So what is the value of SIAM?

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With the large number of different suppliers, offering IT for businesses, with trends like cloud computing and the consumerisation of IT this will increase further. Although multi-sourcing is nothing new it used to mean managing a few suppliers, but now it can run into the high double figures and even more for large companies.

Companies like BP have very complex ecosystems of IT suppliers and manage them with an iron rod. Read about BP's multi-sourcing strategy here.

But not everybody can do so a new industry has grown around this known as Service Integration and Management or SIAM for short. Traditional multi-sourcing contracts would often have a prime supplier that subcontracts or manages other suppliers. SIAM tries to change this through an independent function that does the management and integration. This is often outsourced itself.

Today there are businesses set up that just provide this. End user businesses and service providers want to understand how to evaluate it. Simon Durbin, who leads Information Services Group's (ISG) UK SIAM practice wrote this guest blog to try and explain.

Evaluating the unknown


By Simon Durbin, ISG

"As happens with any new concept, there is inevitably a lot of debate, discussion and practical learning that takes place in the early stages, followed by a period of evaluation. SIAM is no exception and continues to mature and develop and there is no universally accepted approach for evaluating it.

SIAM exists to manage the complex dynamics of service demand and supply. It is about delivering value to businesses, which want to maximise the value from their service providers (whether internal or external) and ensure that services are aligned to business needs.

So what is the value of SIAM?

A traditional business case for SIAM cannot be created in isolation nor can it be separated from the services being managed. The cost of performing SIAM has to be evaluated as part of the total business case for a strategic sourcing or service initiative.

For example, when moving away from a Prime model, the 'hidden' integration cost of the Prime provider cannot be ignored. All too often, clients will move to a multi-source model and fail to consider the integration effort required across the new supplier landscape. When the issue is discovered later, the 'missing' SIAM capability is perceived as an extra layer and is very hard to justify.

The value of SIAM can be demonstrated by metrics that focus on customer value and end to end service performance. The 'watermelon service level' phenomenon is well known (green on the outside, red on the inside). Avoid this by selecting service measures that look at the 'whole system', not just the individual components, and then design the service as a whole to meet these requirements (including the agreement of aligned supplier service levels).

The final area of value to consider is the business interface. SIAM is not exclusively about supply, although it is often positioned as an approach to managing a complex multi-source environment. An approach that does not invest considerable effort in the customer (demand) side of the equation is missing the whole point. Suppliers and services exist for one purpose - to satisfy customer needs and deliver value to the business. Businesses will never value something that they cannot see and don't understand, so use the metrics to give visibility to demand, consumption and performance.

Holistic view

SIAM cannot be looked at in isolation. By definition it is  all about integration and has itself to be integrated across the demand-supply chain. It all starts with the customer. End to end service metrics are critical to define and then manage the services. SIAM is a mandatory consideration in any service or supplier strategy - ignore it at your peril.

Simplicity is key with both implementation and evaluation. Aim to be clear about what you're trying to achieve in the first place, and then evaluate accordingly.

Simon Durbin is a Director with ISG and leads the SIAM practice in the UK, working as a key member of the ISG global SIAM practice. He has over 25 years' experience in IT service and supplier management working as both a practitioner and consultant for FTSE 100 and Forbes 500 companies.  For the past five years he has specialised in advising on Service Integration and Management."

Are Indian suppliers IBM Global Services' biggest threat?

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India's IT services industry has grown fast, but who would have thought that TCS is now IBM Global Services' biggest threat.

That's what one management consultant told me last week. I was writing an article about talk of IBM reducing its workforce in India. IBM is one of the biggest IT services firms in India in terms of workforce and even if it is true that it will cut about 50,000 staff there, it will still be very big with about 100,000 people.

Read my article here.
I have has quite a few emails from readers about this.

But the industry is changing and the provision of low cost full time equivalents is no longer the way to grow and profit for IT services firms. They want non-linear business models and they are doing this with less labour intensive services that harness cloud and automation technologies for example. At the same time customers want services using the latest technologies.

For example Scandinavian IT services firm Cygate has expanded its business without needing to recruit more staff by using automation software from IPSoft. In 2010, the company, which serves more than 1,000 customers including some of the biggest corporates in the Nordic region, was experiencing 20% growth in sales. This meant the company needed to add resources or risk service levels deteriorating. But just adding manpower would have reduced its margins.

So you would think the Indian suppliers who grew their businesses through offering highly skilled IT workers at a lower cost to Western corporates, would struggle the most. But it seems this is not the case. In fact it could be another phase of growth for these firms.

Mark Lewis, outsourcing lawyer at Berwin Leighton Paisner, says, "TCS, India's biggest IT services supplier,  is achieving both linear and non-linear growth. It is still recruiting heavily in India and is building its global workforce at the same time," said Lewis.

While IBM Global Services is always a default consideration businesses outsource IT it is not winning as many deals as it used to. Peter Schumacher, Value Leadership Group, said conversations with large corporates in Europe reveal that Indian suppliers are now  now IBM Global Services's biggest competitor, and TCS is the biggest of these.

The Indian advantage of lower cost skills may have diminished overtime because western IT services firms have built huge offshore workforces of their own. At the same time wages in India have increased. But during the hay day of low cost IT services companies like TCS, Infosys, Wipro and HCL have build strong businesses and developed domain expertise, by moving beyond pure IT services to business services using IT.

The other interesting point is that western IT services forms have shot them in the
Have the western IT services firms let the foot by reducing the fear associated with offshoring. There was a time that offshoring IT was a brave and perhaps a risky strategy for a big business. But companies like IBM have used offshore staff and as a result made it the norm for outsourced service delivery.

Today service levels from offshore and western suppliers are little different and CIOs will make decisions based on the pure business value, rather than perceived risks.

"In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy," says Schumacher.

Is HP lining up the sales of the shell of EDS?

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HP's decision to split the company in two, with its consumer computing and printing departments separated from its software, business servers and IT services operations.

The IT giant is not shy to get itself in the headlines. Back in 2008 when it paid $13.9bn for IT outsourcing pioneer, heads turned and the column widths followed. The same happened a few years later when the value of this acquisition was reduced by almost $9bn.

The news that HP is splitting the enterprise business, including services, from the consumer business triggers a new era in the former EDS business.

I wrote an article about the future of the services business following the split. Here it is.

I have since had conversations about this and quite a few people are describing the split as the first stage in massive restructuring and the sale of the services business.

One source, a former EDSer who now works for a large competitor, says that HP services has been picking up quite a few big deals recently. He said it has also recruited people from Computacenter and recruited former EDS people that had been let go.

But who would buy it and how much would it cost?

The IT sector has changed with digital technologies transforming how businesses receive and use IT and there are lots of suppliers in the sector that are ahead of HP Services in terms. For instance the Indian suppliers have gone from strength to strength and continually manage to report double digit sales growth. They have kept up with digital developments.

Capgemini to breed pigeons for messaging strategy

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This week Computer Weekly wrote an article about Capgemini's 2014 World Payments report.

The report, which was carried out by Capgemini and RBS, does just as it says on the tin and looks at the world payments industry.

This includes all the latest and greatest mechanisms for sending financial transaction messages across the world.

We think Capgemini's press team should read it to learn about the fantastic technologies available and of course l'Internet, as the journalist that covered the story was shocked when she requested a copy of the report on a Wednesday. The response on Friday morning that arrived VIA EMAIL, was that they were sending one by post.

Computer Weekly and Capgemini are installing aviaries as we speak to  house pigeons to help us communicate in the future.

Apple to save Microsoft

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Could the creation of a tablet that business love but dare not speak its name as a corporate device be Apple's greatest gift to Microsoft?

I was chatting with a contact today about the company he runs that provides corporate software  that enables executives to share and access information via tablets.

Diligent's Boardbooks software has enabled businesses to replace hundreds of pages of documents needed to prepare for company meeting.

When I wrote about the supplier in December 2012 it only supplied its software to Apple's iPads. The iPad at the time was the only tablet that was of the right standard to support it.
But almost two years on and things have changed. Well Windows 8.1 has changed things.
Charlie Horrell, managing director Europe at Diligent, told me that since the release of Windows 8.1 devices more interest has been stirred.

Businesses are now looking at the software as an enterprise app rather than one just for board members. The compatibility with Microsoft estates makes it an attractive option, and now that Windows tablets have improved it could result in strong demand.

For example Matthew Oakeley, global head of IT at assent management firm Schroders, told me last year that he does not think iPads will never be a true corporate device because they do not integrate seamlessly with Microsoft.

"I bet a lot of people bought iPads for work but don't use them for work," he told Computer Weekly in a recent interview. "The real problem is that, if you run a Microsoft Windows estate, you want something that can talk to it."

Oakeley said the lack of interoperability between Apple and Microsoft was unlikely to change.

So Apple's creation of a tablet attractive to the enterprise could be providing the perfect platform for Microsoft to become great again.







More insights not more data

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It is hardly surprising that businesses are obsessed with data. The online activity of consumers is constantly tracked whether at home or on the move.

Businesses want to know what people want and when they want it so they can make them an offer they can't refuse. Businesses are also collecting masses of data to help them devise their business strategies.

But to succeed it is much more than just being able to collect the data. Mindtree is a tier two Indian IT services firm that specialises in helping its business customers make better use of data. The company works on the Indian biometric ID project, which involves the details of 1.2 people being collected. So it know all about the collection of, but here in this guest blog post Mark Wilsdon and Soumendra Mohanty of MindTree explain a misconception about data.

Smart Data, Not More Data   
  
By  Mark Wilsdon and Soumendra Mohanty

"One of the biggest misconceptions about the data companies collect is to think that more is better.  That somehow each incremental piece of data collected adds detail to an insight. In reality, though, it is not the amount of data that matters.  It's how you use it. The question every business should ask itself is this: what questions can be answered by the data it's collecting?

According to a recent article in Management Review from the MIT Sloan School of Management, a typical company doubles the amount of data it stores every two years. The good news is that this explosion of data opens up a lot of possibilities. However, possibilities and insights are rarely found at the surface of this ocean.

Being smart with data is not about collecting a million tweets.  It is about the in-depth analysis of tweets, including analysing hashtags containing metadata around the device type, geographic location, time and the context of the conversation. In these insights are the true value of data, allowing companies to push information to customers that is context-sensitive and meaningful. 

Companies that are using data to its full advantage look at it in three ways in order to pull as many insights as possible:

An individualistic approach is mostly gut-driven. It relies on analysts who have spent a long time in a particular domain, finding answers that require access to all types of data across various systems.

Process-centric is a disciplined approach to data. It involves consistently employing common processes, and the reuse of components.

A Data-driven approach identifies evidence-based data analysis traits. This pattern requires deeper data analysis than the two approaches above, as it requires an understanding of context, and the application of sophisticated algorithms to identify patterns.

With such a large volume of data, it is impossible to use all of it to develop values and insights. Because of this, it is extremely important to focus on smarter data rather than more data. By searching, visualizing, analysing and distilling insights from the data you have, you can unlock its essential value.

Now that all of society has essentially moved online, we are witnessing a shift from traditional business models to digital business ones. As this occurs, the way customers engage is more important each day.   By focusing on context-sensitive and meaningful insights, companies will effectively utilise the relevant data that is available to them.  With more and more data being made available every minute, smart use of data is the sole path to success for companies of the future."  

Scotland's independence will open new market to outsourcing

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Imagine all the new IT contracts up for grabs when an independent Scotland starts putting together its public bodies.

Scotland shares over 200 institutions as part of the UK, which might have to be split if more than 50% of votes say 'yes' to independence.

In April I interviewed Steria's UK head John Torrie about its merger with Sopra. He told me at the time the deal could also help Steria expand into Scotland, where Sopra has a bigger business.  So suppliers see the opportunity.

A few weeks ago I didn't think there was any chance that Scotland's electorate would vote for independence. But today I feel like it is almost inevitable.

I don't pretend to be an expert in economics and I am normally one for countries working together and unifying. I think the European Union is a good thing for example.

But there is something about the Scottish independence debate that has made me change my stance. Not on Europe, but on it being better for the Scottish that Scotland is in the UK

I think if I was voting in the referendum today I would vote yes even if it is not the best thing. This would be driven by mistrust of Westminister.

Scotland has a population a little over 5 million out of a total in the UK of over 64 million. It accounts for about a third of the land area. OK you might say half of the land is uninhabitable, but this is not the case if you are a wind turbine or a wave power generator.

Imagine 5 million people, passionate about their country, working together for the common good. Rather than 64 million people all moving in different directions.

The desperation of the main UK party leaders, and Nick Clegg, to stop the "Yes" campaign snowball through the offer of more devolved powers is just reminding people that it was the PM that denied voters that option on the ballot paper.

And the visit of the party leaders to Scotland will probably just turn more people turn away from the 'no' campaign. Three of the London establishment coming to tell the Scottish that they love them, that won't work. Being half Scottish myself with relatives north of the border I have a good feel for how many will see this.

David Cameron's declarations of love for Scotland are certainly not returned with only one Conservative MP in Scotland.

The UK electoral system, first past the post, leads to what is often known as an elective dictatorship where most people are stuck with a government they did not vote for. This is the case in Scotland.

Whatever happens at least it will be the Scots that decide rather than a government in London that hardly any of them voted for.

What's all the worry about? The cloud is more secure

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In the on-premise versus in the cloud debate it is always the subject of security that swings people in favour of on-premise.

People feel safer if their software is on their own premises, but does that mean it is safer. Everybody is connected to the internet so bricks and mortar is no protection.

You could argue that if it is on your own premises you have better control of physical security.

Anyway the point of this post is to highlight research from  analyst firm Pierre Audoin Consultants (PAC), which states that: "Cloud [is] more secure than on-premise IT"

"Rapid development in cloud-based security, including physical security within the data centres, means that, for many firms, it is more effective and cost efficient to locate IT systems in the cloud than on on-premise equipment. CIOs and CISOs should consider the cloud for many of their IT systems, while for SMEs and local government PAC recommends that it should be the default architecture," said PAC.
 
"Security is often regarded as an inhibitor to cloud adoption," said Duncan Brown, research director for cyber-security at PAC and the report's author. "But today's cloud-based security capability embeds state-of-the-art cyber and physical security that most company would find prohibitively expensive if implemented on-premise."

With the outsourcing industry being transformed by cloud computing IT service providers can differentiate through adding value in areas such as security.
 
PAC said cloud service providers (CSPs) were initially slow to understand the importance of security and associated privacy issues. If this is the case they must have been meeting potential clients with ear muffs on.

 "...in the last year PAC has noted a broad shift in CSPs' marketing, positioning and product development strategies driven by two major trends. Firstly, security in the cloud is now a much more reliable and viable alternative to in-house security. Secondly, leading US-based CSPs are investing in their European credentials. Meanwhile non-US CSPs, particularly those headquartered in Europe, are making a virtue out of having datacentres based in Europe.
 
There are good reasons to take a cloud-based approach to security. Cyber security is highly complex, requiring deep technical skills. It is therefore expensive, the cost being exacerbated by a global shortage of skilled professionals."

Also read: Allaying the AWS security concerns: How the cloud became more secure than on-premise.

Are banks building an IT services community to support their digital drive?

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The big banks are throwing money and advice at small IT firms in the digital financial services start-up sector.

While there is a strong argument that investing in start-ups in the digital sector is savvy investment, with just one Facebook enough to pay huge dividends, the benefit for banks in driving the sector is probably more related to technology strategy than investments.
Every other month a bank seems to throw its weight behind a so called fintech IT start-up incubator. They provide capital and other resources such as premises and mentoring. They usually take a stake in the companies they support.

Banks cannot spend money developing digital services. These projects do not guarantee success and are often experimental. It is much better to have suppliers do this work for you.
It is even better if these small developers do it with the knowledge that if they get it right banks will buy it. And because banks are advising and funding these companies surely they will develop what the banks need.

I wrote an article yesterday about this, which you can read here.

There could be numerous benefits from banks such as investing in the future Facebooks and having access to digital know-how and products.

Banks are increasingly outsourcing work as internal resources are tied up with maintaining legacy systems.  Banks don't want to spend a fortune building up digital teams that create hit and miss services, but want third parties to do it.

This could be the perfect way to build a trusted digital IT services community that can cater to the digital needs of banks in the future.

Large IT suppliers are using small suppliers to buy their drinks

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Large IT service providers are hanging around off licenses to get small IT suppliers to buy their cans of larger.

Well sort of.

The UK government has set lots of targets for departments to get them to spend certain amounts of money on SMEs which inevitable means less for the big suppliers.

In a reverse in roles it is no longer the young looking adolescents asking their bearded mates or Dave's uncle to go in the off license on their behalf, but the big established IT suppliers getting the public sector contracts by talking SME suppliers into working with them as a foil.

So according to analyst company TechMarketView the big boys are trying to use the small players to get the business.

"As these 'newer entrants' make their mark, the larger SITS suppliers are trying to reassert themselves. Notably they are playing the 'working with larger suppliers can bring significant benefits' card."

Hear is an article I wrote about the TechMarketView public sector IT services sector report.







Controversial immigration loophole under legal spotlight

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A court case that I covered this week could bring the immigration strategies of overseas businesses into the spotlight.

Intra Company Transfers are used by multi-national businesses to bring staff to the UK from non-EU countries.

The IT industry is the biggest user of this method of bringing in staff, which is seen by many as a loophole in immigration rules.

Indian IT service providers bring thousands of staff from India to the UK every year to work on IT services contracts. These workers cost less than their equivalents in the UK band it allows the Indian suppliers to do business at a lower cost.

But there are rules. These include a minimum pay threshold designed to stop cheap labour being brought in an to allow UK workers to compete, as well as the rule that states a person can't be brought in if there is a UK alternative.

The case in question involves a UK man claiming he was discriminated against by Indian IT services giant Tata Consultancy Services (TCS). Court papers reveal that he has evidence that TCS is breaking the ICT rules when bringing in staff.

IT professionals in the UK campaign against the use of ICTs because it makes it difficult to get work.

In this case the claims do not involve IT staff but admin staff and some managers. He claims to have evidence of over 1000 workers that are in the UK despite not meeting ICT rules.
 According to freedom of information requests from website BackTheMac, which campaigns against abuse of the ICT rules, there are 35,565 ICTs in the UK from India out of a total of about 60,000. IT workers account for a large proportion of the ICT numbers.

In its latest figures, TCS revealed it has 276,195 global staff with 92.3% being Indian.
TCS has a bit over 4000 British staff but has over 10,000 UK-based staff.

Although the case is not about the alleged breach of ICT rules it will put them under the spotlight. TCS strongly denies the claims and the evidence, said to be on a TCS database, is not in the public domain.

This will be an interesting case to watch. Last year another Indian firm, Infosys, had to pay a $34m fine to US authorities in relation to breaking visa rules.

Can social media giants move money around better than banks?

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I have written quite a lot about the new competitors in financial services. Large internet companies as well as social media giants are looking into how they can provide transactional financial services.

In the past I don't think people could see beyond traditional players for these services but the finance sector is so dependent on IT today and some IT based companies have better technology. Add to this the distrust of banks and the desire of regulators to increase competition and you have a real opportunity for alternative financial services firms.

A recent report that gamers in Japan can buy titles on Nintendo's eShop by tapping their contactless payment cards against their Wii U controllers. Whatever next?

In the guest blog post below Tony Virdi, head of UK banking and financial services at IT services firm Cognizant, gives his view on the changing landscape of payments.

The changing face of payments

By Tony Virdi
 
"Over the years, we have transitioned from bartering to tender and cash, moving into cheque and card payments, with many countries now also embracing online and mobile payments. In fact, the value of goods and services purchased with a mobile device is expected to almost triple from £4.8bn in 2013 to £14.2bn in 2018, according Centre for Economic and Business Research. Indeed, this fast-paced evolution has even extended into social network payments with the recent announcement that Facebook is seeking regulatory approval in the UK to offer mobile payments through its platform. And just this month, Denmark announced two cashless initiatives: the ability to pay with mobile phones in shops nationwide and the agreement to run a pilot in which only mobile payments are allowed and shops could refuse to accept cash payments.

In order to keep up with alternative payment providers, those players in the payments ecosystem who do not look to the future, risk stagnating as consumers increasingly seek alternative, more convenient and immediate ways of making payments. But what are the market conditions changing the payments landscape and which are the current priorities of payment providers and processors?

In a recent report published in conjunction with the Financial Services Club and VocaLink, we explored the state of the world's largest payment infrastructures and how market conditions are changing the game. Overwhelmingly, the evolution of technology and in particular, the rise of online and digital channels is having significant impact. As cheque payments are moving towards possible extinction, organisations now notice the importance of mobile and smartphone usage, social networking and collaboration. In addition, security concerns around cloud computing seem to be lessening - according to our research, security has been replaced as the top priority by mobile, with 79% of respondents. As a result, the cloud is used by many of the most forward-thinking organisations who are already putting these observations into practice.

While these mobile, digital and social changes are mostly impacting the front end of retail payments, there is also an important role to be played in the back-end integration of new payment channels. Co-operation is  now key and this involves all parties from banks, merchants and card issuers to payment processors, mobile operators and handset manufacturers working together to develop a multi-channel payments process that is user-friendly.

In addition, the report highlights that regulatory change remains at top on the agenda and is currently the biggest focus for the world's largest payment processing infrastructures. Over 50% of banks consider this a priority as Basel III, the Banking Union, the Bank Reform Bill, Dodd-Frank and more are all hitting the banks hard this year. This is also true for the wider industry. The spotlight on payments resilience, the implications of ring-fencing on bank payment systems and the potential for account number portability are all pertinent issues in this market. But, in a global and digital world, the future lies in innovation. Those organisations that use analytics and customer insight will be the winners.

Analytics technology allows organisations including merchants, card issuers, banks and technology and service providers to understand the spending and payments habits of consumers. Such valuable insight ensures that any new channels rolled out match customers' habits accordingly.  Following such a process will enable organisations to innovate and become more competitive, which is critical given the rise in alternative players entering the market. Most recently, Holvi, PayPal, Amazon Payments, e-Wallet/smartphone services and Square have emerged, along with the arrival of Facebook and Apple into the e-money business.

Customer insights can be gleaned by gathering data from various different sources to create a 360 degree view of the customer. Real-time insights about each customer are based on advanced statistical analysis and machine learning techniques on very large datasets of granular payment data. It is this granular data that enables organisations to better understand their customers and tailor their communications and processes in a more personalised way, rather than relying on old segmentation methods. As each customer's response, feedback or behaviour is processed, it is analysed to provide inputs about campaign effectiveness, brand loyalty, changing spending habits and profit/loss.

There is a huge opportunity for the payments ecosystem to adapt and evolve in line with the digital transformation that is changing the rest of the world. Such change helps organisations to run differently and be able to compete with new players. But for this to work, those involved in the industry must build strong partnerships, based on analytics and evidence that a payments channel is of interest to the consumers. At the same time, all payments providers must ensure that the customer experience is enhanced without compromising on security requirements and regulations that protect our money in the first place."

New world order of the cloud services

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Cloud computing is having a massive impact on the supplier landscape.

The concept of pure cloud computing would reduce the relationship between a business and supplier to something like the relationship I have with Thames Water. Get a bill once a year, pay monthly and only contact them when something goes wrong.

It's all about pipes after all.

But suppliers are trying to address this and creating relationships with customers to help them reach outcomes and ensure they have a good ride. Could be a role for a service integrator?

In this guest blog post Mark Hennessy, senior director at ServiceSource, explains how changes in the cloud landscape will affect the way many vendors do business

Life After Vendor Lock-In

By Mark Hennessy, ‎
 
"There are times when being a cloud vendor in the present day can feel a little like you're immersed in some dystopian depiction of the near future, as imagined by a low-budget science fiction film. Speak to many modern service providers and many could justifiably claim to find themselves wandering, nomad-like, in a desert wasteland of uncertainty, trying to rebuild some kind of order in the wake of a grand battle. The battle in question? The end-user's fight against the oppression and tyranny of cloud vendor lock-in, of course - the immediate aftermath of which has left many questioning the established, accepted order of doing things.

Although it might be something of an exaggeration to say that the fight against becoming locked in to a single cloud vendor has had far-reaching consequences for the future of society at large, there's no doubt it's a battle that the vendors have, emphatically, lost. Years ago, things were much simpler. Cloud services were seen as the next 'big thing', and were approached with caution, which meant that vendors could lock end-users into long, watertight SLAs and charge them a premium for the privilege. Vendors, naturally, built their business models around this reality, and could sleep safe in the knowledge that their customers would not be leaving them any time soon.

There's no doubt that recent changes to the way cloud services are consumed have changed this forever. Where once, end-users would be reliant on vendors to provide cloud expertise, the rise of a proliferation of consumer-focused Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) solutions has altered the cloud landscape significantly. The ease of use of modern cloud solutions has negated the niche role of the cloud vendor and, as a result, today's end-users increasingly see cloud solutions as a disposable commodity and frequently between suppliers and vendors at the drop of a hat.

What all of this means is, of course, that, with the vendor lock-in battle now lost, service providers are finding that the way their businesses are set up is fast becoming outdated. Gone are the days when they could lock their customers into SLAs for any significant period of time with no questions asked. The upshot of this is that many vendors are being forced to completely re-evaluate their business models and look for alternatives that will allow ensure that they are not left behind in the brave new world of on-demand cloud services.

Indeed, many have found that, instead of trying to tie customers into long-term, restrictive contracts, the future of cloud computing is one that is based on a subscription model, which aims to secure recurring revenue as a direct result of building a relationship. Where previously, many service providers will have secured a contract and not spoken to their customers again until the time came to renew, many are waking up to the fact that this is no longer an option. In this new subscription model, there are two things that can guarantee recurring revenue: the quality of your product or service and/or the quality of your relationship with your customer.

Where once cloud vendors saw themselves as mere suppliers of services for their customers, many are now having to adapt, in order to become suppliers of outcomes for their customers.

New considerations they have to take on board include whether or not their customers are getting value, and whether or not they are happy with their current level of service. It's this increased focus on managing the customer lifecycle that will change the way vendors operate, and which will prompt them to explore new tools that can give them the edge when it comes to providing added value for customers. In particular for the subscription and SaaS businesses, effective customer engagement requires a deep contextual understanding of the ever-changing dynamics underpinning the relationship. Businesses need precise, accurate and timely data to provide insight on where the customer stands in the overall lifecycle for customer success to engage at the right time.

A good example of this is an increased focus on analytics tools, which can show how customers engage with services, predict customer churn and give service providers an early warning sign that their customer is dissatisfied. On the other hand, analytics tools can also demonstrate where customers are most satisfied and can even provide them with information that can help them to up-sell to existing customers.

Perhaps the principle message we should take from all of this is that there's a reason that vendors have been forced to re-evaluate the way they operate only after end-users revolted against the idea of being locked-in. It's no coincidence that the new world order of cloud services revolves, not around one side holding the balance of power, but in encouraging stronger, deeper relationships between organisations. If, for service providers, there truly is life after vendor lock-in, and a way through the wasteland that has ensued, then it seems this is the best way forward!"


Is Malaysia a safe option for a South East Asian business services hub?

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About three years ago I met up with Vijayaratnam Tharumartnam who is a director at the Malaysian IT Initiative (MSC), an organisation supporting Malaysia in attracting foreign investment.

I met him again earlier this month for an update.

With more and more multi-national businesses investing in global service delivery capabilities South East Asia is a region where a presence is essential.

There are options in the region with countries like China and the Philippines already supporting companies from Europe and the US with IT and business services.

And the MSC is going out of its way to attract business investment. In 1996 the Malaysian government kicked of the IT initiative as part of its economic transformation. Malaysia wants to be a high income nation by 2020 and IT services have a significant role to play. The nation already has quite a strong telco sector but wants its IT sector to grow.

It is already been successful and has moved from largely providing back-office services to moving up the IT services value chain.

Businesses like GlaxoSmithKline, Shell, BP, HSBC, Prudential Services, RBS, British American Tobacco and BT have operations there.

Since its creation MSC has created about 140,000 jobs.

Tharumartnam told me that Malaysia is a safe place to invest compared to China, which he described as a "muddy road." He said Malaysia is politically stable and does not suffer from natural disasters.

If that is not enough the country does not ask questions about the funding of investors, has relaxed visa rules so companies can bring staff in as they like, it also offers five years tax free and allows the business to 100% own their Malaysia operations.

Tharumartnam says that the Malaysian IR T sector has gone from being an industry worth nothing in 1998 to one with revenues of $10bn today.

Although a great deal of the IT sector is owned by multi-nationals from Western countries the expertise gained within Malaysia has led to the creation of local service providers.

Here is what some of the multinationals are doing in Malaysia

BP

-BP Business Service Centre Asia
Established 2009
Operates a BPO and IT Outsourcing operations
Global Players in MSC Malaysia
-BP Business Solutions
Established 2004
Research and development of software and IT systems for the healthcare industry.

HSBC

-HSBC Global Resourcing UK Limited
Established 2007
A knowledge process outsourcing centre that provisions of management and operational support for HSBC Group Service Centres worldwide.
Global Players in MSC Malaysia

-HSBC Electronic Data Processing (Malaysia)
Established 2002
A Group Service Centre (GSC) for HSBC Group which operate as a financial services processing centre, service centre, call centre and also as a contingency centre for other GSCs of HSBC Group around the world

-HSBC Software Development (Malaysia)
Established 2009
Global Players in MSC Malaysia
Information Technology Outsourcing (ITO) in software development, software deployment , software support as well as consultancy and project management

Prudential


-Prudential Services Asia
Established 2003

Regional IT processing centre, regional data centre, regional shared services centre and regional customer call centre for Prudential Group in Asia.

Bank branches to become the place to complain about online services

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Interesting move from Barclays to retrain 6,500 cashiers to enable them to help customers manage their finances rather than just processing transactions.

In reaction to the explosion in digital services in the banking sector Barclays is redirecting its in-branch human resources away from transaction processing to customer services such as helping people manage their money. More and more people do the transactional side of banking online today and Barclays is reacting to that.

Earlier this week the British Banking Association published a study that revealed that almost £1bn in transactions are processed a day in the UK from customers using online and mobile banking.

A couple of things spring to mind here.

The first, probably the most interesting, is that perhaps banks have finished years of job cuts. Have we reached the tipping point with banks down to the bare bones in terms of people. Barclays is retraining staff to do new roles amid digitisation, not cutting them and replacing them. This is interesting because with more and more businesses digitising and automating processes there is a fear that there will be no jobs for people to do in the future. This Barclays move puts some evidence behind claims from corporates that jobs will change and not disappear. However banks like Barclays have cut thousands of jobs so the 6,500 cashiers is small fry.

The second thing I think of, which is probably just the cynic in me, is this will mean that branches are full of salespeople. I have been in my bank lots of times to speak to personal advisors and they always seen to recommend more stuff from them.

So it looks like branches will just become the go-to place to complain when the online banking system or mobile app crash. And as we all know, thanks to Twitter, this happens pretty frequently these days.







London Stock Exchange outsources to outsource

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IT outsourcing has moved way beyond just cutting the cost of internal IT and now finds itself as an important mechanism for businesses to generate new business lines.

Gone are the days that a business looking to move into a new area has to build its own IT to support it. It can work with an expert. They call them partnerships these days more often than not.

I wrote an article yesterday about how the London Stock Exchange is offering finance firms a platform based reconciliation service. The exchange offers finance firms its UnaVista reconciliation platform as a service.

Now in an effort to increase its customer base for this it is working with Indian IT service provider Wipro. Wipro has the infrastructure and expertise delivering software to customers globally via platforms so the partnership makes sense. It gives the stock exchange global reach.

The multi-tenanted platform is aimed at finance firms but could potentially go wider in the future. The combination of the exchange's good trusted brand and Wipro's reliable and secure infrastructuremight be attractive to customers.

So this is an example of an IT services firm supporting businesses in generating new revenue streams, rather than just cutting costs. This is how most services firms sell themselves these days.

It is also likely to increase as service providers invest in global delivery services and the infrastructures to support them.

Public sector dominates outsourcing but private sector shows it the way with small contracts

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The latest figures from ISG show that the UK public sector has spent a lot more on IT outsourcing and BPO that the private sector over the last two years.

This makes sense because the government has been pushing public sector organisations to cut costs, by giving them smaller budgets. So the public sector has gone from a sector that ISG didn't even do a specific outsourcing report about, to one that dwarfs the private sector.

But what was interesting was that although the public sector spend was some 70% higher than the private sector at £51bn compared to £30bn, the private sector signed a lot more deals. I think traditionally I would expect the reverse. The private sector signed 726 contracts compared with 585 in the public sector.

This is because the private sector has been signing lots of smaller deals. The public sector has been doing mid-sized deals according to ISG.

Why is this? There are a lot of smaller private sector businesses outsourcing these days and there are a lot of existing deals in the private sector in their 3rd, 4th and 5th generations, which are being broken up and shared between different suppliers.

So maybe the government could take a leaf out of the private sector's book and break up deals even more. After all that is one of the ambitions of the government. But this could be a few years away given the less mature out sourcing sector.

Diversity of service not volume the way forward for IT services in new world

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I recently met up with Indian supplier NIIT and found it interesting to see how diverse its business strategy is, for a relatively small firm.

It is always interesting to hear that some small firms have very big customers and diverse and interesting business models. The second tier of Indian suppliers is a particularly interesting one.

IT suppliers these days always talk-up the business enablement credentials they offer, rather than just being seen as cutting costs for their customers. NIIT is no exception with a "focus on customer revenue not costs."

The digitisation of business is changing things. Service providers are attempting to move towards non-linear revenue generation and move away from business models based on time and materials.

For Indian suppliers this is particularly important. They have grown on the back of the relatively low cost of skilled people in India. A confluence of trends means this cannot go on forever. Low cost regions are emerging, Indian wages are increasing and Western governments are trying to reduce offshoring.

The big Indian players are changing their business models, which is a challenge given their massive reliance on labour arbitrage and the pressure on them to deliver good financial results.

The smaller Indian players are an interesting bunch. They are more nimble and seem able to try new models out quickly. I have written quite a bit about these Indian Tier two players.
For example I blogged about NIIT in 2011 and then head if Europe Sunil Surya, told me about the businesses focus on certain verticals as well as IP. 

Earlier this month I got an update from the supplier's COO Sudhir Chaturvedi.

The company has 8,500 staff, half of which are based in three Indian cities: Delhi, Bangalore and Chennai. All of the company's R&D is done in the UK.

Its biggest sector is travel and transport which accounts for 37% of global revenues. Banking and financial services is next up with 35% and it has a separate focus on insurance. Other sectors include media and the government sector in its native India.

In terms of geographies the US accounts for 42% of its revenues which were about $381m, Europe generated 37% and Apac 21%.

NIIT for example is strong in travel and transport and has relationships with BA and Eurostar and is currently transforming the digital services at Irish airline Aer Lingus.

In terms of IP the company has software aimed at the insurance sector. These include catastrophe modeling software to work out the costs and risks of disasters. NIIT has about 14 customers in insurance market Lloyds of London.

The company values vertical expertise. Chaturvedi says that local knowledge is vital to the company. "In every geography 50% of are employs are local because we want local expertise."

It will also put its hand in its pocket and buy resources to impriove services to big customers. When BA acquired Iberia one of its IT suppliers, NIIT, acquired the IT service provider that supplied Iberia. NIIT took over Projecta IT Services in Spain following the acquisition by BA. The British airline has been a customer of NIIT for 10 years.

It also acquired a captive in Manila belonging to another customer Sabre, which operates in the airline industry, to improve its service to the company.

Both these acquisitions are now being used to provide services to other customers.

The company has also devised its own way of classifying service levels and trained 4500 staff in understanding it.

Chaturvedi says the IT service industry is too happy to just do enough. "The industry believes if it meets the SLA it has done its job. We expect to get paid for just doing a basic service."
To this end the company has devised 7 levels of service that its staff have to aim for.

The lowest level, if the service level is not even reached is known as Criminal. The next level is basic. There are five more levels with the top level known as Unbelievable.

NIIT is also focused on infrastructure services and helping businesses ensure that they are always on.

What could IT outsourcers do in the UK to improve their names?

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Outsourcing companies, including IT service providers, are an easy target for politicians when orating.

Despite many of the said speakers being only too willing to get tax payers to fund their lavish lifestyles it has become common for our right honourable members of parliament, pardon the contradiction in terms, to put their foot into the outsourcing debate. And quite right too,

Some outsourcers do take the proverbial.

It is just a shame some of those doing the criticising are complicit.


Anyway the reason I write this is to see what IT outsourcers good do in the UK to perhaps give a little back. Last week I interviewed an executive at Indian IT service provider Mindtree. Prashant Mehra returned to Bangalore to help transform the lives of the city's 1.5 million rag pickers and improve local government waste management in the process.

He is the project leader of a scheme known as I Got Garbage that helps rag pickers in Bangalore organise themselves better to improve working practices and lifestyles. Mindtree created a cloud based platform for the rag pickers. Lots of benefits come from a centralised ERP type system. I won't go into them because you can read the interview here.

So what could the service providers do in the UK? With IT central in people's lives, work, and education today there are lots of things that IT services firms can do.

I am sure there are many projects going on. I would like to hear about these projects and get some ideas about what other things the IT services forms could do to help. I am sure there are lots of charities out there that could do with some support.

Please email me if you have any thoughts: kflinders@techtarget.com

Watch out for a business harnessing your personal data bubble

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You can't do anything without producing data these days. Even the morning jog is no longer a private affair but one that gives you and potentially businesses information about you and your behaviour.

I recently met Paul Roehrig from Cognizant and he told me about what he calls Code Halos. These are the virtual identities that follow people and things around made up of all the data the produce. I must admit writing an article about what was discussed was a bit challenging so rather than me do it I thought it would be better if Paul and his colleagues Malcolm Frank and Ben Pring did it for me.

All three are from Cognizant's Center for the Future of Work. They are the authors of Code Halos: How the Digital Lives of People, Things, and Organizations are Changing the Rules of Business.

Here is their take on what Cloud Halos mean to businesses

Manage Code Halos to win in the digital economy

By Paul Roehrig with Malcolm Frank and Ben Pring

"Think for a moment about your home technology - laptops, tablets, mobile devices, gaming consoles, health sensors, and so on. Now consider all the things you do with your gadgetry: connect with friends, play games, manage your money, read books, work, watch films, listen to music, monitor your fitness, get directions, and buy any number of products. Over time, every click, swipe, "like", buy, comment, deposit, jog, and search produces information that creates a unique pattern of accumulated data and information that becomes your virtual identity. This virtual identity is your personal Code Halo.

If you use any device more complicated than a toaster, chances are this feels familiar and makes sense, but what is new is that this same idea is now playing out in many industry sectors. People, organisations, and things - basically any noun - can now have a Code Halo, and this phenomenon is beginning to change how organisations - and not just the digital native companies - create economic value. Today's companies whose growth or success is quite unlike that of others are dominating by extracting business value from the information that surrounds people, organisations, processes, and products. If this sounds like theory, consider that these firms, Amazon, Apple, Facebook, Google and Netflix, generated some $1 trillion in combined market capitalisation in just the last 10 years. These digital leaders use technology to deliver curated individualised experiences based on our unique needs, wants, and history captured from the data we all share.

At first this can sound like the Big Data story or the rise of the Internet with a new label, but that is not correct. Data, algorithms, analysis, and connectivity are essential, but this shift is not confined to the Silicon Valley digerati.

Traditional companies are now harnessing the power of Code Halos. GE is creating Brilliant Machines. Disney is launching the Magic Band at its theme parks. Allstate and others use mobile telematics devices and analytics to transform auto insurance. Philips is creating value from the information and data around their products. The list goes on, and it is growing every day

Dealing with the market shift - how do companies ensure they come out on top?

Companies that have succeeded or failed have followed the same pattern - what we call The Crossroads Model. While one route can lead to new levels of market prosperity, the other can take them toward extinction (one route can lead to new levels of market prosperity, the other can lead down a path toward extinction).

So, what are some steps to take to stay on the right track

·         Recognise the value of signal. Cognizant recently surveyed business decision makers in 300 firms globally, and they told us they achieved a total economic benefit of roughly $766 billion over the past year based on their use of business analytics. Competing on meaning and insight now stands as a potentially large value-creation lever for most organisations.

·         Make design central to your value proposition. Design is not just about making beautiful applications and Web sites. That's still vital, but beauty needs to be embedded into the end-to-end process and user experience. This is business, not just aesthetics. The iPod beating the Zune, Progressive's web presence, and Disney's guest experience are all examples of putting design at the centre of a business strategy.

·         Compete on trust. Organisations that ultimately win will be those that generate, maintain, and compete on trust, allowing participants to opt in or out from sharing code. Some insurance companies already demonstrate a clear connection between value and information - the Give-to-Get ratio by offering a better insurance deal based on actual driving data.

·         Make IT Your Halo Heroes. Managing technology and information will be essential to the brand promise. The SMAC Stack - social, mobility, business analytics, and cloud-enabled solutions - is changing how people, organisations, and devices interact. Business leaders who want to harness the power of code need to (finally) break down the barriers between IT and the business.

We are in the early days of the next generation of the future of work. To win at the Crossroads, leaders must begin to re-code the business, identify innovations that will matter in the future, and pilot new solutions that link the physical and the virtual for new kinds of business value."

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