A link to an article, I co-authored with Jones Lang LaSalle's Michael Jordan (@thetravellingmj), Greening of the Supply Chain.
Serco buys Indian outsourcing firm Intelenet
Serco has paid £385m for the Mumbai-based business process outsourcing company Intelenet Global Services.
Intelenet operates in India’s private sector Indian market as well as globally.
No decision has been taken on rebranding the business but integration within Serco is expected to save the company up to £35m a year in overheads, according to a Serco statement.
Intelenet operates 34 centres in seven countries and has more than 32,000 employees, 28,000 of which are graduates.
It was founded in 2001 as a joint venture between Tata Consultancy Services and the Housing Development Finance Corporation (HDFC) in India. In 2007 a management buy-out was completed, resulting in the business being majority-owned by Blackstone Group together with Barclays, HDFC and Intelenet’s management team.
Intelenet competes against other BPO providers and consultancies including Aegis, EXL, Infosys, Wipro, Accenture, IBM, Convergys, Teleperformance and Xchanging.
Around three-quarters of Intelenet revenue is generated from international contracts. The remainder comes from domestic Indian business. Intelenet has an order book of around £500m over the next five years.
Revenue for the year to 31 March 2011 was around £170m, thanks to an annual growth rate in the past three years of 12 per cent, according to the Serco statement.
Adjusted operating profit for the year was £19m. The profit margin has averaged around 12 per cent over the past three years.
How do you explain when things don't go as we assume? Or better, how do you explain when others are able to achieve things that seem to defy all of the assumptions? For example: Why is Apple so innovative? Year after year, after year, after year, they're more innovative than all their competition. And yet, they're just a computer company. They're just like everyone else. They have the same access to the same talent, the same agencies, the same consultants, the same media. Then why is it that they seem to have something different? Why is it that Martin Luther King led the Civil Rights Movement? He wasn't the only man who suffered in a pre-civil rights America. And he certainly wasn't the only great orator of the day. Why him? And why is it that the Wright brothers were able to figure out control-powered, manned flight when there were certainly other teams who were better qualified, better funded, and they didn't achieve powered man flight, and the Wright brothers beat them to it. There's something else at play here.
An IT outsourcing video- which highlights ideas which are influencing CRE buyers.
How to report the impact of services contracts on gross margin percentages is always an interesting debate. Today's WSJ interview of Xerox's Ursula Burns has interesting detail on how she views the issue at Xerox. Xerox's business has shifted from hardware sales to services. Today, 50% of Xerox business is from BPO-type services. Property companies have seen a similar shift to more labor intensive, services contracts. Ms. Burn's views on the shift is an interesting read.
WSJ: Services is a hot space right now with lots of competitors, big and small, entering the realm. How do you protect your margins?
Ms. Burns: There are two different types of services that we're concerned about. One is a set of managed print services that are really close to the document technology, so that's our Document Outsourcing business. Dell and Lexmark [International] are getting there, but we are the largest in the business. We have $3.3 billion in the business and growing.
The next part, the fastest growing space for us, is business process outsourcing. This diversified BPO market is ripe for innovation and consolidation, which is why we acquire a little bit every year.
WSJ: As the company moves more and more toward services, should we expect lower gross margins?
Ms. Burns: Yes. You will see higher operating margins. The only way to logically think about this business is to think about it from an operating margin perspective. We will continue to report on gross margin because people still want to hear it. But, it would literally be like speaking in French when everyone else is listening in English.
In my blog last week, I focused on the ways a service provider can help create a bad outsourcing deal. However, a buyer can behave in ways which can derail a CRE or FM outsourcing contract. The attached checklist is a good way to insure your outsourcing deal does not meet expectations. So if you want to create a train wreak in corporate real estate and facilities management do the following:
If you’ve been involved with outsourcing long enough, and if you’ve paid attention to the basic message of Vested Outsourcing, then then you probably know that service level agreements—SLAs—are somewhat lacking when it comes to forging collaborative and transformative relationships.
CHICAGO, April 14, 2011 — Companies that pursue sustainable sourcing and supply chain strategies may initially be focused on reducing carbon emissions and enhancing their corporate reputation, but they typically learn the real benefits are in enhanced performance, risk mitigation, and increased consistency, according to Jones Lang LaSalle’s latest Mind of the Corporate Occupier series that explores the challenges facing corporate real estate executives. Jones Lang LaSalle Corporate Solutions experts are partnering with a wide base of procurement and sourcing executives to develop value-added facilities management programs.
“Since the supply chain accounts for a large percentage of a company’s total carbon emissions, more and more companies are requiring their suppliers to engage in sustainability practices, and this process is working its way through the entire value chain,” said Bryan Jacobs, International Director at Jones Lang LaSalle. “In addition to the environmental benefits, these programs also contribute to long-term business goals by combating variability, generating performance improvements, and mitigating risk.”
The Carbon Disclosure Project — a non-profit organization that is exploring how more than 3,000 organization around the world are responding to the call for action and transparency in managing carbon and climate change in their supply chain — revealed that 86 percent of companies generated commercial benefits through strategic sustainable procurement practices in 2010, compared to only 46 percent in 2009.
“The greening of the supply chain is increasingly gaining C-suite attention as public scrutiny of corporations’ enterprise-wide sustainability practices grows and companies realize they can put their procurement power to good use,” said Michael Jordan, Senior Vice President of Sustainability Strategy at Jones Lang LaSalle. “In addition, the risks facing suppliers that ultimately threaten sourcing activities are increasing, as is pressure from investors to disclose supply chain risk.”
According to Jordan, some of these risks include the negative impact of climate change on the availability and cost of natural resources and the regulatory risk that will place an added time and cost burden on companies, especially those in high carbon footprint sectors such as manufacturing, agriculture, air transport, building materials, and forestry and paper.
These risks and concerns are driving joint process improvement efforts between companies and their supply chain partners to improve collaboration and efficiency, reduce carbon emissions and ultimately generate cost savings for members and suppliers. Two basic tenets have been developed that have proven successful when developing a supply chain sustainability program:
• Engage suppliers: Clearly communicate what, why and how – Suppliers need to know why customers want them to provide data and how they plan to use it both now and in the future. Open communication greatly increases supplier support and opens the door for mutual savings opportunities. Significant benefits can been realized from developing a relationship management strategy that learns from the leaders and encourages and informs the rest.
• Use carbon as procurement decision criteria: Member companies agreed that the most important priority is to create criteria that can also take into account the actions suppliers are taking to improve their climate change performance, and not just their emissions record. The impact of carbon and climate change on business in the future may be an important screening factor as to who the company does business with. Those companies that embed this into their procurement functions are ultimately more likely to gain the greatest benefit.
Sustainability in Practice: Industry Leaders Leading the Charge
According to a recent McKinsey global survey, reducing carbon footprint and creating a greener supply chain has increased substantially as a key priority for companies, with 16 percent of respondents citing it as a top supply chain management goal for the upcoming five-year business cycle compared to only three percent citing it as critical within the past three-year business cycle.
Leading-edge companies are making significant strides in developing industry standards for supply chain sustainability. For example, Jones Lang LaSalle recently served on a committee that developed a Supplier Environmental Sustainability Scorecard for The Procter & Gamble Company. Designed to measure and improve the environmental performance of its key suppliers, the scorecard assesses the company’s suppliers’ environmental footprint and encourages continued improvement by measuring energy use, water use, waste disposal and greenhouse gas emissions on a year-to-year basis.
P&G’s Supplier Sustainability Board, consisting of more than 20 leading supplier representatives from its global supply chain—including Jones Lang LaSalle, are encouraged to use the scorecard in their own supply chains.
“Environmental sustainability is a responsibility we all share,” said Rick Hughes, Chief Purchasing Officer at Procter & Gamble. “The scorecard is a tool we can leverage together to monitor and measure our improvements at reducing our environmental footprint.”
Another example is IBM, which has one of the largest and most complex supply chains in the world spanning 28,000 first-tier suppliers in 90 countries. The company recently announced new management system requirements to advance sustainability across its global network of suppliers. IBM’s first-tier suppliers are now required to establish and follow a management system to address their corporate and environmental responsibilities.
Top Ten Best Practices for “Greening the Supply Chain”
1. Use environmental analysis as a catalyst for innovation;
2. Focus on a list of suppliers prioritized by environmental impact;
3. Manage environmental impacts where they occur—ideally before they occur or get worse;
4. Focus on the business, not social, value that green supply chain management creates;
5. Align green supply chain goals with business goals;
6. Evaluate the supply chain as a single life cycle system;
7. Encourage engagement and collaboration among all key stakeholders and provide training where appropriate.
8. Ask suppliers the right questions. The following questions are common:
• Details regarding their corporate environmental goals as well as the policies and procedures they use to ensure minimum impact on the environment;
Environmental performance awards, recognition, and certifications;
• Participation in Carbon Disclosure Project, Global Reporting Initiative, or similar efforts;
• Internal incentive and governance programs regarding environmental performance at the Board of Directors and C-suite level;
• Greenhouse gas emissions programs
• Ability to identify opportunities for eco-related tax incentives or utility company rebates.
9. Listen to the ideas of suppliers for how to assess performance in different industries. Unilaterally announcing a new set of sustainability ratings to suppliers without taking industry differences into consideration may lead to missed opportunities for improvement and other negative ramifications.
10. Utilize technology to support sustainable sourcing efforts.
Jones Lang LaSalle developed its proprietary OneView Finance (OVF) Sourcing Module for this purpose. With more than two dozen of the firm’s largest facility management client teams utilizing the technology, OVF Sourcing has more than 1,200 client-facing supply contracts initiated into the system across the globe, with more than 20,000 unique supplier records in its database.
By rating supplier sustainability within this database to generate an overall supplier performance score, green suppliers be connected to green clients, enabling them to better support their corporate sustainability goals.
“This global system and its related processes deliver a competitive advantage to Jones Lang LaSalle in both our execution with current clients and selling capabilities with prospective clients,” said Derek K. Driggers, Senior Vice President, Strategic Sourcing at Jones Lang LaSalle.
“When corporations collaborate closely with their supply chain partners on energy reduction efforts, increased efficiencies via automation, and thoughtfully selecting the right projects that lead to the highest return on investment, the quantitative and qualitative benefits are exceptional,” said Jacobs. “The benefits of significant reductions in operating and capital costs, risk, inventory levels, and speed-to-market, coupled with improved customer service and higher product and service quality, add up to a strong case for investing in supply chain sustainability programs.”
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 60 countries from more than 1,000 locations worldwide, including 185 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $41 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.