But the unions is not that happy.
February 2010 Archives
But the unions is not that happy.
Cricket, Football and Rugby were once dominated by England but then it shared it with others, who often put even more focus on it and become better than the inventors.
Today there are organisations set up to promote IT and BPO offshoring in many developing countries. They try to prevent locations becoming seen as risky for businesses to outsource to.
The best known is Nasscom in India but there are many others and below is a selection.
Brasscom - Brazil
Slasscom - Sri Lanka
ITiDA - Egypt
There are also countries like China and the Philippines as well as a host of South American states that are establishing themselves offshore business services centres.
Next month I am going to put together some profiles of some of these locations.
If you have any other favourites or information please contact me either through a comment or by email on firstname.lastname@example.org
Fujitsu suspended planned redundancies while the union did the same in regard to strike action.
I have called the union and await news.
Fujitsu put an offer on the table earlier this month to remedy worker dissatisfaction over pay changes, pension and redundancies issues.
Fujitsu made the offer through ACAS and Unite is recommending that workers accept the offer.
No matter what mess Labour get themselves in the Tories can't seem to take full advantage.
I wonder where a hung parliament would leave the banks. And more specifically their cost cutting measures such as offshoring IT.
I had an interesting conversation with an IT professional this week. He used to work at RBS so I asked him whether he thought the bank's current financial woes would lead to more offshoring. RBS which is over 80% owned by taxpayers lost £3.6bn in the last year.
He told me that the bank is gradually sending more jobs overseas to RBS India.
But surely RBS is not alone in moving IT offshore. Most banks face severe pressure to cut costs.
Perhaps the only finger in the dam stopping a flood of offshoring is the government's predicament. An election is close and the government is unpopular enough without sending UK jobs overseas.
One lawyer I spoke to says he is not seeing any major offshoring deals being signed by banks at the moment. The government has more influence over the banks now than ever before and no bank CEO would risk offshoring on mass.
But if the Tories win the a workable majority at the election, which I thought was a dead cert until recently with a hung parliament looking a possibility, will the finger in the dam be removed?
The Tories have said that the management of banks is a matter for bank management teams and not Ministers. Also Labour will always be blamed for the banking crisis so more offshoring might not hurt the new government as much as it would the incumbent.
But a hung parliament will give a voice to more people which inevitable means decisions are harder to reach. Consensus politics is democratic but can lead to political stagnation. Look at Italy.
Forget the clipboard and half rimmed glasses this is an idea that screams of logic. But is it that different to what is already offered by outsourcing service providers.
Fujitsu seems to have won a fair set of deals in recent months. Could this be partly down to the integration of Fujitsu's businesses worldwide.
I recently met Fujitsu and they were telling me that its global presence combined with its local flexibility and skills has put it in a strong position. You know, large and stable and small and flexible in on. Or as the company itself outs it "global presence local touch."
It has recently won deals with the Department of Work (DWP) and Pensions, the Home Office, the London Council and the Highland council. The DWP as we know was a big one.
But is it just a case of low cost labour offshore and strong presences in Europe?
It actually talks a lot about its approach to outsourcing as being its strength as well as some of the mentality it inherits from its homeland of Japan.
It said that every contract outsourcing signed will inlude a Fujitsu worker with the title Officer of Continuous Improvement. Apparently this idea has its origins in Japan and involves individuals taking responsibility for specific things to drive improvements. Fujitsu said this is not a service manager or a products manager but someone that will continuously come up with ideas to improve performance.
The example Fujitsu gave me about how this can work was interesting:
Fujitsu said one company was getting lots of calls to the IT help desk. This was costing a lot of money so the Officer of Continuous Improvement looked closer. It turned out that the rollerballs on traditional mice were getting dirty for reasons related to the customers line of business. So workers were having trouble using computers.
So Fujitsu bought every staff member an optical mouse out of its own pocket. The rationale was the cost of the help-desk went down, because there were less calls, and the customer was happy because many of the problems ended.
See part 1, part 2, part 3, part 4 and part 5
by I.T. Jobseeker
What an exciting, varied life I lead! Late last week, I made a routine visit to my doctor. After a short conversation, matters were settled, and presumably because she had time remaining out of the regulation ten minutes, she took the opportunity to give me a quick 'once over'. She took my blood pressure and weighed me, then entered the figures into her PC.
'Hmm, that's good,' she said turning from the screen, 'your blood pressure is very satisfactory and your weight is down by seven kilos.
Have you been on a diet since your last check up?' Seven kilos! Over a stone in old money. I knew I had lost weight - my wife had told me that one of my chins had gone missing and my jeans and trousers had been slipping low on my buttocks, putting me in serious danger of becoming trendy. I had taken to wearing belts.
'I would put it down to taking more exercise,' I told her, 'I walk every day, just to the shops and back, it's about a mile each way. And I don't go to the pub so much either, these days'
'I'm impressed,' she said, 'What bought about this change?' 'Redundancy. I've got time on my hands now, so I try to walk whenever I can. As for the pub, I often used to go to unwind after a stressful day at work. Now there's no need.'
'How do you feel about being made redundant?' Her face had suddenly assumed a concerned, serious look. 'Well, there have been better times in my life.' I told her. 'I mean, how is your mood, generally? Does your situation make you feel sad, for instance? Have you become irritable? Do you feel lethargic?' she asked.
My GP was checking for symptoms of depression! Doing her job, after all, but depression? I assured her that I was OK, that I kept myself busy trying to find work and was getting on with things around the house and in the garden. She seemed reassured.
I thought about the changes in me that redundancy and unemployment had bought about as I walked home. A rather odd one was that my feet had become soft! I had been used to wearing outdoor shoes from early morning to when I got home in the evening. Now it's only for a couple of hours each day, resulting in sore feet and sometimes blisters after a long walk. I feel much better generally. More exercise, the weight loss and less stress are a huge plus.
The financial aspects are obviously a worry, but with some redundancy pay still unspent and my wife earning a reasonable salary we are managing for now. I think I am in a better position than many unemployed people. I don't feel any of the symptoms of depression described by my doctor, not yet at least; but I can see how they could come about. I imagine my doctor's prescription pad has seen a lot of anti-depressant action on behalf of the unemployed.
How would I feel if I was still out of work in a years time? I hope I never get to find out. Come to think of it, though, I have experienced some of those symptoms. It was back last year, when I worked for the outsourcing company.
We have all seen the troubles that HP has had recently with workers it picked up through its deal with the DWP. HP workers who joined as part of its acquisition of EDS have been unhappy about redundancies, pay cuts and changes to the pension scheme. Workers have been involved in strikes recently.
Then there is Fujitsu, which has had its own industrial relations strife. Again pay, pensions and redundancies are the trouble spots. The company last week avoided strike and postponed redundancies as union members mulled over an offer it made to them.
And now its Siemens staff at the BBC who could go on strike. They are unhappy with pay freezes and redundancies.
So workers that are business critical to you, but controlled by a supplier, are unhappy with their treatment. They then decide to go on strike.
I would have thought these workers have a strong card. It can't look good to the customer.
This according to a report as is to ensure they fit in with the local social fabric and adhere to Labour rules.
But why is the UK so different?
Is this just because the UK government is so slack when it comes to policing intra-company transfers? Or is it because Indian IT workers speak perfect English whereas their German and French is for example not up to scratch?
When I receive the report I will look closer and try and answer some of these questions.
The pilot has found it takes just 36 minutes to set up a network for a project rather than the 43 days it takes now.
500 employees are linked up to centralised servers holding software that they can all access.
The article also describes cloud computing as the new battleground for IT outsourcing suppliers.
In July I attended a presentation by Robert Morgan, director at Hamilton Bailey which advises suppliers, and he said Indian suppliers will have to be bold in the cloud to retain their strong market position.
It looks like Wipro is readying itself for a bold drive into the cloud.
This was in reaction to the banks decisions to end a desktop management contract with Getronics and take it back in-house and end a six year contract with Accenture.
Well I found out the answer today. But the answer raises an even blogger question.
So a former senior IT executive of Barclays told me that the simple reason why Barclays insourced the work is because its CIO Jim Ditmore is a serial insourcer.
My next question is: can a CIO be a pure insourcer or outsourcer in this day and age?
Like one attendee, that said Nasscom got its swagger back, she also noted a bigger buzz.
Like most Nasscom attendees there is an air of cautious optimism.
Here is her blog post:
"This year's NASSCOM was noticeably more exciting than previous years - there was without a doubt, a much bigger buzz, taking us away from the heady double digit growth days to a more reflective, but nonetheless optimistic view of business models of the future.
This year focused more on re-defining the industry, looking at non-linear growth and new pricing models (like pay-per-use), showing big potential for the Indian domestic market.
There was a considerable emphasis on sustainability and environmental protection, highlighting that India seemed to be leading the way in harnessing technology to deliver for Europe and the UK. It was particularly rewarding for me to see larger scale CSR projects being recognised and rewarded at the event.
I was especially excited to see some of the UK central government there, including John Suffolk, Government CIO. Perhaps one thing that the organisers might like to consider for next year is to include a speaker like global economist Jim O'Neil, who could talk about the BRICs and their potential for economic dominance come 2050.
Overall, compared to last year, NASSCOM 2010 seemed to be much harder hitting and more widely attended by the 'who's who' of the IT industry."
It was carried out by an employee who obtained a colleague's password.
The fraud is reported to have been discovered in December but to have been going on for a year.
Suresh Senapaty, CFO at Wipro, said: "In December 2009, we noticed an embezzlement by one of our employees. Pursuant to an investigation that is ongoing, steps have and are being taken by the company addressing the processes and people issues"
Wipro has not named the employee involved.
The fraud could however involve more people according to reports.
It may not be as disastrous as Satyam's billion dollar internal fraud but it is embarrassing.
I couldn't help getting confused when I read the results. How could outsourcing do well and IT services and consultancy do badly at the same time?
Us journalists always think making results confusing is deliberate and attempt to hide something. But we are like that by nature so it is not the case I am sure.
After speaking to Capgemini it became clearer. So just to prevent confusion outsourcing to Capgemini is IT outsourcing, BPO and KPO.
While Technology services are implementations and Consulting is traditional management/business consulting. But neither are outsourcing.
This makes it clear because there were obviously less implementation projects has companies held of spending. Similarly business consultancy is probably less required when customers are just trying to steady the ship.
This blog posts describes a scenario where the government may need to sort it out sooner rather than later. Or maybe the Indian suppliers will sort it out on its behalf.
The CIO of the Department of Work and Pensions made a very interesting statement when he announced an agreement with Fujitsu.
He said the department will be putting lots of IT work out to tender in line with changes across government.
If you combine this with the attendance of government CIO John Suffolk at the annual Nasscom event this month and you have a potentially interesting future trend.
The big Indian IT suppliers do not have that much in terms of UK government contracts. Although they are focused on applications rather than hardware the changes in government procurement and the interest in them from the government CIO means now could be the time to increase their presence.
There is a lot of application development and maintenance work to do for government and then there is BPO.
Just over a year ago I attended the first meeting of an All Party Parliamentary Group (APPG) focused on improving the UK's economic relations with India.
The first group of companies from India to meet the APPG were IT companies. Not surprising when you consider that TCS and HCL have thousands of people in the UK.
A spokesman for the APPG said at the time: "With the economic downturn companies are trying to make cost savings and this is a way of seeing what role Indian IT companies can play in this. It will also look at how public sector procurement can be improved," he said.
So the government wants to cut costs and, in the DWP's case anyway, departments are looking at refreshing their supplier agreements.
Will the Indian suppliers step forward and take on some of the most contested IT agreements in the land?
Or will the need to offshore work scare the government off?
Offshoring jobs is very unpopular in the private sector but in the public sector it could be suicidal for a government. The costs of paying for redundancies in the public sector is massive and the unpopularity is politically dangerous.
Also the civil service has a habit of making it difficult to make changes that could cost civil service jobs.
Douglas Hayward, an analyst at IDC specialising in outsourcing, says now could be the time for the Indian suppliers to win big in government. He says the application development and maintenance work that government requires suits them. He also said there are BPO opportunities.
He says companies such as HCL and TCS are becoming more local with thousands of UK staff so they are resourced to support local government.
But he says due to the political unpopularity of offshoring work and the huge costs associated with making public sector workers redundant Indian companies are more likely to win "green field work" rather than legacy contracts.
He says sending existing work offshore would be difficult but new projects could be more easily sent offshore.
It will be interesting to see how the Indian ID card project runs. The project will provide 1.2 billion Indians with biometric ID cards. The man who is heading it is Infosys co-founder Nandan Nilekani. If it is a success, in a country where millions upon millions live in remote areas, the UK government might look at Indian delivery capabilities differently.
Here Robert Morgan of Hamilton Bailey describes the challenges of the Indian ID card project.
The"Promises! Promises!" event will be held at the offices of law firm Berwin Leighton Paisner on Friday 05 March.
The event will be chaired by Computer Weekly Editor Bryan Glick.
There is no charge, but places are limited and are likely to fill up quickly. If you do not have a direct invite you can sign up by emailing email@example.com
Below are the details that appear on the invite.
"Will the BSkyB/EDS case become a defining moment for change in the IT outsourcing industry?
BSkyB won its five-year legal battle against HP/EDS after the judge in the case accepted BSkyB's claim that HP/EDS had misrepresented its capabilities in selling a CRM system. Appeal or not, what will be the repercussions for the outsourcing industry and its customers? How will suppliers need to adapt in order to protect themselves from future litigation of this type? We will look at how suppliers may need to change their approach to assess their risks and protect themselves from future similar cases, and how this might impact bidding costs and willingness to supply, and also on bid prices offered to customers. Where does this case leave customers? What should they do to guard against such cases? We would like to invite you to attend a special event to explore the repercussions of this case.
Date: Friday 5th March 2010
Time: Registration 08:00am. Seminar 08.30am to 10.00am.
Location: The Auditorium, Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London, EC4R 9HA
"This is the first in a series of competitions to replace our existing IT and telephony services contracts by 2015 and it sets the tone by delivering significant benefits for the Department and as a framework for Government wide IT," said Harley.
Successful suppliers will be expected to provide green IT solutions, cut costs and retain high performance levels.
It will be interesting to see how HP fairs in these competitions because runs a lot of the DWP's IT.
The HP DWP deals come from the EDS legacy and HP has had difficulty integrating the EDS workforce. Former EDS workers are up-in-arms about cuts to pay and benefits as well as lots of redundancies. The threat of strike action by former EDS workers has not exactly filled the DWP with confidence?
But the Fujitsu deal, which was taken from HP/EDS, could just be the supplier merry-go-round where the main suppliers lose some but win new ones.
See part 1, part 2, part 3 and part 4.
by I.T. Jobseeker
My interview suit got a rare outing last week. A company needed an analyst to provide cover for a lady on maternity leave. The benefits were contractor and the pay was permy, but needs must and it was only for a year, after all.
I spent some time thinking of the things that might come up at the interview, referring to the job spec the agency had supplied. I had studied the company's website and came up with a few questions from me for the 'do you have anything to ask us?' bit that comes at the end of all interviews. I thought that I was well prepared when I set off to meet them, I had rehearsed all the questions they could possibly ask, except for the 'killer' question. Surely nobody would ask it? Not in this climate to somebody in my position? Not for a temporary job! My circumstances were clear from my C.V. and the agency had told them why I was available immediately. I put it out of my mind.
Far Fields Financials are situated in a recently developed business park in a remote part of South East England. After two buses, a train and another bus, followed by a ten-minute walk, I arrived long before my appointment, dreading the prospect of being late. It had taken almost two hours. If I got the job, I would need to buy a second car, I thought. My wife uses the one we have for her work.
The business park seemed to be there because a farmer, who, frustrated by his dealings with the The Ministry of Agriculture, Fisheries and Food , had decided that low-rise office blocks were the way forward and had pocketed the proceeds of the family farm before heading off to the Bahamas. Who could blame him? A cow in a nearby field eyed me curiously and mooed as I headed towards Far Field's offices and the door marked 'Reception'.
Eventually a bearded, casually dressed man approached as I sat in the waiting area.
'I.T. Jobseeker?' he said, offering his hand. 'Gordon Bennet, head of systems development here at Far Fields.'
'Good to meet you', I replied, maintaining eye contact, a firm but not crushing grip in my handshake.
I followed him to the interview room, making the usual small talk. We were joined by Alistair, a senior analyst.
The interview was going quite well. The usual competency based stuff with Gordon Bennet asking most of the questions. I was relaxed and felt confident in my answers, Alistair nodding approvingly on many occasions.
Then, out of the blue, I was asked: 'What attracted you to Far Fields Financials as a company you would want to work for?'
'Well...' I knew the answer, of course. But why didn't he?
My head told me to say something like: 'I have followed the company's progress with interest over many years. I have admired the levels of customer service which have become a benchmark for the industry as a whole'.
My heart wanted to say: 'Are you having a laugh? Why do you think that I'm prepared to travel to this pimple on the backside of the back of beyond for the sort of money you want to pay?
My mouth said something that was a mix of the two, but I fear the heart featured rather too much in the final answer that was liberally sprinkled with 'Um's' and 'Er's'.
The agency rang yesterday. I didn't get the job.
Mark Lewis, a lawyer who works in the outsourcing sector, talked about a meeting he had recently where a CEO at an Indian supplier talked about how he wants more UK citizens to work for his company but struggles to find them.
The CEO even raised the issue with Lord Mandelson at a recent meeting.
In a recent interview with HCL, its European president told me the company wants local people in the regions it operates.
I don't want this blog to appear to be against the use of Indian suppliers because it certainly isn't. But the blog wants a fair chance in the jobs market for UK workers and better treatment for some workers caught up in outsourcing deals.
So I would like the offshore service providers to outline their stance on the Intra Company Transfer System and whether it is being abused. And whether they want more UK citizens as staff.
I would also like to know whether UK IT professionals are seeing any opportunities at offshore service providers in the UK.
Thisis Mark Lewis' comment to my earlier blog in full: "On a related, but slightly different, tack, I had a very interesting chat last week in Bangalore with the CEO of one of India's leading IT companies. He says that he is actually looking for suitably qualified IT workers in the UK to join his company. He states that, for all the talk about Intra-Company Transfers (ICT), companies like his would much prefer to employ local IT staff. The main reasons are that there are a limited number of India-based IT workers who actually want to come to the UK under ICT and the catchment group is in the age range 24-28, so is by definition quite limited. As he has to pay his Indian staff approximately the same as equivalently qualified UK workers, it would be far less disruptive to employ UK IT staff. He asks: where are they and how do I get to know about them? He raised this issue with Lord Mandelson recently. Perhaps our Job Centres should send lists of UK IT workers to the Indian IT companies and between them and the IT consultants bodies set up a proper work exchange?"
As a result I am putting together an article about the UK jobcentre system and how it caters for IT professionals.
One of the recurring themes of my interviews, with IT workers that have been made redundant as part of an offshoring IT agreement, is they find Jobcentres disappointing.
But possibly the biggest problem is after three months jobseekers are expected to broaden their searches. This is difficult for specialist IT professionals and jobcentre staff don't seem to understand that IT is an umbrella tern more a plethora of different roles.
The chain of events will begin with a specialist IT worker losing his or her job. They will have already trained an offshore replacement. After three months looking for work they are forced to broaden their search. They eventually get another job in IT but it is a completely different role.
If you repeat this, thousands of times, you lose the onshore skills and then there is no choice for businesses and government.
The skills will be lost forever.
So is the three month rule to broaden job searches appropriate in the IT sector? Three months is not a long time during a deep recession. When demand for the lost skills rises there will be a massive onshore skills shortage and UK organisations will depend on offshore suppliers.
Although this need not be a negative thing it does pass control of destiny over to suppliers. Imagine a few years down the line, a supplier could double its prices. This is unlikely but possible.
Do UK IT workers made redundant need more support potentially for longer?
By Alex Blues
Another NASSCOM event comes to an end. I was concerned that the atmosphere would still be subdued but the opposite was true. If anything it was too upbeat as if the recession was just a bad memory, as one CEO said, "NASSCOM has got its swagger back."
The key change for me at NASSCOM is this is no longer purely a major Indian Outsourcing conference. It is a global conference that happens to be held in India where 22 trade delegations were promoting their country as an offshoring destination. Eastern Europe like Egypt have made their presence felt, some are always here like Northern Ireland, but there are new and more exotic ones like Colombia and Brazil.
Much of my time today was spent interviewing CXO's from the major players as PA will be issuing a white paper around March. So my colleague Manish Khandelwal from PA provides the key messages for today:
1. Winners will be those that focus on the outcome not on the transaction
2. The supply knowledge chain will expand and will have a profound effect businesses
3. C2C business will see growth
4. Ideas will drive the industry, but execution will be the key
5. Buyers will demand more flexibility and eternal contracts will become extinct
6. The industry will be driven towards finding practical applications for the masses
7. Public sector transformation, particularly in the developing world, will provide the opportunity to make a real difference
8. While industry may see mergers and acquisitions, SMBs will push innovation and continue to prosper
9. Collaboration across the boundaries will be a key driver
So what are my key takeaways from NASSCOM 2010?
1) The move from thinking about cost to providing customer value
2) The move from input based pricing to outcome based pricing
3) The move from bespoke solutions to platform based solutions
That's it from me until next year...
I had a meeting with an IT professional who is now unemployed after losing out in an outsourcing deal.
This guy was working in IT before I was born and I am not that young (37).
It really brings home the impact a decision made by a business to offshore IT can have on the lives of workers.
So somebody who has worked for over 40 years and paid tax all the time now can't even get benefits because he has over £6000 savings and his wife works.
But then you have to think about the loss of over 40 years' experience doing IT in a very niche sector.
You cannot replace this over night.
Big businesses are outsourcing the responsibility to make job cuts to service providers. I always feel the suppliers get the most criticism but te employers know what is going to happen to many of their staff when they transfer to a supplier. It can but rarely does benefit their careers.
I am sure no business takes lightly making people redundant but are short term cost gains really worth it?
See part 1
"The speaker's lounge is the one place at NASSCOM that is a retreat from the chaos and I have been fortunate to use this as my base during the conference. It is the who's who of the sourcing industry and it is fascinating to be a fly on the wall and listen to the debate about whether the recession is over and the rumours about the companies likely to merge.
It is hard to believe how quickly this industry has changed. Only two to three years ago, the talk was about how far costs could be reduced and it was difficult to differentiate between many of the company's offerings. Now the talk is about added value and outcome-based pricing.
The key messages today are:
1. The recession has forced more end users to increase the percentage of work going offshore
2. The recession has been good for the industry which is now leaner and fitter -the downturn in the US and Europe has required companies to look at new emerging markets
3. The smaller companies are still suffering and we will see an increased number of mergers
4. The appetite of Indian companies for cross border acquisition will return
5. The market will return to double digit growth in 2011
6. The 1990s were dominated by software maintenance and development, 2000s by BPO and the 2010s will be dominated by infrastructure and systems integration
7. European markets will show much more appetite for consuming offshoring services
8. Governments in the West will come to terms with offshoring in the public sector
Government CIO John Suffolk has been at the annual Nasscom event in Mumbai this week where, according to a report on India website CXOtoday , he said Indian service providers have been important in providing UK public services. But he did suggest that smaller contracts were the way forward.
In February last year spokesman for the All Party Parliamentary Group (APPG) on UK-India trade and investment relations told me: "With the economic downturn companies are trying to make cost savings and this is a way of seeing what role Indian IT companies can play in this. It will also look at how public sector procurement can be improved."
The first Indian group of Indian companies that attended the APPG were IT companies.
So there is no question that Indian service providers do and will continue to play an important role in providing the UK government with IT. But how can this be done without putting experienced IT professionals in the UK on the dole?
There are hidden costs of offshoring for governments seeking the support of public opinion.
What is the best balance?
Day 1 - Nasscom
By Alex Blues
"This year's NASSCOM (National Association of Software and Services Companies) conference in Mumbai is an event that I have seen grow to one of the largest global conferences, with over 1600 delegates, 120 speakers, 130 suppliers and 22 trade delegations promoting their country as an offshore destination.
Compared to last year the atmosphere is upbeat. Last year, the recession was politely ignored but still the elephant in the corner, Mumbai was still reeling from the terrorist bomb attack and the Satyam debacle was in danger of wrecking the Indian Outsourcing industry. This year, these issues have been forgotten, but there is still a sense of realism that the days of 30-40% growth are ancient history.
The key messages so far are:
1. The cloud is going to dramatically change the industry
2. The offshore industry is no longer about wage arbitrage, it is about providing business value
3. Specialism is key to success and the offshore industry is no longer just about applications management and development
4. In the next decade, an astonishing 80% of the new opportunities are expected to come out from new areas
5. Collaboration is key, be it across public and private sector, or across continents, or across partners
6. Buyers will demand more flexibility and eternal contracts will become extinct
7. Education systems will be challenged to produce employees with new skills - skills that remain undefined today and will constantly evolve!
8. Procurement as a function will evolve and buyers will invest more in Governance and supplier management
9. Industry will be challenged to find ways to support businesses to drive down the costs of services and products
(Constrained by time and space, I can't go into too much detail, but do please use the 'Leave a comment' box below if you'd like an expansion on any of these)
It is now 18.25 and if I can make it through the crowds I should just make it to the next event at 19.00. 'Melange: A journey from Broadway to Bollywood'. It's a tough life."
Thanks for that Alex. Very interesting and feel free to leave a comment in the comment box as Alex said.
The Business Standard, an Indian website, says this "clearly indicates the industry is back on its feet" but does it?
There is a growing feeling that better times are around the corner but this year's event might be a good time to reflect on the past and bullet proof for the future.
See part 1, part 2 and part 3.
by I.T. Jobseeker
So now even the Indian BPO providers are saying that the policing of ICT's could be better!
Wake up, Woolas!
The news that Nasscom, the body that represents Indian BPO providers will welcome greater scrutiny of ICTs comes as no surprise. Crucially, there is no denial that abuse of the spirit, if not the letter, of the ICT regulations is taking place.
It's rather like Westminster MPs, who, knowing that the game is well and truly up, now say that they support a tightening of the controls on their expenses.
The likelihood that an incoming Conservative government will crack down on the ICTs, as reported last week, has clearly worried them. That's why they are supporting better policing of the existing regulations, fearful of a cap being implemented. For them, it's the lesser of two evils.
However, greater scrutiny and better policing of the existing rules will cost money and is unlikely to happen. Checks by the UK Borders Agency on short-term migrants for breaches of UK employment regulations, such as ICTs, will always be a low priority while the main focus is on illegal immigrants and when there is a significant terrorist threat.
I think that the only workable solution is to have a variable cap on ICTs, set by the Department of Work and Pensions, according to the availability of skilled workers in the UK.
Nasscom's stance would seem to be: 'catch us if you can'.
Nasscom is the trade body that represents IT service providers in India.
This should be an interesting one because it follows a tough recession which although officially over could yet see another dip. Yes people are not ruling out a double dip recession.
It is an interesting time for the Indian suppliers. The intra company transfers scheme is being criticised, new rules on VAT could make life more difficult and then there is emerging competition from China.
How will the Indian suppliers change to prosper over the next decade?
They seem to have weathered the recession reasonable well and have displayed their flexibility to react to changing trends.
But it's not just the Indian companies at NASSCOM. Most outsourced service providers these days have significant Indian presences so they will all be there.
Unfortunately I will not be attending but I am hoping to get feedback to those that make it to Mumbai.
We have a guest blogger from PA consulting reporting after every day so look out for that. With the mobile technology around these days feel free to send your thoughts either in the comment section or by email on firstname.lastname@example.org
See the NASSCOM timetable.
So banks are considering giving offshore suppliers more control of their processes to avoid having to pay an extra 17.5% for their BPO services.
Last month the government changed the way businesses pay VAT for BPO services. From January 01 VAT started being charged at the point of use rather than supply. Typically offshore services deals with Indian companies do not include any VAT.
Financial services firms will not be able to claim VAT back, like other businesses, because they do not charge VAT as their services have no value added.
According to Robert Morgan, director at Hamilton Bailey, the legislation has made client and suppliers face some hard decisions. He says he has already noticed three clear trends arising from the introduction of VAT on financial services provided from offshore locations:
- Client extending or offering new services want to choose a supplier who qualifies as a full financial services supplier - which means either full or partial exemption for VAT. Companies like EDS/HP and Capita have an offshore capability which has a Banking license and qualifies as a financial institution supplying services to other institutions. Offshore companies have varying degrees of investment in this regard
- Advisory consultants such a Hamilton Bailey has to work a lot harder to define the scope of services and meet certain requirements with a lot more clarity in order to obtain a percentage of the service to be exempt or partially exempt
- Clients seeking to qualify for exemption on offshore services are having to cede more controls to the service provider in order to qualify for exemption
"Thus all parties have to be far more cautious and far thinking in their strategies," says Morgan.
Jean-Louis Bravard director at Burnt-Oak Partners who is former global head of financial services at EDS, wrote this opinion for us in December.
"Value added tax is a consumption tax levied on any value that is added to a product or a service. The concept (invented by the French) was first introduced in that country in 1957 and by now dealing with VAT is routine, not only in France but throughout Europe and Asia (where it is generally named GST)."
So why bother writing an article on VAT?
First of all, it is important to be reminded that the key concept in VAT is that personal end-consumers of product and services cannot recover VAT on purchases but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services sold to end-users.
This rule is slightly misleading as in reality businesses only recover VAT in full if they themselves add VAT to the services they sell. Traditionally that has been a problem for banks and insurance companies because historically the bulk of their services have been VAT free.
The world is about to change... from 1 January 2010.
Nothing changes for consumers, who will continue to feed the state machine. However, things will change for businesses for any good or service they transact cross border.
The current practice of charging the exporter's VAT rate (or exporting VAT free) will now be reversed, which means that a UK business buying a French product will now be levied the relevant UK VAT rate, not the French.
The first impact is that selling across borders is now going to be far more complex as each exporter will need to know tax rates in 27 countries versus one before and more importantly the rules for VAT will make a dramatic impact on non EU sales into the EU.
The problem, especially for banks and insurance companies, is that since VAT was first introduced they are now far more international and rely far more on outsourcing.
Taking an Indian supplier providing BPO services to a UK bank as an example, today the VAT rate is zero but from 1 January 2010 the services will be taxed at 17.5% (assuming the rate returns to that as announced). In a normal business, that would potentially generate a cash-flow issue (between payment and collection of VAT) but in the case of banks only a portion of the VAT is recoverable. A bank with only interest income and no VAT bearing fees would have to pay 17.5% of its Indian bill to the Inland Revenue.
In financial services, VAT issues are not new and various solutions were found to diminish or altogether avoid VAT issues when outsourcing services. BPO offered the argument that VAT should not be levied when an internal process (VAT free) was moved to an external provider using the same employees via a TUPE transfer. If my reading of the new rules is correct, VAT issues remain unchanged within the same country but arise anew even if the service provided is intra-company from a subsidiary (no matter the percentage ownership) located somewhere else in the EU. (My assumption is that intra-country any extra VAT cost may be negotiated away).
There seems to be no scope within the EU directive for companies headquartered in one EU member state to be treated as VAT grouped so that cross charges within the group can be VAT free. While this creates tremendous complexity for most companies, the impact on financial services could be significant.
For example, a UK based bank with an asset management back office in Ireland or Luxembourg will now incur VAT (at the 17.5% rate from 1 January 1 2010) whether it is a subsidiary or has outsourced to a BPO supplier, European or not.
In conclusion, I see three main impacts: The first obvious difference between previous years and 2010 is that tax revenue will most certainly go up as a lot of previously VAT exempt services will now be taxed and not all VAT will be recoverable. This is a stealth tax on financial services and will probably not lead to a mass protest by consumers as taxing banks is a recurrent leitmotiv in the press.
The second difference is that within the EU we will now have a level playing field. Services whether provided from inside the EU or the rest of the world, will now be subject to the reverse charge, whether provided by a third party of within the group. In other words, any service provided to a UK company from any location will incur VAT at 17.5%. Simple isn't it?
The third issue is for existing outsourcing services contracts. Which party will bear any cost increase? Take the example of an Indian company with a Luxembourg European headquarters re-invoicing BPO services to a UK bank. Assume that the bank recovers only 20% of the VAT it pays, then, from 1 January 2010 the true cost goes up by 14% and this may wipe out a substantial part of the saving generated by the move of the supply to Mumbai.
For a very clear description of the changes I recommend the UK tax authority website.
For analysis and views on the impact on outsourcing, I found Berwin Leighton Paisner to be the most informative."
He will discuss the topics of discussion in the speaker forums, the general buzz of that day and the main topics being pushed by the delegates.
The event in Mumbai runs from 09 to 11 February. It will focus on issues related to technology, trends, the IT eco-system, and emerging opportunities.
Nasscom blogger Alex Blues.
Nasscom said the IT-BPO industry will be worth almost $50bn in the first quarter of 2010.
I would like to see a breakdown of this number. How much is outsourcing to cut costs and how much is strategic?
I would also like some views about how cloud computing will impact both IT outsourcing and BPO?
NASSCOM CEO Pramod Bhasin is quoted as saying: "The industry has reinvented itself by increasing its cost efficiencies, utilisation rates, diversification into new verticals and markets and new business and pricing models."
This is interesting because from my meetings with the Indian suppliers they do appear to be flexible and reactive to changes in the markets.
Bhasin went on and said there will be increased focus on higher end offerings such as system integration, consulting, business intelligence, knowledge services and vertical specific BPO services.
This could suggest that most of outsourcing contracts now are to cut costs.
But will it be to cut costs or will it be strategic outsourcing?
TPI also revealed figures that painted a nice picture of the IT outsourcing market.
EMEA businesses spent a massive E12.4bn on outsourcing over the past three months, with the sector recording a 135% quarter-on-quarter increase, according to TPI. The total value was also 61% higher than the same period a year ago.
But what does the industry think?
How the BskyB victory will change outsourcing
By Peter Brudenall
Although we are still awaiting the final damages award following the BSkyB-EDS judgment last week (EDS were this week ordered to pay an interim amount of £200m suggesting that the final figure will be considerably higher), IT and outsourcing suppliers will already be starting to think about the implications of the decision, and what they might need to do in order to minimise the chances of being on the receiving end of a similar claim.
Firstly, will this "open the floodgates" to similar claims? Given that the decision has not changed the law as such, and IT disputes are inevitably very complex and extremely expensive to litigate, (and therefore rarely reach the Courts) this decision is unlikely to lead to any significant increase in similar claims, although we would expect that customers who are in dispute with their IT suppliers will increasingly look to the pre-contract discussions to see whether any misrepresentations might have been made. If so, such representations could be used to give the customer significant leverage in the dispute, given the potential liability that could follow.
- Should IT vendors now impose protocols and constraints on their sales staff?
Suppliers will want to ensure that all communications to a potential customer are, to the fullest extent possible, reviewed and/or monitored to be sure that they are not saying or promising anything that cannot be justified.
- Will the decision lead to customers seeking only to contract with the larger vendors and on a more defensive contractual basis?
Similarly, suppliers should expect that their customers will increase the level of due diligence conducted on aspects of a supplier's bid. For example, customers are likely to want to obtain sufficient validation for claims made by suppliers prior to the contract being signed. It is possible this may over time then lead to a certain amount of defensiveness on the part of the procurement process, with customers preferring to deal with the larger suppliers who have longer track records (and who may, therefore, find it easier to justify their promises as to timescales, quality of performance etc).
Some of the other issues we suggest suppliers consider include:
- conducting an appropriate level of due diligence on the project to ensure that they understand and have considered the risks involved in undertaking a project;
- be realistic with customers about the potential for a complex IT project to go wrong;
- ensure staff are trained on the implications of this case, and understand the potential for massive liabilities to result from incorrect or misleading statements made to a customer.
I blogged earlier this week about how Apsco CEO Ann Swain was asked by a company representing Nasscom in the UK for a meeting.
Apsco as we all know are hardy campaigners against what they allege is the abuse of the ITC migration system by Indian service providers and their customers.
It is a controversial subject because UK workers are losing their jobs to offshore staff, who are paid less.
So controversial is the subject that the Tories have got in on it and said they will set limits on the numbers of ICTs; cap it, in other words.
It seems the common ground they found was that caps wouldn't work. But better policing would be good. (There was however lots of disagreement.)
Apsco is not against ICTs, because they are an important way of filling skills gaps and making the UK competitive. Nobody wants protectionism. But Apsco is against the rules being bent.
ICTs are only permitted if the offshore worker receives the same pay as local workers and if there are no local skills to do the job. But this is often not the case.
And Nasscom agrees that it should be policed better, because it believes it has nothing to hide. In fact it welcomes closer scrutiny. I suppose to clear the air.
For more about the controversial ICT scheme see these stories:
Will caps on IT immigration just win votes or create a successful compromise?
Tories pledge to cap IT worker immigration
Indian companies are top importers of IT workers
Government stops businesses importing labour to cut costs
UK IT workers train overseas replacements
Click here for part 1, part 2 and part 3 of BG's Davos diary.
WEF in the eyes of an Indian IT outsourcing giant - part 4:
By BG Srinivas
The general feeling at the end of Davos was that the road to recovery is going to be a long one.
There was an unease about the fact that the fundamental forces that created the financial crisis have not been dealt with and hence, a "double dip" recession can't be ruled out. Every bit of good news is being looked at with a tinge of suspicion. Is China an asset bubble? Is gold an asset bubble? Is the strong showing in the December quarter a result of pent up demand or the beginning of a new growth cycle? Fiscal discipline - for organisations and countries - will have to be regulated in some form. The exact nature of the regulations is yet to be finalised and even the broad contours are being hotly debated. But whatever form these regulations take, there is an agreement that all stakeholders need to be a part of the consultation process and that the regulatory framework should be able to remain relevant over the next 50 years.
The other strong theme from Davos was the growing importance of emerging economies. While India has always been well represented at Davos, there was a strong contingent from China this year. The emerging economies, everyone agrees, will drive global growth and will be the key to the revival of the developed world as they represent new markets and new innovation hubs. The relationship between emerging and developed economies will have to be built around collaboration instead of trade and non-tariff barriers.
There were conversations around sustainability, which I suspect will be a big topic next year. As usual, Davos provided an ideal platform to network with clients, prospects, partners and friends. We had over 500 people come in for the Infosys cocktail reception, which has, I believe, established itself as the place to go for the best food at Davos! We also had a great lunch panel discussion on "Social networks vs the CEO - is the CEO prepared?" There was no place left to stand in the room. But above all, Davos is a place where you get together with your peers and try to figure out a solution the pressing problems of the world. It is a great way to give back to society.
With an election looming any unpopular policy is sure to be seized upon by opposition parties. ICTs fit this bill.
The ICT scheme allows staff to apply for a permit to transfer to the UK from an overseas branch of their employer. But there are accusations that the system is being abused by Indian offshore IT service providers. Indian workers are being paid far less than their UK equivalents, which is not allowed under ICT rules. Also ICTs are only supposed to be permitted when there is a shortage of UK skills to fill posts, which is often not the case.
A recent freedom of information (FOI) request made by a Computer Weekly reader revealed the massive number of foreign workers entering the UK on ICTs, despite rising unemployment.
The data showed that for the year December 2009 to December 2010 a massive 45,924 ICTs have been granted out of 62,589 requested. A massive proportion of ICTs is typically made up of IT staff from India.
The numbers are increasing every year. During the dotcom boom in 2000 only 12,726 IT workers entered the UK on ICTs, according to a FOI request made by Association of Professional Staffing Companies (Apsco). Seven Indian companies accounted for 43% of the IT workers entering the UK on ICTs in 2008, according to more figures obtained by the Apsco.
"It seems extraordinary that when British workers can't find jobs we are bringing foreign workers from halfway round the world. This is another sign that Gordon Brown's 'British jobs for British workers' was a meaningless sound bite," says shadow immigration minister Damian Green.
The Tories plan to keep the existing points-based system, which allows IT professionals into the UK, if they score highly enough on a range of measures. But the numbers will be capped.
"The one big gap in the points-based system is that there is no overall limit on how many permits can be issued in any one year," says Green.
One industry source says this is merely electioneering. "This is a fairly blatant attempt to win votes. The reality is that Western European countries all have ageing populations, and outsourcing or immigration will be one of the key ways of remaining competitive."
But one IT worker recently displaced as part of an offshoring agreement says: "[The Tory plan] looks good, but the term 'migrants' is a worry. This suggests a long-term stay, when in fact the problem is due to ICTs on a short stay, perhaps a year or so. But it is better than Labour's approach by a mile."
Mark Lewis, of commercial law firm Berwin Leighton Paisner, also sees the logic.
He says, "There is no reason to have an infinite number or even such a high number of ICTs issued. So a quota may be the fairest way forward for offshore IT suppliers and UK business."
But Union Unite is against the Conservatives' plans to cap ICTs. Peter Skyte, national officer for IT and communications at Unite, says migrant workers play an important role in the UK economy but adds that a better balance is required.
"We do believe that there is a need to strike the right balance between enabling employers to recruit or transfer skilled people from abroad, providing fair access for UK and overseas migrant workers, and protecting job and career development opportunities for resident workers." This, he says, is necessary to enable UK IT professionals to move up the value chain within their chosen occupations. "We are however opposed to the Conservative proposals for an arbitrary cap on migration numbers."
Ann Swain, CEO at Apsco, says there was nothing wrong with the current system but it was being abused but it needs to be better enforced. "There seems to be no appetite to police it," she said.
John Brazier, managing director at the of Professional Contractors Group (PCG) believes applying a cap to the number of ICT workers entering the UK would be a wise move. "Whilst ICT permits clearly have a value, their abuse and overuse is damaging. I hope the annual cap proposed by the Conservatives would be extended to ICT permits as a way of dealing with the displacement that has affected many contractors."
But he adds that main issue is not the ICT permit itself but the abuse of the system. "What we need is better enforcement of the rules, and a way to ensure the marketplace is as fair as possible. ICT workers being paid less than the minimum salary undercut contractors."
An influential source in the outsourcing industry says,"...the UK would be terribly handicapped if it closed it borders to talent, no matter where it comes from."
Political change leads to changes to legislation but many proposed changes often disappear without a trace. The Tory plan to cap ICTs is taking IT industry issues to a high level. But whether the controversial ICT scheme is changed if the Tories win, or whether it needs changing at all, is less certain.
Apsco is a vocal critic of what it says are abuses made of the Intra Company Transfer (ICT) migration scheme by Indian companies.
Ann Swain, CEO at Apsco, said Nasscom approached Apsco to set up a meeting. "They want to see if there is any common ground."
What will be the outcome?
I will blog on the outcome of this meeting tomorrow.
Is this just electioneering or could it work.
With an election looming it is no surprise that the Tories have a stance on the practice of UK companies replacing UK staff with lower cost foreign workers.
The Tories describes its policy as one of "controlling legal migration."
Basically depending on the availability of UK workers the limits will be changed.
"We will introduce an explicit annual limit on the numbers of non- EU economic migrants. We support the points based system, but believe that it can only be fully effective when a limit is implemented," said the Conservative party.
If they won the election the Conservatives said it would introduce an "explicit annual limit on the numbers of non- EU economic migrants taking into consideration the effects a rising population has on our public services, transport infrastructure and local communities. The ability to move the limit up and down would be a visible sign that the immigration system is sensitive to the needs of British workers in a recession. This would enable us to react directly to fluctuations in the labour market."
"The one big gap in the points-based system is that there is no overall limit on how many permits can be issued in any one year," said shadow Immigration Minister Damian Green.
"This is why the public has a lack of confidence in the immigration system, which people regard as being out of control. This is why a Conservative government would introduce an annual limit, so that Britain can continue to attract those who will help our economy without putting too much pressure on our essential public services."
Seven Indian companies accounted for 43% of the IT workers entering the UK on ICTs. The total number of IT workers coming in on ICTs was 29,240 with 12,573 working for the Indian firms.
Regarding Indian companies using ICTs to bring over IT workers, he said: "It seems extraordinary that when British workers can't find jobs we are bringing foreign workers from halfway round the world. This is another sign that Gordon Brown's 'British jobs for British workers' was a meaningless sound bite."
This is part 3 of our series of blogs written by an IT worker that has lost out in an offshoring deal. Last week the blogger talked about the trouble with jobcentres and this week he describes his experience of recruitment agencies.
This is part 3 of our series of blogs written by an IT worker that has lost out in an offshoring deal. Last week the blogger talked about the trouble with jobcentres and this week he describes his experience of recruitment agencies.
by I.T. Jobseeker
I was taking a break from the ads on Jobserve and CWJobs one afternoon last week. I had already made several applications earlier in the day, and although one or two seemed like good prospects, the rest were purely speculative. My mobile rang.
'Hi', said a smooth, syrupy voice. 'This is Justin of Smarmalot Recruitment.
Is that I.T. Jobseeker?'
'Yes', I said, 'that's me.'
'How'ya doin', I.T.?', he asked.
Before I could answer, he went on: 'I've got your CV. Thanks for sending it in'.
I recalled the role that his agency were dealing with. It was a speculative one. 'So you think that I'm suitable for that role in the city?', I asked, hopefully.
'Well, possibly not, but I'm sure that I can place somebody with your sort of skills. What's your availability?'
'Yesterday', I told him, and explained about my redundancy.
'Well, your skills are in demand, you've had good experience and your CV looks great. Well presented. All the right facts in the right places.'
I wondered why would-be employers were not beating a path to my door, only to be blinded by the intense rays of light that must shine from my...
'What I am going to do is to ring my contacts in (he listed the names of many FTSE-100 financial companies) and tell them you're available', he gushed.
Was this the Simon Cowell of the recruitment industry?
'Before I do, though, can I ask you a question?'
'Why have you never sent your CV to Smarmalot before?'
'I'd never heard of you', I told him, 'but don't worry, I have now.'
'And you will hear a lot more of us, that's for sure. Tell all your friends to send us their CV's. I'll be in touch soon. Ciao, I.T.' he said.
'Good to talk to...', he had already hung up.
Another day, another agency. Yesterday morning, Gary of Shaftum Recruitment called to discuss a role I had applied for. Speaking with a patter honed in the used car lots of South London, he told me that he thought his client might be interested in me. He said he could see from my CV that I'd had most of the experience required.
Presumably I could blag the rest?
'There's just one thing.', he said.
'Your CV. It's naff. I'm gonna need to change it and reformat it somehow. Then I might be able to send it off.', he said, condescendingly.
I wonder how Justin is getting on.
All Computer Weekly blogs have the same problem. Obviously we do not allow them on the site. Because of this readers do not get to see the spams, which have to make you smile sometimes.
Here are some recent spams that have tried to outwit our censors. If you look at the posts they are replying to they are particularly funny. I have deleted some classics so cannot share them all.
I have taken out foul language but left the spams as they appeared.
A selection of the spams received by Inside Outsourcing blog
Blog post: London Stock Exchange system up again.
Spam: "Gravitation is not responsible for people falling in love."
Blog post: Infosys European head blogs from Davos - part 3
Spam: "Woah, I would not have taken it there if I were you, but this is a rather good entry. Perhaps you should allow me to post a guest post to express my feelings about the other side of this argument."
Blog post: Infosys European head blogs from Davos
Spam: "I don't know if I completely agree. However, you do have a decent argument. Perhaps I can create a response in opposition to your arguments.
Blog post: NOA predicts public sector outsourcing surge
Spam: "Intriguing webpage. My friends and I were just discussing this the other day. Also your page looks excellent on my old laptop. And thats rare. Nice work."
Blog post: Ousted IT blogger speaks out
"The government had me locked up in a mental ward for five months for complaining that this was happening. Labour Party supporting doctors under instruction from the Fixated Threat Assessment Centre (FTAC) said that my belief that the things described in this blog were delusions."
Blog post: NOA predicts public sector outsourcing surge
"Thank you so much for the great post this was just the thing I needed this morning!"
Blog post: Outsourcing suppliers are taking on supplier management responsibilities
"Theres a bomb in tesco hardwick"
8 - Outsourcing suppliers are taking on supplier management responsibilities
"Hllo my computer has a trogen and its all because of ur crappy web site any credit card frawd im giving u the bill u b******s
9 - Outsourcing suppliers are taking on supplier management responsibilities
"My sh***y computer has crashed its all ur f*****g fault u all what to get real jobs u bunch of b******s
Here it is:
-- Advertisement --