May 2010 Archives

Are Accenture, Deloitte, IBM etc under pressure from IT specialists?

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Wipro is targeting growth in the consultancy space and is already taking staff from the likes of Accenture, IBM, Deloitte

According to new European head of Wipro this is because of it "business model, direction and [the] opportunity to grow with an "entrepreneurial" Global IT services company."

It makes sense companies such as Wipro can broaden their services because they have worked closely with some of the biggest global corporates for quite some time now.

Why shouldn't they take more responsibility in large transformational projects?  Consultancy is all about people, so if companies like Wipro can attract staff from the big five consultancies the options for IT project leaders might increase.

So could the likes of IBM, Deloitte and Accenture be under threat from some of the large pure play IT giants?

But who will challenge and what will they have to do to topple the consultacy giants?

I will soon write an analysis of this, so please post your comments.

Public sector cuts could lead to "golden age of outsourcing"

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Interesting take on the government cuts in the Guardian. Seymour Pierce analyst Caroline de La Soujeole says government cuts might only hurt outsourced service providers in the short term. In the long term it will mean more public services being outsourced.

She says a "golden age of outsourcing awaits" as the government turns to the private sector to get more bang for its buck.

She says 14% by value - some £80bn - of public sector services are outsourced but she thinks that could exceed £140bn by 2015.

The report goes on to say that public sector service providers such as Capita, serco and Compass have been hit by the news of government cuts with share prices dropping.

Here is another take on the cuts from one of the suppliers affected.

Gary Bettis, president at Compass Management Consulting,  says that rather than just cut contracts the government should  learn more about IT costs.

"Rather than coming up with blanket figures like the £1m contract limit, there is greater potential for savings if the public sector understands what is driving its IT costs.

It is equally possible for the public sector to be paying too much for a £1bn contract and for lots of £1m contracts.  You can have inefficient contracts both large and small.

Analysis of public sector IT provision and comparisons with the wider market show that the public sector is typically paying 40% more than the market rate for IT services.   This poor performance reflects a combination of questionable procurement practices and inadequate management of the demands  on the service provider (for extra services and customisation, for example) which drive up costs.

It is only by transforming both sides of the deal - for example, demand management as well as a standard service framework -  that the large savings we need will be achieved."

Wipro's strategy in Europe outlined

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Wipro's new European head, Jeffrey Heenan Jalil, outlined his plans for the business to me yesterday.

This plan is made up of three key themes. These are: Transformation, glocalisation and flexibility.

These themes are all reactions to what customers want.

Here are some more details.

1 - Transformation.

This is about building up the capability to help customers transform their businesses. To do this the company is investing in its consultancy business. To this end it is targeting senior staff at the big five consultancies, you know the Accentures and IBMs of this world, and is being successful in doing so.

2 - Glocalisation

Wipro wants to employ people local to its customers to make it a truly global company that can support global companies.

For example Wipro is trying to rebalance its staff in Europe. It wants to increase the proportion that is from the regions they work in. By the end of this year it wants 50% of people serving European customers to be locals. About 42% of its European staff are local today, compared to 32% last year.

Heenan Jalil said the reason for this change is a communication one. Workers serving customers must be able to fully understand customers and they must be fully understood by customers.


3 - Flexibility

The third part of the strategy is being more flexible with its technology solutions as well as the way they are paid for.

For example things like pay as you go could be offered more.

Being flexible in this context means going into a customer with an open mind. In other words suppliers should not go in with the decision on what they need to do already made. But this does not mean Wipro will supply no consultancy, because they will.

Wipro tries but struggles to fill IT roles in Europe with Europeans

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I was with Wipro's recently appointed head of Europe, Jeffrey Heenan Jalil, yesterday.

Jeffery Heenan Jalil.JPG

I will blog about his strategy going forward but I was interested in hearing about his recruitment struggles.

He says Wipro is finding it difficult to find staff to fill European based roles.

He said there are hundreds of vacancies in at Wipro in Europe for staff to work on customer sites.

"We have hundreds of on site jobs not filled because I am finding it difficult to get the staff."

He says he could fill the roles from India but wants to fill these roles with locals as part of its plan to increase the proportion of staff in Europe that is local. By the end of this year it wants to have 50% of European staff local to the region.

He says this is because the company needs to ensure that workers touching customer have no problems understanding or being understood.

He is not sure whether this is a result of a skills shortage or if Wipro is looking in the wrong places.

He also says that contrary to popular belief, bringing staff over from India is more expensive that recruiting locals in Europe.

He said the combination of the salary they must be paid as well as flights and family support makes it much more expensive to bring staff from, India.

Heenan Jalil replaced Ayan Mukerji, who is moving to a global role to head up Wipro's manufacturing business.

Jeffrey is a Kiwi and not surprisingly is a Rugby man. He claims to be a handy flanker, but having met him I would say he is too small.

MillenniunIT will have to hold back its sales instincts for now

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It must be strange for the management and workers of a supplier that is bought by a customer.

The London Stock Exchange acquired Sri Lanka based MillenniumIT last year, primarily to replace its  core trading system Tradelect but also to continue selling to other trading companies. The opportunity in the sector is actually quite big.

I was at The London Stock Exchange today for its full year financial results. It became obvious that although the company wants MillenniumIT to continue to sell to other companies, it will have to put most of its resources into a strict timetable of technology challenges.

"MillenniumIT's focus is currently on the London Stock Exchange and not sales", said one commentator.

And I can see why. It has to migrate the London Stock Exchange to MillenniumIT by mid September. Then Turquoise, the competitor it acquired, will be switched to MillenniumIT by the end of September.

By the end of the first quarter of 2011, the Milan exchange Borsa Italiana, Oslo and Johannesburg will move to MillenniumIT.

It must be a real change in a businesses mentality and must require some management.

Does China offshoring need a Western Hand?

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Do Chinese IT suppliers need to be managed from the West to make it big in global offshoring?

Following my meeting with Nigel Grieve of Bleum, I though I would ask this question.

Bleum is a software development company in China, which is owned by an American and managed from the US,

China has huge potential with a massive pool of IT talent. Hundreds of thousands of students graduate every year with computer science degrees. In 2008 IDC said offshoring to China will grow 23% every year until 2013 when it will be worth $6,8bn.

China has over 350,000 computer science graduates every year and the government has chosen software development as an industry to develop.

But there are fears over things like security, language and the protection of intellectual property.

Bleum's model is an attempt to overcome some of the fears associated with China, because if suppliers can remedy some of the problems then China is probably an easy sell.

The charges per worker per day, for example, are much lower than even India.


So this is Bleum:

The company is 10 years old and is run by American Eric Rongley.

It has about 1000 staff in Shanghai and a handful in the US and Europe to manage the company and support certain accounts.

The main applications it develops are e-commerce, financial services, supply chain and retail. Walmart has an e-procurement system from Bleum.

Bleum has a policy that all staff to speak English while at work.

It uses biometric security to protect its different locations. Each customer will have a physically separate support centre.

Its recruitment process is rigorous. It gets 2000 applicants every month and takes on only about 50.

It has a four stage recruitment process.

1 - Candidates must reach 140 in an IQ test.
2 -There is a skills test and people are chosen depending on the demand for particular skills at the time.
3 - Candidates must speak a good level of English.
4 - Then there is a behavioural test.

China needs a Y2K to overtake India

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I met with  Bleum today. This is a software development firm that is based in China. It is US owned and managed and boasts Walmart as a customer.

I was with its UK director Nigel Grieve today and we had an interesting conversation.

I must admit I do think that China needs a Y2K moment to really get it going and Nigel Grieve agreed. He said without such an event China will have to be satisfied with closing the gap on India organically.

I will write quite a few posts as a result of the meeting, because China has huge potential as a destination for offshore IT services.

Just to wet your appetite for the sort things I will write about, here are a few examples:

China has 350,000 computer science graduates every year

Bleum gets 2000 applications from computer science graduates every month and takes on 50.

To qualify to work for Bleum you have to have an IQ of at least 140.


Will new Google ranking rule stimulate outsourced web development?

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If research carried out by website optimization firm Aptimize is accurate the UK's FTSE companies need to improve the performance of their websites.

It describes how UK FTSE companies have slower websites than their US equivalents.

Google recently announced that it would measure the speed of websites when deciding where to rank them. The slower ones will be ranked lower and we all know how important a good google ranking is.

Web development is not the speciality of most IT departments let alone businesses so there must be a need for these companies to outsource the development of websites to specialists.

Website speed is now such an important differentiator that there could be an increase in outsourced development. Businesses won't mind paying for specialist development if it directly affects their Google ranking.

IT suppliers should come out the closet over SME sector

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Having worked for the press covering the IT channel and for the last few years being more end user focused, I couldn't have avoided noticing a degree of snobbery in the supplies sector, when it come to the SME market.

The SME market is bigger as a whole than the corporate sector. It employs more people as a whole and actually spends more money on IT.

But traditionally the big service providers have avoided it because of its fragmented nature. But to escalate the problem suppliers that do have SME customers don't always want to talk about it. They think they should talk about their big customers because it makes them look better. Journalists, like me, probably don't help matters because we always want to write about the big deals with big corporates.

But a couple of meetings recently have made me think there could be a change on the horizon.

The first was with the UK head of Tata Consultancy Services (TCS), Lakshmi. He talked about a trial of an SME service in the cloud aimed at SMEs. This could come to the UK if successful. Providing package services in the cloud overcomes the costs associated with servicing a market made up of companies of all shapes, sizes and specialities, that are spread all over the place.

The second interview was with MindTree. This is a tier two Indian supplier that is not embarrassed to say it targets smaller customers or just parts of large contracts.

The chairman told me it only currently offers full service outsourcing to companies much smaller than itself or just parts of larger contracts with big companies.

Also I was with T-Systems recently and when talking about the public sector they were modest enough to say local authorities and not big central government departments were their target in the sector.

With the internet today small companies can receive software from offshore suppliers. In the past large suppliers had the luxury of dedicated pipes.

So when will we see true enterprise grade services in the SME? And when will the big suppliers get over their snobbery and talk about it.

I think the last recession will make suppliers put more value on the SME sector and invest more in their capabilities in this market.

Can MindTree combine low cost services with high end consultancy?

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As promised in an earlier post I thought I would write a bit more about my meeting with Indian service provider MindTree and the offshore service pioneer, Ashok Soota, who chairs the company.

MindTree is, which was involved in the development of Microsoft Azure, ten years old and about the seventh largest Indian supplier, with revenues last year a shade over $270m.

The company was formed in August 1999 as the result of a collaboration between executives of Indian service provider Wipro, US consultancy Cambridge Technology Partners and Lucent.

This diverse group of people combined the low costs of India with the high end consultancy of Cambridge Technology Partners and the technology expertise of Lucent.

Up to now it has had two broad business lines. These are IT services encompassing internet based solutions as well as business intelligence and data warehousing software. Its business intelligence software is its main business and accounts for 60% of its sales.

The other business line is product engineering where it designs and engineers components of products.

It is now entering a third stream by entering the smart phone white label market. In October last year it acquired a part of Kyocera to support this.

MindTree's UK business accounts for 10% of its business and has 800 staff. 80 of these are in the UK, with 720 in India that are dedicated to UK customers.

It says it will only work on full scale IT outsourcing projects with mid sized companies, but will and does work with huge corporates on parts of IT outsourcing projects.

For example it built the postoffice.co.uk website. It also provides services to Unilever.

UK head Tridip Saha said as a mid sized supplier it will offer its customers more attention. He added that it can give midsized companies service levels they could not afford from the tier ones.

"We are restricted by our reach and not our capability," said Saha.

IT service providers get a excited but rein in your killer instincts.

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If you see an over excited IT supplier salesperson throw water on him or her.

IT outsourcing service providers can get a bit more excited this year but should rein in their killer instincts.

Gartner's latest research of global IT spending in vertical markets show growth in all vertical sectors.

Suppliers are advised to move to a growth strategy but fears of sluggish growth and even a double dip recession mean suppliers should prepare for this.

On the customer side it seems cost optimisation is the order of the day.

See story with more detail here.

Western IT giants ignored the Indians too long

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I met up with Ashok Soota on Friday. He is the executive chairman of tier two Indian service provider MindTree.

I will write more about MindTree in due course because they are an interesting supplier.

But it was great talking to a man who was at top of the Indian IT industry way before they were famous. While Ashok Soota was the president of Wipro in the 80s and to late 90s, some of the senior executives of the big Indian players today were out in the field.

I enjoyed his story of how the Indian companies were able to rapidly get to where they are today.

It is a story of missed opportunities for the Western IT giants.

This is what he said:

"The suppliers in the West only started to feel threatened by us in 2000."

But there were missed opportunities for the Western companies to keep more business for themselves.

"Before 1994 Western IT companies were not really noticing us because we were mainframe maintenance."

"Then client/server came they thought we could not do it. But we were."

"Then Y2K came along (millennium bug) and they thought we would go away afterwards. But Y2K gave Indian companies entry into big global companies."

"Then they did not think internet work could be done offshore, because of the need for a quick turnaround. But distance can be an advantage because you can work around the clock."

Obviously the internet played a role.

"The internet reduced transaction costs. Before this big players had dedicated pipelines. Now it became possible for a mid sized company to communicate with a mid sized company."

"It was 2004 by the time the big Western suppliers became anxious."

So what did they do? Well obviously they all moved to India.

The saying don't underestimate your competitors springs to mind. But also from a customer perspective it shows that just because a supplier isn't an enormous global brand does not mean they cannot equal or better the services of the IT outsourcing giants.

TCS practices what it preaches

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Tata Consultancy Services (TCS) consolidated its business when it knew its business was going to take off. Now its customers want the same to help them when times are bad.

One of the purposes of this blog is for me to keep in touch with readers with a specific interest in outsourcing. Because I regularly speak to the great and the good in IT outsourcing, I pick up lots of interesting titbits.

I blogged earlier this month after I had a meeting with TCS's UK head Lakshmi. Something we talked about was TCS's internal IT platform, known as Ultimatix.

A S Lakshminarayanan TCS 2009 2.JPG

The reason I am writing about this is because it shows how investments made to take advantage of good times can also help save money when times are bad. It also demonstrates why just measuring the up front costs and not the total benefits of IT investments can be a mistake.

Ultimatix is to this day TCS' single biggest IT investment. The company did it after Y2K when it realised it was going to grow very quickly.

Ultimatix is the platform TCS uses to consolidate internal systems and take advantage of group knowledge.

The company for example has single ERP and knowledge management systems across the company. Before this the company had lots of different systems.

"When customers see this it is good because they also want it," says Lakshmi.

He says it has helped TCS keep costs down, which was particularly beneficial during the downturn

But it is not just about cost cutting. Ultimatix also links all its staff together and through social media ideas are shared.

Lakshmi says, "If you have an idea for something you can ask the whole company (150,000 people in TCS's case) and people can put their ideas forward."

It is always good to hear stories of how IT suppliers, who always sell hard on what they can do for you, can help you through their own experience.

When the Indian companies grew massively during the lead up to and the aftermath of Y2K they had to adjust their businesses to enable them to ride the wave.



Winner of the World Cup ticket caption contest chosen

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I have chosen the picture caption that has won the the pair of tickets to this year's World Cup final in South Africa.

The winner is Lisa S with:

"Generally it's gone great, but as you can see we're having a few problems with crowdsourcing."

Thanks everybody we had loads of good entries but sadly only one prize.

Lisa S please get in touch soon to claim  you prize.



IT contracts could bare brunt of initial government cuts

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I blogged last week about how outsourcing is seen by some as a way of cutting the deficit but the new government could see cancelling outsourcing contracts as a better way to do this.

This could create uncertainty over the performance of numerous IT outsourcing service providers.

News that the new government could put contracts signed by Labour, before the election, on hold while they decide where to make cuts will create uncertainty amongst the IT community that specialises in this area.

A contact of mine said that the uncertainty about the coalitions appetite for outsourcing has already lead city analysts to downgrade the stock of some public sector outsourcing specialists.




Could Tata Consultancy Services' £600m PADA deal be at risk?

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An interesting story in the Times today.

It is all about contracts signed by the Labour government just before they were kicked out. The new government could put them on hold and evendrop them.

There are, apparently, billions of pounds of spending commitments left behind that have not yet been accounted for.

According to the report one of these is "a £600m computer contract for the new personal pensions account scheme rushed through by Labour this year, which will still cost at least £25m even if it is cancelled."

So that's the Personal Accounts Delivery Authority (PADA), which was created by the government to administer pension schemes. It was outsourced to Tata Consultancy Services (TCS) in March.



India gets its own BPO Shawshank Redemption

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India is getting a BPO operation based in a prison.

Yes Hyderabad's Cherlapally Central Jail is all set to become the only prison in the country to be a BPO.

IT firm Radiant Info Systems is working with authorities to turn hundreds of educated convicts into workers at in the BPO sector.

It reminds me of the film Shawshank Redemption when the inmates work and the prison head profits. It will only be a matter of time before the prison boss recieves nice pies cooked by Wipro, TCS, Infosys etc. You know, "have this nice pie in return for not bidding for that BPO contract."

Mind you they might be able to get someone to run the company. Isn't there a former head of a big Indian supplier doing porridge in Hyderabad?

He could turn Radiant into a top 5 Indian company from his cell.


What are UK businesses using outsourcing for so far this year?

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Here are seven key findings of the latest UK Pulse survey of outsourcing trends carried out by sourcing consultancy Equaterra. This is for the first half of 2010.

I will be writing an analysis next week but in the meantime here you go. Any comments you leave will be useful for analysis.

1 - IT outsourcing market demand growth is expected to increase in the next period according to the IT service providers polled. Seventy-one percent cite that the demand is increasing for the next period, up 26% from 2H09

2 - 51% of the respondents cite the economic climate is driving more outsourcing and the decision-making  process is expected to speed up in the next period

3 - 35% of the respondents indicate that the contract profitability is increasing, up 32% compared to 2H09

4 - The leading market segment (with the greatest expected demand) is Infrastructure Management, followed by  Application Development and Maintenance and Desktop Services/Help Desk/Support

5 - The industries with the strongest demand for outsourcing services are Banking, Financial Services, Insurance,  Government/Education/Non-Profit and Energy/Utilities, Oil & Gas, respectively

6 - In existing deals buyers are more frequently conducting benchmarks from a price/performance perspective, and  are also opening up deals to get better pricing from service providers, to change other deal terms/conditions (e.g., volumes, performance levels) and to change the scope of services. Buyers are also pushing more work to offshore locations

7 - Many buyers continue to struggle to adequately perform outsourcing governance and management activities • though most are focusing more attention and resources on improving capabilities. There are several things buyer organisations must typically do to improve capabilities in these areas, including getting more and better executive level support and deploying and expanding the use of more adequately skilled and dedicated resources

8 - A variety of often confluent factors is responsible for slowing and in some cases even stopping outsourcing deals. In the majority of cases buyers will ultimately complete the transaction, though in some cases buyers may abandon efforts in lieu of pursuing other change initiatives or because they cannot develop a viable business case in current market conditions. This highlights a need for buyers to develop robust business case models and that suppliers need to educate buyers where they see appropriate with what the components of a solid case are. Another major challenge to successful outsourcing deal consummation is 'relationship and supply management & governance' (including the retained organisation). It is clear that buyer organisations considering outsourcing need to make supply management and governance a formal part of their (out)sourcing strategy

HCL wins more plaudits, but was Cognizant the big success?

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I blogged earlier this month about how HCL was the fastest growing of the Indian suppliers.

HCL Technologies reported global revenue of $2.186bn in 2009 which was 27.6% more than the $1.713m in 2008. It is now the 60th biggest global player in revenue terms.

HCL says its success is down to its business transformation, which included broadening its portfolio and empowering its staff.

If my praise was not enough Datamonitor now says HCL Technologies was number one in traditional IT outsourcing space 2009-10  in The Black Book of Outsourcing.

I have spoken to lots of people since and it seems, in terms of organic growth, Cognizant was the best and HCL benefited from its acquisition of SAP supplier Axon.

Cognizant grew revenues were $3.146bn in 2009 compared to $2.703bn in 2008. This was a 16.4% increase. It is ranked 42 in the world.

Lee Ayling, UK managing director at sourcing consultancy Equaterra, says HCL and Cognizant are doing well for different reasons.

"Cognizant is is being aggressive in Europe ion the traditional application space and doing a good job. HCL is going for a broader portfolio."

He says there is room for growth. "They are both seen as new entrants in some of the markets dominated by the big Indian and US suppliers."





World Cup final ticket caption contest hotting up

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Inside Outsourcing's contest to win a pair of tickets to the world cup final is hotting up. We have had about 40 entries. See the original article and read the comments for the entries.

There is still a lot to play for. Two tickets to the final is the prize, both donated by World Cup sponsor Mahindra Satyam. Why not have a go? Click here.

I will be judging at the weekend so Saturday is the last day to get your captions in. You can have as many attempts as you want. 

Outsourcing could cut UK deficit, but will suppliers touch it with a barge pole?

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It seems to make sense that outsourcing the IT work of government departments will cut costs and help reduce the budget deficit.

But outsourcing in the public sector is a very different challenge to doing it in the private sector. There are many stumbling blocks over staff pay and compensation for those seen as surplus to requirements.

Will any suppliers want to take it on?

Below is the view of Dell Services' VP EMEA Ferenc Szelenyi on the benefits outsourcing IT would bring the public sector. But at the bottom I have some comment from a prominent outsourcing lawyer to describe why this is not as straight forward as you may think.

"The current UK government expenditure now stands at around £680 billion a year, of which only around £80 billion worth of activity is outsourced. Currently, much of that spending is at a local level, but it is my view that the new coalition should eventually spread this across national government sectors. With every sector currently looking to reduce their operating costs, it is apparent that IT outsourcing has crucial part to play."
 
"This is because currently, organisations in the public sector are looking to maintain services as best they can while recognising that there will be less money. Therefore, outsourcing is an ideal fit. Personally speaking, the con/lib coalition should be more concerned with commissioning the right outsourcing services rather than taking tasks on themselves. Therefore, managers in the public sector should turn to IT outsourcing at a time when improving efficiency and cutting costs is imperative. A successful outsourcing strategy provides a medium to long-term solution, which can not only deliver the necessary cost savings to ease the burden of the current deficit, but also provide improved operational efficiency and access to specialist skills and technology. This allows any new or existing government to focus on core (in-house) activities."

"If you take IT services as a prime example, an outsourcing service provider is better placed than a government body to transfer paper to electronic records, having already made the investment in the required technical equipment, training and skills."

"Health care is a prime example of a sector that is always being asked to fulfil the escalating needs of the patient, not to mention having to comply with the ever-changing government rules and regulations. This coalition could potentially increase these headaches, as potential indecision in policy making is unlikely to make changes required to stamp authority early on."

And Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, says:

"Outsourcing from the public to the private sector is not straight forward because there are a number of agreements with unions in the public about how members will be treated if transferred to a supplier."

"These agreements will force private sector outsourcers not to sack staff for a period after transfer and will also require those outsourcers to make pension arrangements for ex public sector workers and enhance redundancy payments.

"All of that means the cost of outsourcing from the public sector is significantly higher than outsourcing from the private sector."

See also outsourcing expected to increase in local government.
 

Tory caps on immigrant IT workers will be UK's loss

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The Tory plans to limit the number of overseas workers in the UK could lead to a brain drain in the UK.

Tory plans to cap the number of workers permitted in the UK appears to be one of its ideas that has avoided the Liberal Democrat quick rinse and therefore should go ahead. Although promise actually means something different in politics.

According to an overseas senior IT professional the UK is not that good a destination for people with high level IT skills.

This is what he said:

"Even though the UK has an incredibly high demand for skilled IT professionals, the standard of living in the UK has become very low compared to other developed countries.

Cameron will now go ahead with his plans to put a cap on immigration, but I'm not intimidated. There are many immigrants in my department and even though we are paid less money, we bring a significant contribution. Speaking for myself, I am a lot more skilled and produce a lot more compared to colleagues of about the same age.

Despite the general, simplistic argument that we are taking jobs away from UK nationals, we are bringing a specialised workforce to a country that is depleted of high-level IT skills.

So if the new Prime Minister wants to continue to bear the high costs of that sort of work and make it more difficult for immigrants to come and work here, I don't care - I'm off to Canada soon anyway!"

 


 

Tory caps on immigration survive Liberal quick rinse

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Tory caps on immigration look set to be one of it's policies that survives the Liberal Democrat quick wash.

The Tories plan to cap the number of overseas workers permitted to come to the UK.

I wrote a blog post in February about this.

Here is what then shadow immigration minister Damian Green said about it.

In contrast the Liberal Democrats eared an amnesty on people in the UK illegally. They also had a plan to have immigrants live in the regions where their skills are in demand.

But it appears the Tory plan has not been abandoned despite Liberal opposition.

Labour's Australia style points system is seen as a good policy, but it is not policed well. Large corporates bend the rules on Intra Company Transfers (ICTs) to bring in cheap labour from countries like India.

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.









See World Cup software boss talk shop

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This is an interview with the man that headed up Mahindra Satyam's project to implement the event management software for the 2010 World Cup.

Dilbagh Gill is a good man to know if you want tickets I reckon.

Here it is.




Tata Consultancy Services UK head talks of recovery

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I thought I would write a bit more following my interview with TCS's UK boss A S Lakshmi yesterday.

I blogged separately about TCS's trial of SME services because I thought that deserved to be flagged up.

Lakshmi also covered areas such as the recession, the recovery and TCS's growth going forward.

He says the recent recession was the worst he has seen because it seemed to go on for much longer. Also in the early years of this decade the Indian suppliers were growing so rapidly they probably didn't feel the recession.

But the last three quarters have been "amazing" for TCS, says Lakshmi, with profits rising. He says TCS has cut its costs associated with existing projects but has continued to invest in strategic areas.

TCS even took on 30,000 graduates that were promised jobs prior to the recession.

It seems business as usual with the recovery under way.

TCS invested in technologies such as  HR,  procurement and financial services platforms as well as an analytics platform.

But it is the usual suspects going forward. Lakshmi says the three big growth areas will be application development and management, infrastructure services and BPO.

And customers are not surprisingly the banks. Lakshmi says they are definitely spending on IT again.

See here recent blogs about the equally positive Infosys and HCL.





RBS to offshore hundreds more jobs

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It seems RBS has well and truly caught the offshoring bug. I remember talking to representatives a couple of years ago who were proud to say RBS  had a policy not to offshore IT.

According to reports the bank has now decided to send another 500 jobs to india as part  of a reduction of 2600 roles.

Since the bank was bailed out in October 2008 it has cut over 22,000 jobs, many IT.

I had an interesting conversation with an IT professional in February about RBS. 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.




Indian IT giant could soon target UK SME

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I was with TCS's UK head A S Lakshmi today.

Just a routine update on what TCS is doing.

One of the interesting things was the fact that the company is running a trial of an SME service in the cloud in India. If successful this could come to the UK.

He says the problem for suppliers attempting to succeed in the SME sector is the fact that it is fragmented and companies do not all fit into a single mould. "They have the same requirements of large companies but it is difficult because they are very fragmented."

But cloud computing will reduce the overheads of serving a fragmented market. Spoecially designed SME business services in the cloud.

So a supplier that boasts some of the biggest corporates in then world as customers might soon have something for the SME sector. Lets face it the SME sector could benefit from some of the innovations of suppliers like TCS.

If cloud computing can lower the cost of delivery and make it profitable for service providers then why not. In total the SME sector is bigger than the large enterprise sector.

World Cup final tickets still up for grabs

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Inside outsourcing's caption competition for two World Cup final tickets, kindly donated by Mahindra Satyam, is still up for grabs.

Since launching the contest late last week we have had four entries. So take a look and see if you can come up with a better caption.

Click here to see all the details and enter to win two tickets to the 2010 World Cup final.

We have now chosen the seven lucky winners of our previous competition. The winners will be notified soon and will recieve tickets to matches at this year's World Cup.

Linux is ready for the ultimate challenge

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If the London Stock Exchange can use Linux for its core trading system then surely enterprises can move to the open source version of Unix.

Trading venues are dependent on 100% up-time and high performance computing. Milliseconds of downtime can cost its customers millions and cause reputational damage.

This is why the London Stock Exchange is currently moving its Tradelect core trading system Tradelect, which was built using Microsoft .Net, to MillenniumIT's core trading platform which is Linux based.

Linux is often seen as lacking support and large enterprises often overlook it.

But MillenniumIT started building its applications in Linux in 2006, when according to CEO Tony Weeresinghe, the developer wanted to bring the cost of its platform down.

So basically the London Stock Exchange, which is 100% dependent on the performance of its trading systems, trusts Linux.

Mind you it did buy the supplier in the process of deciding on moving to the new platform.

Weeresinghe says there are now two strong vendors in the market in the form of Suse Linux and Red Hat that enterprises can buy from. "They both offer good support."



Are Sri Lankans thinkers and Indians workers?

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Following something that someone said to me today I thought I would ask the question: Are Sri Lankans thinkers and Indians workers?

I met a Sri Lankan IT entrepreneur in the form of Tony Weeresignhe today
. He is the man that founded software development company MillenniumIT, which was recently acquired by the London Stock Exchange.

I asked him whether Sri Lanka could become a bigger destination for offshore IT services.He said Sri Lanka will have more to offer now that the war is over.

"Sri Lanka is the third fastest growing offshore services destination in Asia after India and China," he says.

But, possibly controversially, he told me that Sri Lanka has an advantage over India in that there is more thinking. "In Sri Lanka there are thinkers not workers and in India there are workers not thinkers." Where does that leave us Brits?
 
He says this is something to do with the education system. It is a new one to me but I suppose the best scenario would be to have workers and thinkers.

Maybe it is just a regional joke that I don't understand.

Can Weeresinghe make the London Stock Exchange succeed in IT sales?

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I had a great meeting with Tony Weeresinghe, the man that set up MillenniumIT.

This is the Sri lankan software development house that the London Stock Exchange spent £18m on acquiring in September 2009. This was a bold move to replace its core trading platform Tradelect with the MillenniumIT core trading software.

So it is a company that offers outsourced software development that was bought by a potential customer. Reminds me of that advert about an electric shaver. You know the one "so good I bought the company."

Not only that but the new owner wants it to continue to sell to its competitors.

Weeresinghe is a very interesting man. I will be writing lots of stories as a result of the interview, but to cut a long story short, he is a Sri Lankan that did not go to university because he was only being offered physics when he wanted to study engineering. He later became the Sri Lankan head of Oracle and then ran Sun Microsystems' Sri Lankan agent.

He eventually sold Millennium IT to the London Stock Exchange where he now works as head of MillenniumIT which is part of the London Stock Exchange but sells technology in its own right.

Rather than reduce Millennium's sales business to focus on developing for the London Stock Exchange it sees the acquisition as a potential sales boost.

He said in the past MillenniumIT has been shunned by the big exchanges, because it did not have the strong balance sheet that is required to be taken seriously.

"Nothing has changed since our acquisition but we have the new brand and a strong balance sheet," added Weeresinghe.

He said without the backing of the London Stock Exchange it would struggle to compete. "The goal posts have moved because we compete with the actual exchanges. This makes it difficult because people buy for the relationship and thje name not necessarily for the technology."

So other trading firms can buy the same trading platform as the one used by the London Stock Exchange. Although Weeresinghe points out that there has been a lot of work at the infrastructure level to increase the performance levels such as trading speeds at the London Stock Exchange. "You can rest assured we will be the fastest in the market."

Millennium IT does a full range of products aimed at the capital markets such as clearing systems.

For exchanges that do not want to use the same technology as a competitor Weeresinghe said: "How many Ferraris do you see on the race track?"

Although other sectors are harnessing complex event processing software similar to that used in the trading industry MillenniumIT will keep its focus. "We understand the trading business."


Win two 2010 FIFA World Cup™ final tickets here

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Mahindra Satyam has donated two extra tickets to  the 2010 FIFA World Cup™ final to Computer Weekly.

The company which is providing software to the event and is an official sponsor of the event, has already contributed seven tickets which are being given away in a competition.

Please give us an IT related caption for the picture below. The best will win two tickets to the final on July 11 in Johannesburg. The prizes are just tickets to the final and do not include travel and accommodation.

pic 8.JPG

Please fill in your caption in the comments section and ensure you put your name and email in the correct fields.

I will judge the best caption on 15th May so you have until then.

Terms and conditions apply.




IT leaders may face recruitment challenges if Tories win

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So the much awaited day of reckoning has arrived. The General Election is here.

I remember when the Tories were booted out in 1997. I was a student at the time and there was a feeling of renewal in the air. This time it's a bit different with none of the parties really offering any hope.

But one thing that might change if the Tories manage to get a decent majority, which is unlikely, is that the number of IT workers allowed in the country from outside Europe will be capped.

What I was wondering is has David Cameron consulted his much hyped business leaders about this. Because without mentioning their company's names many of them are serial offshorers of jobs.

You know the people I mean. That group of millionaires that complained about what they describe as "the job tax." The national insurance rise to you and me. If they care so much about British jobs, why do many of them offshore work that could be done in the UK

IT workers are angry about jobs being filled by overseas workers when the skills are available in the UK. Businessess abuse the Intra Company Transfer points system to bring in cheap labour. But will the Tory caps work.

Most of the IT workers that have complianed about the massive influx of workers, mainly from India, do not actually agree with the Tories.

Many believe the current system that only permits workers to come in if a job cannot be filled by a UK worker, is fine but is not policed properly.

Here is a blog post I wrote about it in February.



Logica revenues are down overall but the UK is up

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Logica UK reported a 3% year-on-year revenue increase to £187m, up from £182m in 2009, while Sweden's revenue was up 4% at £135m.

"This steals a march on Atos, which reported a 2% UK revenue decline," said Anthony Miller, analyst at TechMarketView.

See the full story here
.

HCL was the fastest growing Indian Supplier but TCS hangs on as biggest

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I often blog about the relative success of the India suppliers so here is a list of the main Indian players and the revenue and revenue growth in 2009 compared to 2008 in western Europe, according to Gartner. It also includestheir ranking In Western Europe.

HCL Technologies reported global revenue of $2.186bn in 2009 which was 27.6% more than the $1.713m in 2008. It is now the 60th biggest global player in revenue terms.

Cognizant grew revenues were $3.146bn in 2009 compared to $2.703bn in 2008. This was a 16.4% increase. It is ranked 42 in the world.

Wipro reported revenue of $4.084bn in 2009. This was 9.5% higher than the $3.730bn announced in 2008. Wipro is 35th biggest service provider globally.

Infosys reported a 1.3% decline in revenues with $4.444bn reported in 2008 compared to $4.504bn in 2008. It is number 33 in the world rankings.

TCS is still the biggest with a world ranking of 25. It grew its revenues by 1.2% in 2009 to $5.725bn compared to $5.657bn in 2008.

Mahindra Satyam is still finding its feet after the recent fraud at Satyam, and its subsequent acquisition by Tech Mahindra. Its revenues fell 26.7% in 2009 with $1.200bn reported compare to $1.636bn in 2008.






Why did Accenture and HP services revenues drop the most last year

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Yesterday I blogged about the Gartner figures on the IT services market last year.

Accenture and HP both recorded double digit falls in revenue compared to 2008. The two giants stood out amongst their peers, but why?

I have since spoken to a couple of people about this and here is an example of what I have been told.

One contact told me that HP and Accenture had the biggest losses for completely different reasons.

On Accenture:

"Accenture has built its business up with very large deals and their have been fewer during the recession."

"Consultancy services like Accenture's are very expensive and people think twice about it when time are bad.

"It has also been unsuccessful changing contracts it signed before the downturn."

On HP:

"HP has had difficulties cause by the acquisition of EDS.

"There is ongoing uncertainty about HP/EDS and HP has caused the sales machine that was EDS to slow down because of redundancies."

What do you think?




Be prepared to create outcome based outsourcing agreements

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It seems that outsourcing agreements with a business outcome written in are all the rage.
Gartner's latest report on the IT services market said that suppliers selling outcome based services did a bit better than those that did not.

Having looked a bit deeper and spoken to lots of people in the industry I have found that these types of agreement are becoming increasingly common.

But there are warnings from experts such as make sure the outcome is directly linked to the IT in the contract and ensure the contract is carefully written.

See the full article I wrote here.

HP and Accenture have double digit declines in 2009

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Gartner's latest report about the IT services market revealed HP and Accenture were the hardest hit by the slowdown in spending.

HP revenues declined 10.4% in 2009 and Accenture's dropped 11.8%.

Apparently companies offering outcome based services, in other words being charged for results rather than services consumed, did a bit better than the average.

Was Accenture too expensive and is consultancy something that businesses cut when times are hard? And is HP suffering from the fact that its EDS business, as it was,  is being changed beyond recognition.

Interesting times ahead.

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