huge opportunity driven by two things. The first was that customer needs should be met by whichever channel is most convenient for them; the second was our call centres, which have the most volatile volumes in Europe.”
But he urged that IT services be outsourced strategically. He says: “The internet and other self-service channels are easier to manage and more scaleable. Their provision allows customers to migrate from the call centre to the web to save on our cost of ownership. NRE is always seeking to be proactive and do new things, like the speech recognition technology we use with our telephone TrainTracker service.
"We always innovate and encourage our smaller suppliers to do the same, because we only have a small team of core staff, who are very good at being innovative themselves"
Chris Scoggins, CEO, National Rail Enquiries
“It is the most sophisticated mass-market speech recognition service in the world. And we launched a new one in August with a whole breadth of new features, which was actually our second world-first. The first was the real-time information system we launched with Thales.”
Proactive not reactive
Outsourcing does not necessarily mean service by rote. Soggins says: “Not many countries have centrally coordinated train information and certainly not one with multiple, privately owned train companies and train services. The TrainTracker service launched in August combines real-time information into its journey planner facility. This has to take into account real-time train timings and the state of the network to advise you on your journey. The balance is very much proactively towards technology application rather reacting to it, as we have done with voice. We always innovate and encourage our smaller suppliers to do the same, because we only have a small team of core staff, who are very good at being innovative themselves. This enables us to encourage our suppliers to be faster off the mark and makes them more willing to generate new ideas. We do this by maintaining a balance between big, solid players and smaller, more nimble ones.” But Scoggins is no micro-manager, instead preferring to drive strategy and reinforcing the business IT alignment to his core management team.
“But a large part of my time is externally focused,” he says. “I spend a lot of time talking to the train companies and other agencies, like National Rail and the Department of Transport about relevant parts of the future railway strategy when it comes to passenger information. Our chief quality officer and their counterparts in operations are extremely important, particularly in terms of proactively managing and developing service improvements for our shareholders.”
He adds: “I regard our outsourcing suppliers as part of our team. I encourage my guys at headquarters to manage our relationships with them, because it’s still our brand and our customers, so we know best how to manage it. I don’t go to service revenue related meetings, but I engage with the suppliers’ managing directors to make sure our business stays high up their customer agenda. My job is getting my team excited and encouraged to do the job in hand.”