January 2010 Archives

Tories might break up BT dominance for 100Mbps pledge

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Not strictly speaking outsourcing but very interesting to businesses outsourcing IT.


Shadow chancellor George Osborne promised that a Conservative government would deliver 100Mbps broadband services to the 'majority' of homes by 2017. Part of this might involve breaking up BT and giving competitors duct access.


Speaking on the Andrew Marr show Osborne said "If there are some parts of the country where the market can't get to; because I think the best way to deliver this is by breaking up the British Telecom monopoly at the moment which holds back companies like Carphone Warehouse or Virgin. If we find the market can't do that, then use the BBC license fee, the digital switchover money in the license fee, to get broadband out to the rest of the country, but let's see first of all if we can have the market delivering that super-fast broadband."

A BT spokesman said: "The UK boasts one of the most competitive broadband markets in the world with BT having a 25 per cent market share. 99 per cent of homes can access copper broadband, prices are low and close to 20 million homes are already enjoying services.

"Technology is moving on and BT is at the forefront of that revolution. We are investing £1.5 billion to get fibre to at least ten million homes by mid 2012 and we want to go further. Going substantially further will however - as we have seen with other countries - require some form of public sector support and so we look forward to engaging with politicians from every party".


Look out for more Computer Weekly coverage tomorrow.

Infosys European head blogs from Davos - part 3

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This is the third blog from Infosys' BG Srinivas from the World Economic Forum in Davos this week. Click here for part 1 and part 2 of BG's Davos diary.

WEF in the eyes of an Indian IT outsourcing giant - part 3:

By BG Srinivas

Yesterday, the Prime Minister of economically embattled Greece said that countries like his "are being used as the weak link, if you like, of the eurozone." Which leads us to ponder on another important question - how globally competitive are the countries of the eurozone?

In my post yesterday, I had talked about how emerging economies represent the next growth opportunity for global companies. But to succeed in these new markets, companies have to restructure their cost base. You can't be five times more expensive and hope to be competitive. And to restructure your cost base you need to be innovative and flexible.

Take cars, for example. Europe is strong in the automotive sector. Is that enough to be a leader in the Indian automobile market? If they continue with their current cost base, they will, at best, be players in the small high - end segment of the market, while the Japanese and the Korean - and the Indian - car makers run away with the market. People in India need smaller, affordable cars. There are 3 companies hitting the market with cars under $3000. And, India needs cars that are cleaner.

To meet these requirements, European car companies need to indigenise their manufacturing.

The assembly lines have to be re-designed for the local market, the components have to be manufactured and sourced locally. But above all, the companies need to be flexible in the mind set and their operations. The formula that has helped them to succeed in Europe and other developed nations may not be the winning formula in India, for instance. The consumer needs are different, the consumer mindset is different and the consumer behaviour is different.

It has been done before. ABB and Siemens are good examples. And it can be done by others if they are prepared to be innovative, flexible and to restructure their cost base. But, if not, then the eurozone may find that it doesn't have a play in the fastest growing markets of tomorrow


Are acquisitions good for outsourcing sector?

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I wrote a story recently about what mergers and acquisitions in the IT sector mean to CIOs.

It talked about how large suppliers can take technologies to the next level.

The story mainly focused on IT manufacturers but what about in the outsourcing sector?

Three of the biggest IT acquisitions last year were Xerox buying ACS and Dell buying Perot Systems. And lets not forget HP bought EDS a couple of years ago.

Big companies renowned for selling hardware taking over service providers. Will this work or hasten the commoditisation of IT outsourcing? And is this a good or bad thing?

HP has certainly had its problems integrating EDS, but it is making money.

Dell has bold claims about its ambitions in services but what will it deliver?

What are people's views on the Xerox acquisition of ACS?

How will these acquisitions leave the end user?

Will there be two tiers to the outsourcing industry?

Infosys European head blogs from Davos - part 2

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This is the second blog from Infosys' BG Srinivas from the World Economic Forum in Davos this week. (click here for part 1)

WEF in the eyes of an Indian IT outsourcing giant - part 2:


By BG Srinivas

Emerging economies are fast emerging as the hot topic of discussion this year. Countries like India, China, Brazil, Russia, Mexico, Vietnam, Indonesia, Turkey, South Africa and Argentina have the growth rates and the population mass that excites and attracts organisations. To grow, organisations need new markets and these countries offer vast untapped markets. Whether you are selling credit cards or cars, diapers or cell phones, the centre of gravity of your markets are bound to shift to these emerging economies.

Such investments are a win-win situation. These countries welcome the investments and organisations benefit from the new growth markets. However, organisations going into these emerging economies need to be careful about a few things. To begin with, the needs of these new markets are different from those of the developed economies and products/offerings will have to be re-thought, re-designed and re-configured. At the same time, companies will have to re-invent themselves culturally to include the new mass of talent that will come into their fold in these emerging economies. The centre of gravity of the talent base, too, will shift to emerging economies.

Along with their vast talent pool (India produces 400,000 engineers every year, while the US produces 60,000); these emerging economies are creating the ecosystem that will turn them into new innovation hubs. These countries would like to avoid the mistakes of the developed world and will have to innovate to bring down the carbon footprint per incremental dollar of GDP growth. Innovation will be required to create products that offer value to countries with lower per capita income. Such innovation will cover the entire spectrum - from use of materials to smarter process flows; and it will be driven by the desire for new markets from the seller's point of view, the desire for a better life from the buyer's point of view and the ubiquitous presence of technology. In fact, emerging markets will leap-frog many traditional technologies and go to the state of the art, much like India leap-frogged the land line and has 450 million mobile phones today.

This will lead to global growth. But, I hope that it will also lead to a much more integrated, culturally sensitive, economically inclusive and a fair world. A world, where we work on what is common between us, so that our differences become a matter of curiosity, not hostility.

Infosys European head blogs from Davos

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As promised here is the first part of a series of blogs that Infosys' European head BG Srinivas has agreed to do for Computer Weekly from the World Economic Forum in Davos, Switzerland.

WEF in the eyes of an Indian IT outsourcing giant - part 1:


By BG Srinivas

"The air outside is much colder than last year, but the mood inside the Congress Centre at Davos is much warmer.

There is a palpable sense of relief that the world has not come to an end - as many feared that it would, this time last year. Governments have stepped in, emerging economies continued to grow and the free fall seems to be over. Cautious optimism is the phrase that comes to mind.

As efforts to figure out the optimal way of re-building the post crisis world begins at Davos, new questions are emerging.

Has anything really changed for the financial services sector?

Are they going back to the old ways? How much of regulation is required?

Are we tending towards over regulation?

But then, what regulations have truly been put into place?

What will it take to get the employment growth back on track?

Can the emerging economies shoulder the entire burden of global growth?

How should the developed economies collaborate with the emerging economies for a win-win solution?

We have survived, yes. But we need to start growing again. And we need to make sure that we don't repeat the mistakes of the past. Over the next few days, I expect new ideas to get debated. I will keep you posted.


HP-EDS loses court ruling in £700m dispute with BSkyB

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My colleague Tony Collins has been following the EDS (now HP) BSkyB court battle since the begining.

This case has been going on for five years and is related to a failed CRM system. It has cost both firms millions of pounds.

As Tony wrote earlier today the judge ruled in favour of BSkyB.

It is the first time a judge has ruled in favour of the claimant in a case of this scale. BSkyB is claiming £700m in damages.

What message does this judgement end out to suppliers?

Will there be more claims from corporates unhappy with systems or services?

For more about the case see another Tony Collins piece,

Ousted IT blogger hits jobcentre

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This is the second part of a series of blogs a guest blogger is writing for the Inside Outsourcing blog. He was replaced at the company he worked at by an offshore supplier.

See part one.

Situation: vacant part two:

by  I.T. Jobseeker

For me, one of the most depressing aspects of redundancy is the fortnightly visit to the local Jobcentre. Mine is in a run-down building in a run-down road with other offices boarded up. It always seems to be raining on the day.

Jobcentres have two functions.

The first is to ensure that those claiming benefits are actively seeking work.  This is achieved by requiring their 'clients' to keep a log of their attempts to find employment. The log is given a cursory examination and initialled by an 'advisor' who then authorises payment of benefit. So far, so good.

The second is to introduce Jobseekers to potential employers.

I recall a visit a while ago. A little early, I sat in the waiting area, passing the time by counting the number of face piercings on the man opposite me, without being seen to stare. I got to nine before my name was called.

I sat down at the desk of the advisor, a hatchet faced woman who looked like she was having a very bad day. She spent a moment looking at my details on her screen, then initialled my log.

'I see you've been unemployed and claiming benefit for over two months, now, Mr Jobseeker', she said.

I imagined her writing 'must try harder' on my file.

'After three months you must consider work outside of your regular field, which is...' she looked at her screen.   

'I.T', I said, helpfully.

'Yes, well, you must be prepared to do something else soon. Minimum wage will apply', she told me.

She entered search criteria onto her screen. A list of vacancies came up, she swivelled the screen around so that I could see it. 

'How about this one?', she asked, pointing to an Oracle DBA position in Dagenham.

'It's not something I could do', I told her. 'I'm an analyst, I work more on the business side. This is a specialist, quite technical, role'.  

'It's an I.T.  job, isn't it?', she asked, incredulously.

'Yes, but...'

'I should remind you, Mr Jobseeker, that failure to apply for a suitable position could result in the loss of benefit entitlement', she said.  

I was about to try and convince her that suitability was indeed the issue, but then thought better of it.  

'OK, I'll apply for it', I said wearily. She handed me a print of the details.

'Good luck with your application, Mr Jobseeker', she said, as I got up to leave.

I gratefully stepped out into the rain. Abandon hope all ye who enter!

Dell has bold claims about Perot tie up?

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Dell has made some brave claims about the opportunity for its services business following its acquisition of Perot Systems.

I have listed the claims with some comments from people I have spoken to. Please tell me what you think.

Dell claims:

"1 - The IT industry remains fragmented with only 4 companies offering a set of integrated service offerings (IBM, HP, Fujitsu, and now Dell).
2 - Dell is powerfully positioned as one of the 10 largest IT services providers.
Industry comment: "In terms of pure services turnover maybe number 15-20 worldwide."

3 - From a customer point of view, we know IT budgets are pressured, and customers want technology that offers best value solutions.

4 -   We want to help organisations innovate and focus on strategic objectives while spending less on routine IT management."

This is why Dell says it bought Perot:

"1 -   Dell became an IT leader through highly efficient built-to-order solutions.

2 - Now, we want to do the same thing in services, reducing complexity and driving out inefficiencies across the service and support lifecycle.

3 -    We believe that the new Dell Services (Dell's legacy services organisation combined with Perot Systems - which we acquired last November) is big enough to be credible, yet nimble enough to lead a transformation in the services industry."

This is what tell says about the merged services organisation:

"1 - We are a $7.5bn global services organisation with more than 42,000 employees.

2 - The organisation generates approximately three-quarters of its revenue from infrastructure and related support services 18% from applications and consulting services, and 7% from business process services.
3 - We serve the entire spectrum of potential clients, from large organisations to consumers.

4 - We see the combination of our solutions and teams creating enhanced growth opportunities through cross-selling opportunities as well as being presented the opportunity to participate in a broader range of sales activities

5 - This is a very exciting time and we're stronger together

6 - We can fill out capabilities that neither company owned by itself

7 - Qualify for more RFPs and win more deals
8 - Sell more products and services at existing accounts."

This is what Dell claims to do?

"1 - In addition to scale, the components that now form Dell Services have a comprehensive range of complementary strengths ... and a consistent history of creating an award-winning customer experience.

2 -   Together, the companies support nearly 15 million systems and manage over two million seats

3 - Consistently, Dell Perot Systems has ranked number one as healthcare IT contractor and number one by KLAS for Clinical Implementation Services

4 - The combination of solutions and teams from each company creates growth opportunities through cross-selling, but even more significantly presents the opportunity to participate in a broader range of sales activities.

5 -  Dell Services offer best-in-class suite of intelligent, end-to-end services and business solutions to reduce IT complexity and lower costs

6 - From our knowledge of industry requirements, we then tailor industry-specific solutions that solve business problems and deliver the best value for the resources invested.

7 - The strength of our combined business model rests in several areas:

 -  Intense customer focus - committed to top customer success
 -  Domain knowledge - Industry expertise in healthcare, government, and large enterprise is a competitive advantage that allows us to add long-term value through industry-focused solutions  
 - Breadth of services - Integrated technologies, IT and business services, and industry-specific consulting are combined to create services that transform organizations
 - Global delivery model - Modular services delivery put customers in control, allowing them to select only what they need, which means lower cost for customers
-   Recurring revenue - Over $13 billion in annuity-like revenues."
One industry commentator asked:  "What is the definition of 'integrated services.' CSC, Atos, Logica, T-Systems, Siemens and many others offer these services."

Is Dell underestimating the challenge?

What do you think?

Indians can get offshore qualifications from the UK

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The British Computer Society (BCS) is spreading its reach to IT professionals in India by striking a deal with an Indian IT qualifications provider.

The deal with a company called Brilliant Examination Provider, will Initially see the Indian organisation offer the Institute's latest qualification in Green IT as well as Software Testing and Business Analysis certifications, before gradually expanding its offering of the Institute's qualifications.

But won't this just put UK IT staff under pressure? Surely Indian workers that get BCS recognised qualifications will be used to replace UK workers in offshoring deals. Or is the deal with Brilliant a brilliant idea?

Just because these workers are equally qualified doesn't mean they will be paid the same. Hence they will always be attractive to cost cutting UK businesses.

From recent blogs I have done it seems that workers that have lost out to offshore workers are very unhappy that they lose out on the fact that they cost more.

Please read this blog and the comments to get the views of workers that have lost out in offshoring contracts.

I am not against offshoring work as long as workers in the UK are not cut because they cost more. Everyone loses out because the offshore workers are underpaid and therefore under valued as well.

Councils to outsource more IT this year

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Local government IT is being stretched and with demand increasing and investment decreasing council will be turning to suppliers for services.

I was at the launch of the annual local government report on IT. The report, which is carried out by Socitm, revealed an 11% drop in IT spending and a 10% reduction in IT staffing levels.

The report's author Peter Searle, like government CIO John Suffolk, said public sector IT will this year have to change how it operates.

He said councils could no longer do more with what they have, never mind with less, and will have to do things differently.

This is where outsourcing comes in.

But which suppliers will succeed and what type of services can be farmed out?

Businesses are still only spending money to save money

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Could telecoms, utilities and Financial services be the first sectors out of recession?

Wipro announce its results today. It posted strong results but admitted the recovery is slow for UK businesses that are still only investing in IT to cut costs.

Like most of the resilient Indian IT companies they seem do well during good times and bad.

This because they can offer cost savings during bad times and when things recover they are in a good position to offer innovative services, having continued too invest during bad times.

They also seem to avoid mass redundancies and therefore retain their capabilities. Well that's one interpretation.

Talking to Wipro's Ayan Mukerji, COO of Europe at Wipro, it seems that UK businesses are not yet making strategic IT investments. But they are spending to save money.

But he did say telecoms, utilities and financial services sectors were showing signs of recovery in terms of IT spending.

Ayan Mukherjee.JPG

It is not just the Indians either. IBM's services and outsourcing division increased its revenue by 15%, to $11.4bn. Mind you a lot of that is in India these days.

Ousted IT blogger speaks out

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With stories all over the IT press about UK IT workers losing their jobs to offshore staff we thought it would be good to hear the story from the horse's as it were.

An IT worker who lost his job at a major financial services business has agreed to do a series of blogs for us describing life during and after an Intra-Company Transfer (ICT) changed his life.

From earning over £40,000 a year he gets just over £64 a week.  And his skills are idle.

Here is the first blog in a series:

1 - Situation vacant

By IT Jobseeker

Like Karl Flinders I was glad to see the recent report in The Times highlighting the loophole in the inter-company transfer system that allows Indian IT workers into the UK, at the expense of their local counterparts. I speak from the heart, as well as the wallet: I am just one of many who have lost their jobs as a result of this abuse. 
 I was happily working for a well-known UK insurance company until they outsourced their IT to a well-known Indian BPO provider. Usual story.
Adding insult to injury, my former colleagues and I were required to train our Indian replacements before being made redundant. I remember one as saying that it was 'rather like being forced to dig your own grave, kneel in front of it, then take a bullet in the back of the head...'.  A tad over dramatic perhaps, but apt nonetheless.
According to The Times report, Phil Woolas, the Immigration Minister, defended the ICT system. He is quoted as saying that the system 'made Britain an attractive place in which to do business'.  This may be true for  Tata and Infosys, but not so for UK Plc. Six months ago I was paying tax and National Insurance on my £40k + salary; now I receive £64.30 a week Jobseeker's allowance. Do the sums, Phil.  

Does India have an Enron in waiting?

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Satyam may have avoided becoming India's Enron but there could be another fraud around the corner.

The Satyam scandal that hit the outsourcing industry might not be the last, according to the Asian Corporate Governance Association (ACGA) in Hong Kong.

The independent organisation has published a white paper and it claims that corporate India is open to a repeat of the billion dollar fraud committed by Satyam chairman B. Ramalinga Raju.

See the full ACGA report here.

The report is 55 pages and have not gone through it all but appears there are major questions regarding corporate governance in India. The fact that directors are the owners seems a problem as well as the companies that audit these firms not being appropriate.

The website the azdailysun.com quotes one of the reports authors
Sharmila Gopinathas saying "To think there aren't other companies [other than Satyam] that dabble in less than forthright practices, to believe that other companies are not doing this kind of thing is naive."

Is there reason for UK corporates to think twice about outsourcing to India?

The Satyam fraud could have left companies that outsourced to the company high and dry if it had collapsed.

What does the industry think?


SME could avoid snow problems through local outsourcing

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The Federation of Small Business is calling on the government  to review contingency planning following the chaos caused by the snow.

This could be a call for small businesses to outsource more.

Only one in 10 people were able to get into work at the height of the snow travel chaos, according to estimates by the FSB.


For example one of my colleagues built the above snowman when he should have been working. Thanks Cliff Saran for the picture.

Outsourcing may be seen as the domain of bigger companies but SME's could probably benefit from outsourcing their back-up.

I recently met the CEO of a company called Onyx Group. The CEO Stephenson told me about their business model.

Onyx has datacentres and office space. Local companies large and small can take advantage of it. If for some reason workers can't get in the office they can set up at one of Onyx's office spaces, where they can think to their network.

It has a few datacentres and office space in the North East of England and Scotland and is targeted at businesses in these regions as a local back up.

My Colleague wrote an article explaining why bigger companies were better prepared.

Infosys boss will blog here from the World Economic Forum

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I am happy to announce that BG Srinivas, who is a European head at Infosys will be posting blogs on Inside Outsourcing at the World Economic Forum 2010, which is in Davos from the 27th to the 31st of this month. He is also responsible for the engineering and product development business, globally.

The forum, according to Wikipedia brings together "top business leaders, international political leaders, selected intellectuals and journalists to discuss the most pressing issues facing the world including health and the environment."

So what will a senior executive at an Indian outsourcing service provider be doing there?

BG says, having attended the WEF for several years now he is interested so see what new themes and ideas will emerge from this global gathering.

"WEF is a great discussion platform for business leaders and politicians to assess and debate the state of the world's economy," he says.

BG says that this year's theme is 'Improve the state of the world - rethink, redesign, rebuild' and he wants to see what the role of technology in the process of regeneration.

"In particular, I expect to see the themes of digital networking, global talent, and sustainability play a key role in the forum's dialogues. Additionally, it will be interesting to examine the contribution emerging markets, such as India, China and Latin America, will make towards the further growth of the global economy, especially given their increasing strength and importance."

BG Srinivas, is on the Board of Infosys BPO and three other Infosys subsidiaries.


He was head of European Operations for Infosys Technologies and leadership the European business grew to $1bn in revenues. BG lives in London and has a degree in Engineering from Bangalore University.

Ten more outsourcing predictions for 2010

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Another set of predictions for outsourcing in 2010.

This time it is Kit Burden, partner and head of technology and sourcing at legal firm DLA Piper.

I am begining to see lots of correlations between predictions from diffrent people. Thatr must be a good thing.

DLA Piper predictions:

1- India will continue to be the offshore location of choice, but will come increasingly close to its peak, under pressure from Central and Eastern Europe in particular

2 - Contract renegotiations will also continue to be the order of the day, as customers are under pressure to revise/revisit existing deals so as to cut costs/ensure that all possible value is being derived from them

3 - The pace/number of outsourcing deals will increase, partially as a result of the continued commercial pressures in the economy but also because larger players (such as the banks) will have come to the end of their "strategic analysis" phases in 2009 and will now be looking to implement the recommendations

4 - The scope of what is considered "outsourceable" will expand, potentially even to some areas previously considered as being too "core" to be allowed to be done by external partners

5 - The nature of the presales process will be changed fundamentally by the outcome of the BSkyB - EDS decision (whichever way it goes!)

6 - The focus for charging structures will be ever more on unitary/transaction based pricing, with pure labour arbitrage based resource-linked charges being viewed with sceptical eyes

7 - Deals done in haste in 2009 will be repented at leisure in 2010, with a potential rise in the number of formal outsourcing related disputes before year end

8 - The trend will continue to be towards multi sourcing rather than "mega deals"

9 - More deals will be based upon the capabilities of "the Cloud" (i.e. remotely hosted infrastructure and applications)

10 - Contract negotiators will refine new provisions/thinking developed during 2009 in the light of the Credit Crunch (e.g re termination for "financial deterioration" etc) and work out which of them will remain relevant as the economy recovers

London School of Economics predictions for outsoucing in 2010

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Today I contacted professor Leslie Wilcocks, one of the experts on outsourcing at the London School of Economics.

I was calling him about the deal that Capgemini had won with the House of Fraser but while I had him on the line I asked him for some predictions for this year.

Off the cuff he had some very interestingf thoughts.

These are some of them:

"A lot of the quick and dirty outsourcing contracts signed during the downturn will break up towards the end of this year.

"The ecomic situation will improve and companies will outsource more, especially BPO, because they have reduced their headcounts. But the recession was deeper in the UK and may take until 2011.

"Governments are readying a lot of outsourcing."

He also said offshoring will become less controversial which might explain why governments will be more comfortable doing it.

Interesting set of predictions I think. I will continue to post predictions for outsourcing in 2010 so if you have any fill the comments section on the blog.

We can revisit them at the end of the year and see how close to reality we got.

HP receives massive blow by losing DWP contract

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HP's woes contiunue as the Department of Work & Pensions ends an outsourcing agreement with the supplier.

According to a report in the Register Fujitsu Services is replacing HP.

Details are still thin on the ground but this is a blow to HP.

HP staff at the DWP in numerous locations are already involved in an industrial action. A meeting is planned on January 22 to try and sort it out.

Not only has HP got rid of the EDS name but it looks like it might be getting rid of all the business as well.

I also found an interesting website this week that I am sure will be unterested in HP's current troubles.

But I am sure Mark Hurd theCcEO is not worried.

IT outsourcing predictions 2010 from Steria

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Another set of predictions for 2010 and this time 12 from service provider Steria.

Actually quite a good list I think.

I think number three is interesting. Somebody mentioned that this would increase in outsourcing. Even sourcing firms will have to take on an element risk.

1 - 2010 will see applications management being largely influenced by offshore capabilities and pricing, giving new life to the sector

2 - New technology, such as cloud computing or software as a service, will be exploited

3 - Businesses should look at more innovative commercial models, seeing BPO as a partnership. This will mean both sides can share the risk and the rewards accordingly
4 - BPO bespoke growth will slow as it reaches its maturity. Instead, new offerings will reinvigorate the market such as multi-tower BPO, with companies looking at a combination of offshore, near-shore and on-shore BPO
5 - Buyers will be looking for business improvement, not just cost reduction
6 - The integration of IT and BPO will become key in 2010
7 - There will be a resurgence of offshore vendors entering the UK and Europe
8 - M&A activity will remain vibrant in the coming year
9 - The government is likely to show increasing interest in how IT can contribute to the green agenda to reduce the carbon footprint
10 - Due to the £175bn deficit, the government will also be increasingly receptive to new delivery models such as externalisation
11 - Government IT spending will come under increasing scrutiny and the focus will shift from policy to execution
12 - New regulatory changes in the financial sectors across all perimeters will dominate IT investment

And here are some more predictions for the outsourcing industry in 2010.

The National Outsourcing Association predictions

Industry experts predictions

But what do you think?

Infosys results show recession has gone a full circle

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So Infosys announced increased sale and profits today. Compared to some of its growth rates over the last decade it might appear a disappointment. But in the current climate it was good news.

The company said the recovery is being driven by the financial services sector in the US. Quite ironic as that was where a lot of the problems started.

BG Srinivas, who heads up Infosys in the UK, says the UK is behind the US in recovery terms but there are positive signs.

Is it just a case of businesses outsourcing to cut costs? Or is it actual investment in strategic projects?

With Forrester predicting Europe to lead the IT sector out of recession things could be much brighter in the outsourcing sector this year.

Why is Barclays cutting IT suppliers and moving work in-house?

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Barclays' decision to end supplier contracts and take two IT functions in-house is an interesting one. Why has Barclays taken this route?

Last month Barclays decided to end a desktop management contract with Getronics and take it back in-house. The bank then decided not to renew a six year contract with Accenture. The contract included application development and support for UK banking systems.

One CIO told me that banks are always looking at the numbers and if outsourcing contracts get more expensive over time they may in fact be cheaper to in-source.

While this is true for many contracts it could not have been the case for the Getronics contact. A source of mine tells me there is no way Barclays would get a cheaper deal. Getronics was apparently 15.8% cheaper than its predecessor on the contract which was EDS.

Another contact said the financial trouble that Getronics found itself in 2007 before it was taken over by KPN could be one of the reasons for the Barclays decision. He questioned: "Is this the fiurst of many of the Getronics clients that change suppliers?"

Has the erosion of Indian service provider dominance begun?

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An Indian Economic Times report on the increasing competition facing India's outsourcing services giants could be one to watch this year.

The report says that companies in places such as Brazil, Mexico and Israel are beginning to eat into the customer bases of the Indian companies.

This combined with the increased take up of cloud computing see companies such as Wipro, Tata, Mahindra Satyam, Infosys and Cognizant face huge challenges.

These companies have remained strong despite the recession but could it be real competition to their low cost approach that gets them?

The London School of Economics carried out a survey last year of alternatives to traditional offshore destinations. It looked at 14 non-Bric (non Brazil, India, Russia and China) locations. These were: Belarus, Bulgaria, Costa Rica, Czech Republic, Egypt, Mexico, Morocco, Philippines, Poland, Romania, Slovakia, Tunisia, Venezuela and Vietnam.

Co-author professor Leslie Wilcox said there is a shortage of information about offshore destinations other than those in the Bric countries.

So which offshore destinations will win in 2010?

Jeff Kelly is someone that can turn BT Global Service around

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BT's decision to appoint former EDS executive Jeff Kelly as CEO of its Global Services Division is a good one according to a man that knows him well.

Kelly replaces Hanif Lalani who stepped after 14 months in the role.

Former EDS Financial Services head Jean-Louis Bravard, who is now director at sourcing advisory Burnt Oak Partners, says if anyone is capable of turning BTGS around it is Kelly.

"It is an enormous challenge but if somebody can run BTGS it is definitely Jeff Kelly."

Bravard said Kelly's experience running the general motors account at EDS will stand him in good stead. "This is a massive contract that few could run."

It is a massive challenge. BT is restructuring its struggling Global Services business to focus on three separate areas after its "unacceptable performance" led to the group losing more than £1.3bn.

What does the industry think?

NOA predicts public sector outsourcing surge

Karl Flinders | 2 Comments
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The National Outsourcing Association (NOA) thinks the public sector will be a hot spot for outsourcing this year.

This comes in the organisation's predictions for 2010. But what does the industry think.

It says pressure on managers to cut costs will lead to increased outsourcing contracts in the public sector.

This could be the only sector that benefits from public sector IT spending this year with spending expected to be slashed in the second half of next year.

Bernard Brown, head of business services at KPMG, warned this week that public sector spending cuts could dampen the recovery.

"The prospect of possibly extensive public sector job cuts in the second half of 2010 casts a long shadow over everything. The jobs market has been cushioned in recent years by continued public sector expansion. If this is put into reverse post-election, it could have a significant effect on employment figures."

The NOA predictions in full are listed below and click here for predictions made to Computer Weekly by industry experts.

1- Goodbye recession - The UK will technically be out of the recession in 2010, joining those European countries that have already returned to growth, and leading to a boost in confidence. For this reason many will be asking their outsourcing suppliers for increased capacity to support renewed growth

2- Mini-Multisourcing - 2010 will see a further revision of multisourcing or multivendor deals as end-users try to create simplicity in their outsourcing. Focusing on a smaller pool of suppliers will also help companies reduce governance costs - a common bugbear in multivendor arrangements

3 - Green with a vengeance - Environmental concerns will come back to bite those who thought they had been forgotten in recession. Some parts of CRC will become law and suppliers will need to understand it and be aware of the supply chain implications.

4- Business Process Outsourcing booms - It currently only makes up around three percent of the entire market so there is lots of room for growth as the recession weakens. BPO growth will be driven by the need to rebuild companies flexibly without taking on a large amount of risk through full time staff.  And now that organisations have a taste for BPO then expect them to use more, the drivers wont be just cost and we'd expect it to break through the 5% barrier by the end of this year.

4- High as a cloud - The move towards cloud computing will become more noted as more traditionally outsourced services (from CRM to infrastructure and storage) are delivered via this technology. However, given that outsourcing arrangements are based on relationships and change more than technology, it's possible that the "cloud" just becomes (in outsourcing terms) another way of deploying the technology, in a similar way to thin client.

5- Freed from captivity - Those end users with their captive outsourcing centres will increasingly divest to reduce management costs and move towards true outsourcing. As a result of this, back office outsourcing companies will increasingly diversify and expand service offerings through acquisition.

6- SME sourcing - the SME sector will increasingly recognise the benefits of outsourcing and even offshoring as it looks to growth opportunities whilst reducing overheads. Locations offering outsourcing services to smaller businesses such as Mauritius and Sri Lanka will continue to grow in strength and prominence as they learn to target the SME sector in countries like the UK for potential customers

7-Location, location, location - China will see a growth in call centres and continue to eat away at the share of established outsourcing locations. The Philippines, Brazil and Russia will see an increase in business as they grow in prominence on the world stage. While Brazil will see increased competition from Chile, it will continue to grow in strength IT-wise if not in BPO as it already has over two million IT workers. Many locations will also start to specialise more in recognition that global outsourcing cannot continue to grow interminably more noted as more traditionally outsourced services (from CRM to infrastructure and storage) are delivered via this technology. However, given that outsourcing arrangements are based on relationships and change more than technology, it's possible that the "cloud" just becomes (in outsourcing terms) another way of deploying the technology, in a similar way to thin client.

What will happen in the outsourcing sector this year?

Karl Flinders | 2 Comments
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I wrote a story today about the year ahead in outsourcing. I spoke to people across the industry and got some interesting comments.

Below are the comments I got but what do you think?
Harry McDermott, CEO art consultancy Hudson & Yorke which works in the Telecoms sector, believes a mobile operator will acquire a company to add managed mobile services to its portfolio.

"I believe managed mobility services will become a big issue in 2010. I think we will see a big mobile operator acquire a major player in the fixed telco or IT outsourcing space

Tony Rawlinson, managing director financial services at sourcing consultancy Equaterra

"When I look at what's hot and what's not in outsourcing in Financial Services I see 2010 being a year of restructuring, EquaTerra expects further mergers and acquisitions on the client side and additional consolidation on the vendor side, all driving re-alignment of outsourcing contracts alongside new deal flow."

Robert Morgan, director Hamilton Bailey says a household name in Europe might disappear

"We will see the absorption of a major European outsourcer into another company probably an American company."

"There are still companies that are run quite badly and are clinging to scale being everything."

Duncan Aitchison, EMEA president at sourcing consultancy TPI says he expects to see an increase in the total value of contracts signed in this market into 2010.

"We believe we are likely to see a rise in the number of large scale contracts awarded both globally and in Europe in the next 6-9 months."

"In 2009 we saw relatively slow large scale outsourcing activity, (those contracts valued at €20 million or more), however. The earlier slowdown of activity was driven by a lack in corporate decision making, as companies struggled to cope with the impact of the global recession. With signs of confidence returning to the market, the larger businesses, who are the primary drivers of the outsourcing market, appear to be willing to make more strategic, long term, decisions about their sourcing strategies."

Peter Brudenall, lawyer at Hunton & Williams, says the next 12 months will see a few of the big Indian outsourcing service providers increase their European capability through acquisition. "We will see some of the Indian suppliers building up their delivery presence in Europe. This will mean buying medium to large service providers."

Ade McCormack, business IT consultant at Auridian and Financial Times columnist, thinks 2010 will be the year that cloud based services gain momentum.

"There will be a big move to cloud based outsourcing. The increased financial pressure on organisations means they need to be more demand orientated."

Foreign workers taking UK jobs. A good headline but is it anything new?

Karl Flinders | 3 Comments
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Are stories about foreign workers in the UK headline getters or cause for concern?

I was interested to see a story on the Times website about the Intra Company Transfer (ICT) system which enables overseas firms to bring staff to the UK.

It is good to see the nationals highlighting a loophole in the system which is being used, mainly by Indian outsourcing service providers, to bring low cost workers to the UK.

The story was very informative but did not say anything new. But any headline as controversial as "Arrival of 30,000 migrant IT workers 'deprives Britons of jobs'" is worth a read.

ICTs were originally designed to allow large US comapanies to bring very senior staff to the UK. But now thousands come into the UK to carry out low level jobs at low cost.

Because many of these Indian service providers are large coporates themselves they can afford UK offices and they use this to transfer staff and bypass the ICT system.

Naughty you may think. But their customers including the big banks don't mind.

Whenever I interview senior executives at the Indian firms I alkways ask them whether they think it is fair that UK workers lose their jobs because they bare undercut on cost. The answer is usually the same. Uncomfortable silence followed by "we abide by the UK immigration rules."

The last six months of last year was a big period for the ICT system with a review carried out and reforms promised. I covered the subject in some depth last year.

For more information here are some of the stories I wrote last year all with eye catching headlines.

December 03 - Indian companies are biggest importerst of IT workers

September 07 - Government stops businesses importing Labour to cut costs

August 24 - New rules on immigration don't go far enough

August 20 - Government closes migrant worker loophole

August 19 - UK IT workers train overseas replacements

August 05 - Migration Committee reveals ICT investigation results

August 03 - Big business abusing migrant worker law

June 03 - Offshore suppliers 'take the mickey' out of UK law

Top outsourcing stories of 2009

Karl Flinders | 2 Comments
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This is a list of what I think are the top ten outsourcing stories I wrote last year. I have ranked them in terms of the number of people that clicked on the articles.

Obviously there were massive stories written by other people. But what were the best?

1.Satyam chief B Ramalinga Raju admits to fixing the outsourcer's books

The chairman of Indian IT outsourcer Satyam Computer Services admitted that he fixed the company's books for several years.

2.Satyam staff exodus as fraud unravels

More than 14,000 Satyam workers had their CVs on the web within a day of the news breaking that the company's chairman had been cooking the books.

3. HP staff face a hurricane of cuts to pay and benefits

HP staff, who already face significant voluntary pay cuts as part of the firm's cost-cutting plan, face further involuntarily cuts to many more of their benefits.

4.Pay cuts barely touch HP executives

Hewlett-Packard's top executives are unlikely to suffer in the company's voluntary pay cut programme, despite agreeing to take pay cuts of up to 20%.

5.'Naive' BT Global Services split into three

BT is restructuring its struggling Global Services business to focus on three separate areas after its "unacceptable performance" led to the group losing more than £1.3bn.

6.India losing its advantage in outsourcing

Indian IT service providers are losing their advantage against global competitors for providing IT outsourcing services as customer satisfaction levels fall. But they still compete successfully and still achieve high customer satisfaction levels.

7.Why IT service providers should offer flexible pricing now

EDS's decision to offer businesses flexible service options will help IT departments cut costs without losing service levels. EDS's new model will allow customers to take out services while not paying as much up front.

8.1,000 angry HP EDS staff vote to strike

As many as 1,000 Hewlett-Packard staff will go on strike for one day in December to show their disapproval of pay freezes and job cuts at the company.

9.Who will buy Satyam?

Indian IT supplier Satyam is up for sale, but who will buy the company that has been shaken by an accounting fraud that went on for several years unnoticed.

10.Business outsourcing is on life support, bosses told

Commoditised outsourcing is no longer outsourcing and strategic outsourcing is on life support.

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