July 2010 Archives

Will G-Cloud change or decimate IT profession in public sector?

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As the Government cloud computing platform (G-Cloud) comes closer to a reality, IT professionals in the public sector must be considering how it will impact them.

 

But it doesn't have to be doom and gloom. There might be better jobs available as a result of the G-Cloud. Well that's what one supplier thinks.

 

Global Crossing is involved in a pilot of the Public Services Network, which will be the network infrastructure underpinning G-cloud. Mike Thomas public sector consultant at Global Crossing says the company anticipates it will be able to deliver services outside the pilot project by September.

 

He says the role of IT professionals will move from fixing and maintaining services to one of consulting with users as to the services required to fulfil business requirements.

 

I thought I would put this out and get the views of the IT profession.

 

Somebody said something similar to me recently. It was the COO of a company called Bluesource. This supplier takes over the running of email infrastructures for companies.

 

The COO told me by doing this companies can switch underutilised administrators to more challenging and rewarding roles. He said since the company has been selling this idea to IT heads sales have increased.

 

Is this just a way that suppliers are softening the blow for inevitable redundancies or is there something in it?

 

I also recently blogged about  the type of job opportunities being created, for IT professionals, by cloud computing.

 

See this link for cloud computing jobs being advertised on CWjobs.

Is there a worrying dependence on public sector for outsourcing suppliers?

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Interesting survey from sourcing consultancy TPI. It found that businesses outsourced €2.2bn less in terms of value.

A total of €3bn was spent on outsourcing by UK businesses in the first half of this year compared to €5.2bn in the first half of 2009. Total spending was €12bn in the UK with a massive 75% of this in the public sector.

The UK public sector outsourcing spend is very important to the EMEA region as well. It accounts for 86% of EMEA public sector outsourcing.

This would appear worrying because the UK government is planning massive cuts.

But maybe not. I was talking to a contact of mine last week and he said he had meetings with government officials and the impression he got is that anything in he public sector that can be outsourced will.

And Francis Maude does to be clearing the way for massive outsourcing with prosed legislation to reduce civil service redundancy benefits as well as other changes to rules concerning outsourced workers in the public sector. 

 

How can this man not get a job in IT if the economy is recovering?

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I blogged earlier about a reader, who is a very experienced IT professional, struggling to find work.

Not only that, he is struggling to get interviews.

Just so you can understand why this makes an interesting blog take a look at this man's level of experience. In the previous blog I wrote about how businesses could miss out on the best talent because theyare not organised enough following deep job cuts.

Take a look at the jobseeker's CV. Employers are missing out.

If you cannot see the CV click on the link below. (PS if you want to employ him contact me and I will forward your details.)

CV-pdf

Civil servants on the payroll with no work to do is an outsourcing challenge

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Comments by Francis Maude about how civil servants actually have no job but are too expensive to make redundant depict a major hurdle that the IT outsourcing industry.

The government must overcome this scenario if it is to outsource more to cut costs.

The admission came when Maude was defending a decision to introduce emergency legislation to change the redundancy benefits of 500,000 civil servants.

Currently civil servants can get up to six and a half years pay when made redundant. Maude wants this to be cut to one year pay.

This would make it more affordable to replace in-house staff with those from outsourcing providers.

The government is also looking at changing a rule that entitles workers at private sector suppliers in government departments similar benefits to colleagues in the public sector.

Both these changes will make wide-scale outsourcing possible.

In fact, according to Mark Lewis a lawyer at Berwin Leighton Paisner specialising in outsourcing, unless changes like this are made outsourcing will never be able to give the government the potential benefits it offers them.

He says, that unless platinum pension schemes, large redunandcy payouts and other public sector worker benefits widescale outsourcing in the poublic sector could be a non starter. 

Here is a blog post I did in May about the advantages of outsourcing but the problems for its application in the public sector.

 

 

Businesses have cut too deep and are too disorganised to recruit effectively

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One of the readers of this blog has told me about the current challenge finding work despite companies requiring staff again

I asked him why a man with his CV, which is very impressive, could struggle to find work at end users and suppliers?

He said: "I would say its amazing that I am struggling but I am getting the same story elsewhere in the Industry. I think that many organisations may have cut too deep during the recession and now they have the capex but can't get organised.
 
I have my CV at four investment banks where I am getting the 'oh the hiring manager is too busy to read the CV's he has right now' line."

Remember the series about the IT job seeker in this blog. He was an IT worker replaced as part of an offshoring contract. Despite his 40 year experience he had troubles finding work. If you didn't see it here it is.

Should India have influence over UK immigration policy?

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The UK government is going to offer India a say in its new immigration policy, according to a Guardian report.

According to the report a Downing Street source said the prime minister was keen to offer reassurances to India. "We want to work with India and other countries to ensure that high-skilled people can still come to Britain," the source said. "We are going to talk to these countries about how to implement the cap."

Has David Cameron cottoned on to the fact that Indian workers play an important role in providing services to UK businesses or is he just pandering to one of the world's fastest growing economies.

In the lead up to the election the Tories pledged to cap the number of work permits given to non EU citizens. This is a guaranteed vote winner as thousands of unemployed UK citizens feel they are being overlooked.

At the time shadow immigration minister Damian Green 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," said Green. What was that last bit Damian?

The IT sector is the biggest contributor to Indian Labour immigration to the UK. Indian IT workers make up a vast amount of immigrant labour in the UK It seems that the Indian authorities are making it clear to the UK government that it does not approve of a cap on the number of work permits granted.

Indian IT companies have become critical components of IT departments of the UK's biggest companies.

Many IT workers that contact me are not against Indian workers being given permits but do think it is unfair that these workers are paid less. This makes UK workers uncompetitive.
Cameron wants closer ties with India because he knows its economy will continue to grow and it is a massive potential market for UK goods and services.
It seems he is prepared to compromise on a major election promise.

For the figures for labour immigration to the UK over the last decade see a recent blog I posted.

Could a flurry of private sector IT contracts offset public sector quiet?

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With the UK government being very open with suppliers about its ambitious IT cost cutting plans, companies that rely heavily on public sector business could benefit from an increase in their private sector client list.

Logica's deal with BMW to consolidate disparate security systems that manage access and identity of 200,000 workers, is an example.

Fujitsu has also increased its private sector business with three new contracts for a desktop management programme, a global support and logistics programme and one for mix of back office and shop floor systems. Worth a total of £200m.

Fujitsu said there was a flurry of activity in the private sector after very depressed sales for nearly 30 months. Much of the activity appeared to be driven by mergers and acquisitions, as well as by demergers and "disaggregations",  said Fujitsu's UK head.

 

Government could go to war with unions over outsourcing worker benefits

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A rule that guarantees private sector workers on public sector contracts "no less favourable terms" as their colleagues who were in-house staff before being outsourced, could be scrapped.

According to an article in the Financial Times the government is "minded" to scrap what is described as an "informal code."

The code was introduced to prevent the emergence of a two tier workforce with workers transferred to suppliers from the public sector enjoying far better T&Cs than private sector colleagues.

Another law known as TUPE guarantees workers that are transferred to a supplier from a customer company.

The current system makes it difficult for many service providers to take on government contracts. Francis Maude wants to introduce more competition to government contracts, which are currently dominated by a small number of firms.

After George Osborne said Indian companies are welcome to help the UK government cut IT costs, the removal of rules such as this could trigger a spree of offshoring in government.

Although a different issue, outsourcers also struggle to inherit workers from the public sector with their T&Cs, which are protected by TUPE as mentioned above,  often better than the private companies would normally offer. 

I blogged back in May about how outsourcing could cut the budget deficit but suppliers will be put off by the fact that they have to take on certain liabilities, when public sector workers transfer to them, such as public sector pay and pensions benefits.

Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, put it concisely in my previous blog.

"Outsourcing from the public to the private sector is not straight forward because there are a number of agreements with unions in the public sector 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."

He told me that unless the government is brave enough to tackle "platinum plated pension schemes" for public sector workers the outsourcing agenda could fail. 

George Osborne invites Indian IT firms to get involved in UK public sector

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It was interesting to see George Osborne on Channel 4 news, cornered in Mumbai and asked about how UK public sector cuts will impact Indian IT companies.

He said it was "an opportunity for Indian IT contractors to get involved" an offer their services to the UK government.

Osborne, along with senior UK government and business figures including the PM, is in India trying to promote Britain to the expanding middle class in India. Read the article I link to (above) because this is one serious delegation.

India could become a big market for British goods. Well that's if locals turn to fish and chips.

But unsurprisingly Indian journalists are more concerned about how UK cuts might effect the sales of their IT giants.

The Indian IT suppliers must have a bigger role in the UK public sector if cuts are to be made. But the UK government will have to shake up how it buys IT services first.

I also found it funny when the UK journalist said the Prime Minister was coming to India and someone asked: "Is Tony Blair coming?" So Brown wasn't even noticed and Cameron is yet to register.

I wrote an article back in June 2009 about the All Party Parliamentary Group focussed on improving trade between the UK and India. The feeling was then that the UK public sector could do a lot worse than outsource more to Indian IT firms. 

See also: For how long will there be no Indian firms among the UK government's top suppliers?

Who is in Capgemini's Royal Mail supplier ecosystem?

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Capgemini's outsourcing deal with Royal Mail involves  the outsourcing giant becoming a services integrator. This is Capgemini's approach to bringing other software suppliers into deals.

It makes sense that the customer can get other services quickly in the knowledge that Capgemini has approved them. Bringing new services into a company via the  cloud may be easier, but the same care must be taken when selecting them.

The company calls this Capgemini Immediate. In the Royal Mail deal there are 18 service partners involved including Salesforce.com, Google, Attenda, Eloqua, Kognitio, Zeus, Acquia , Cordys and Servicenow.com.com . Click here for full list.

Some of the names are well known.

One of the lesser known ecosystem members Kognitio is a data analytics company .

Here is what its CEO Roger Llewellyn says about Capgemini's
 
"Capgemini's partnership highlights the benefit of Cloud computing: it makes it possible to receive IT services quicker, easier and more cost-effectively than it would ever be to try and implement such a service in-house.  For example, Business Intelligence and Data Warehousing could cost an organisation hundreds of thousands, if not millions, of pounds as an up-front expense if installed on-premise: when provided through the cloud, those up-front costs are eliminated and companies such as RMG can use an eBusiness environment, paying only for the services that they need and use.  And by securing services from a trusted provider, such as Capgemini, organisations can be sure that the data involved is protected as securely as it would be if it were in their own headquarters."

This is one of the great advantages of outsourcing. The suppliers have a great knowledge of the applications available for everything. Perhaps an understated strength.



IT outsourcing was biggest government IT expenditure

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Figures from the Office of Government Commerce (OGC) has published figures on how much the government spent on IT, networking and related costs last year. This does not include people costs.

The total spend on IT was £7.57bn and outsourcing was the biggest single chunk of spending at £2.33bn.

See the full breakdown in this article.

It is good that the government knows what it spends on IT and networking but the total spend including people costs is much higher. In fact part of the problem facing the government as it tries to bring down costs is that it doesn't actually know how much it spends in total.

Apparently it thinks it is between £13bn and £20bn. Mind the gap. I wouldn't mind it.

 

 

Should the government give IT suppliers freedom to create, like Royal Mail has

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Would you hire Picasso to paint for you and then tell him what to paint and what materials to use?

I was watching an interview with Royal Mail's CTO Stuart Curley on the back of the company's deal with Capgemini.

It is an interesting deal because it is a cloud computing one. But more interesting than that is the fact that Royal Mail didn't demand cloud computing. In fact it didn't demand any particular technology. It just told Capgemini what outcomes it wanted.

For example The Royal Mail wanted to be able to build and pilot new services quickly and at low cost. It also wanted to have a pay as you go model for IT.

So Capgemini gave it cloud services. Everybody happy.

The government will have to take this attitude and give the suppliers more freedom if it is to make the savings it needs. It will have to forget telling suppliers how they should do things and how much money they should make.  Open book accounting should go for a start.

 

 

 

Logica's BMW win will help offset public sector spending cuts

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Logica's deal with BMW to consolidate disparate security systems that manage access and identity of 200,000 workers, is good news for a company expecting UK public sector revenues to drop.

Suppliers that have large UK public sector businesses have been warning of falls in revenue. Cable & Wireless and Capita are recent examples.

Suppliers were recently invited to a meeting with Minister Francis Maude to discuss how costs can be cut. The government is also expected to ditch or renegotiate some existing contracts.

I wonder how many of the suppliers that are heavily focussed on the public sector can actually win significant business in the private sector. Will they be able to ride out the current period of spending cuts?

There will be opportunities for them in the public sector still. Wherever cost savings are required, IT has a role to play.

 

 

Capgemini transforms the Post Office in the cloud

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I blogged back in March about Capgemini's plans in the cloud computing space

Greg Hyttenrauch, head of UK outsourcing business at Capgemini, told me all about the company's Infostructure Transformation Services (ITS) and its desire to be a service integrator.

Well Capgemini has today announced that the Post Office has taken up the service for the next six years. The Post Office can now re-engineer its IT infrastructure to use cloud services and only pay for what they use.

So just to recap Infostructure Transformation services is a single point of contact at Capgemini for customers that want a cloud computing IT infrastructure. This is required because cloud computing is relevant across Capgemini's complete businesses but customers want one point of contact for cloud services.

Greg also told me about the company's desire to be a services integrator that can enable customers to use cloud based services from other approved suppliers and manage it for them.

Both Capgemini's ITS and Service Integrator roles are important in the Post office deal.

The deal is also a good one because it demonstrates how the cloud can make an IT department more responsive to the needs of the business. The Post Office will only pay for the computing power it uses and will be able to create new web based servce in  the cloud more quickly and at a lower cost.

The Post Office is planning to launch more online services and reduce the cost of its website at the same time through the cloud services. 

 

 

 

The government IT outsourcing contracts that could go next

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I was just looking through Ovum's latest report about the IT outsourcing trends in central government.

The report lists the projects that have already been targeted for cancellation or face cancellation or renegotiation. It also outlines the projects that could go next in the government cull.

Already cancelled are Capita's £430m twenty year Child Trust Fund programme, Capgemini's £40m ContactPoint six year project and IBM's National Identity Register deal worth £265m.

So here is what Ovum thinks could be next:

1 - Tata Consultancy Services faces the axe

TCS's £600m Pensions Administrations and Delivery Agency could be the first to go. This was a big deal because it is the biggest government deal to be won by an Indian offshore service provider. There is a clause in the contract that states that when the first stage of the deal is complete in October 2010 there will be a decision on whether to continue or not.

TCS is responsible for IT services, system implementation and administration of the National Employment Savings Trust.

See earlier post about this.

 2 -  DWP deal with Fujitsu faces review

In March this year Fujitsu won a £330m contract to replace HP providing desktop services. The contract is over the new government's £100m maximum cost ceiling and was only due to start at the end of 2010

3 - CSC National ID scheme deal could change 

It also thinks CSC's £385m ten-year National Identity Scheme deal will be reviewed.

 

The report warns suppliers to look for growth outside the public sector but there is some good news.

This is that IT service providers "hold a trump card" because IT can help government deliver more for less. It also says that the government has not "waged war" on IT suppliers but just on projects perceived to lack value.

Opportunities in government will, according to Ovum, be outsourcing, BPO, shared services and G-cloud.

See also:

Ten ways to cut government IT costs

For the full report sign in with Ovum 

 

 

The solid facts about immigrant workers in the UK

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There are always heated debates when it comes to the number of immigrant workers in the UK.

This is particularly true in the IT industry, where thousands of workers enter the UK through the controversial Intra Company Transfer (ICT) scheme. This often occurs when companies offshore IT work to low cost destinations, such as India.

Whether you think there have been too many non EU workers in the UK or whether you think they are an essential resource, below are the hard facts.

An Inside Outsourcing reader has sent me all the figures on labour immigration to the UK over the last 11 years. This was provided in answer to a recent parliamentary question from James Clappison MPIt makes interesting reading and shows just how core to the immigration debate the IT industry is. It also adds fuel to the fire when it comes to the debate over alleged abuses of ICTs.

If you click on the links below you can see all the statistics, as presented by the government, for the total number of immigrant workers by occupation, the total number using ICTs by occupation and the total number using ICTs by nationality. These show all occupations but IT stands out as a major recipient of immigrant workers.

1 - Total number of immigrant workers by occupation 1997 to 2008

 Click here

 

2 - The total number using Intra Company Transfers by occupation 1997 to 2008

Work Permits that were ICTs by occupation.htm

 

3 - The total number using Intra Company Transfers by nationality 1997 to 2008

Total ICT permits by nationality.htm

 

For a taster here are some of the figures for IT professionals

- Work permits granted between 1997 and 2008 for certain IT roles.

Other IT occupation - 104,070
Computer engineer - 3,720
Computer programmer -  8,610
Software engineer - 62,165
System analyst -  26,800
Total 1,568,235

Of this over 300,000 were Intra Company Transfers and half were IT workers. A massive proportion were from India.

- Intra Company Transfers in the UK between 1997 and 2008 by nationality

India -166,410
USA - 61,845
Japan - 20,625
Australia -12,570

 

Six considerations to help avoid outsourcing disasters

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Robert Morgan, director at Burnt-Oak Partners, has followed up his ten point guide to cutting costs in the public sector with a six point guide to avoiding the biggest outsourcing mistakes.

He goes beyond a top ten of reasons for outsourcing failures, and through his wisdom of many years in the industry, outlines six factors that if considered properly could help businesses avoid the worst mistakes.

Here is what Robert describes as the usual top ten reasons for project failures.

1 Cultural mismatch with the winning service provider
2 Setting of unsubstantiated and unrealistic success goals
3 Poor contract framing usually with inadequate or ill defined details
4 Inflexible clauses - contracts must reflect the realism of the clients marketplace and need for rapid change cycles
5 Limited or poor expectations - poor preparation and understanding of client needs and rationale for outsourcing
6 Outsourced for "cost savings" alone - often this fails to live up to expectations
7 Failure to use specialist advice in the tender, legal for the contract, HR on the transfer of staff, media for the announcement
8 No measures for success - will always lead to future conflict
9 Loss of client control due to poor project and contract management, governance and reporting
10 High staff attrition particularly of key personnel


But here are his six key factors that, if considered properly, can avoid the worst mistakes of outsourcing.

 
1 - Deal and strategy alignment

Client executives must understand where the deal fits within their declared strategy. The management and staff need to understand its purpose, scope, limitations and context. This is needed to avoid the worst of the emotional impact that the outsourcing decision brings with it, where staff will worry about their jobs and how the deal will affect them. They will ask: Will it extend into the back office? Is it going to be off-shored to India? Will it be transferred to the supplier? Who will be the supplier ? Above all else the executive needs to be visible and be seen to sponsor the move overtly and by implication be responsible for its success


2 - Specialist support

You would not engage in M&A activities without specialist subject matter experts in areas such as legal, regulatory, change management, funding, integration, etc, even if you were a seasoned acquirer. So why would you enter outsourcing without expertise in legal, HR issues, transition, process, governance, benefit collection, etc especially if you have not previously outsourced?

 
3 - Understanding of risk and its mitigation

These days risk relates to all stakeholders from staff, shareholders, regulators, clients, competitors to financiers. Have you understood how you will handle an exit from the contract however it occurs? This includes staff and knowledge transfer and retention, Intellectual Property ownership and rights, onshore offshore risks, suppliers financial stability, get out clauses for change of ownership, plus a mitigation strategy for each.


4 - Shared Value

Can the CEO articulate the underlying rationale and building blocks for incremental value, is it mutual (supplier and business), have you identified any hidden value the supplier might reap or benefit from, for example IP. Will the drive for cost reduction create a misalignment with the business needs, and most importantly will the two cultures merge and a hybrid delivery organisation be successful? This concept must follow into Value based negotiations where appropriate, and thus build a true win-win deal


5 - Are you ready for a new way of thinking?

Change plus uncertainty, equals pain. Can you see yourselves managing and motivating staff that are not yours, have you the governance and reporting skills required to achieve alignment and balance, will the business user come onboard quickly, how do you avoid winners and losers and what new metrics of performance will work? Again visible executive sponsorship is paramount

6 - Are you set up to realise the benefits?

Outsourcing always lays out the immediate cost, efficiency and effectiveness synergies to be collected. Fewer than 50% of deals deliver this because of the lack of preparation to do so. Really important issues are, who will be in the retained team (the best people not those left behind), clear cut responsibilities of the client and supplier, a hierarchy of measurement and service beyond KPI's, clarity on timing and conditions for synergies to be collected, regular reporting on this, escalation where progress is slow or non-existent, and a clear understanding of the supplier staff's bonus and incentive scheme.


According to Robert, "deals fail because of a lack of some or all of the above. Clarity of purpose, clear communications from the executive all the way down the organisation and consistency of message will help enormously to secure a long-term successful outsourcing deal for you.

 
Outsourcing never really ends - it merely goes through different phases. It will always remain a people to people service and people need solid leadership and simple consistent goals."

Consultants working for the government for free, but for how much longer?

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I was with an IT consultant to the government yesterday and he told me that the government is currently benefiting from free consultancy.

He said consultants within government don't want to lose momentum on projects so despite the new government putting spending on hold, consultancies are still doing the work.

IT suppliers are already feeling the impact of the government's plans to slash IT costs. Cable & Wireless and Capita have already announced that they expect their financials to be negatively affected.

Obviously it is good for any service provider to go out of its way to help a massive customer, but for how long will it continue.

The government really needs to make it clear what it wants to its suppliers and civil servants and then empower somebody in government to drive it.

The suppliers will do what the government wants and probably more if they are given the freedom to do so.



Could public sector IT suppliers be up that well known creek?

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Cable & Wireless was the first supplier, which recently met the government to discuss cost cutting, to come out and state the obvious. That profits would be impacted, in a negative fashion, by the government cuts in spending.

"Following the new government's Emergency Budget in late June, non-contracted spending in the UK public sector has slowed very significantly. Given the nature of our public sector business, this reduction will adversely impact trading in the current year," said the company in a statement.

Now Capita, which also attended the government meeting, has come out and said: "current pressures on public spending may potentially affect growth in the short term," in its latest results statement.

But these two and the other top suppliers can probably weather this type of storm

But according to Mark Lewis, a Lawyer at Berwin Leighton Paisner specialising in outsourcing, it is the mid sized and small IT forms that depend on UP public sector business that could be hit the hardest.

Could this be bad end users. The disapearance of smaller suppliers will reduce competition, wipe out some service innovation and hit SME IT users the hardest.

Police chiefs show staggering lack of technology understanding

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I wrote an article today about the report titled: Sustaining value for money in the police service. It turns out three quarters of police chiefs don't know anything about how IT can cut duplication and costs.

The report was put together by the Audit Commission, Her Majesty's Inspectorate of Constabulary and the Wales Audit Office and looks at where costs can be cut without the need for reducing the number of officers on the street.

Having more officers on the street would be a good thing. I was burgled a couple of years ago and the police didn't turn up for over 24 hours.

Perhaps the most staggering thing in the report was the statement that only a quarter of chief constables, that's about ten in England and Wales, think there is potential for more back-office savings. Surely they don't think they are already harnessing the full potential of things like shared services and cloud computing?

The report said in the year 2007/08 the police made a quarter of its total £224m savings through back-office cuts.

But the report said that police forces need to do more. "A lack of ambition for back-office savings is a barrier to achieving value for money," said the report. It said only a quarter of chief constables think there is potential for more back-office savings.

The report does point to examples of forces sharing back office functions with each other and even local councils. And it also reveals the success of these projects. But there is massive potential for more shared services.

So why do only a quarter of chief constables not think there is potential for more back office savings? Companies such as Capgemini and Steria are certainly selling the concept of shared services in the police sector.

If there is a similar lack of ambition for back office reform across the public sector then the government might miss out on the best way of cutting the budget deficit.

It also seems inappropriate for the government to ask suppliers to cut costs while public sector organisations hold back progress.

See also:

Ten ways to cut IT costs in government

Could cloud computing be the answer to cutting billions of government spending?

Government must pay up front to cut IT costs.

Has HP services had its defining moment with General Motors extension?

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Could the $2bn IT services deal between General Motors and HP Enterprise Services be a sign that HP's services model will work.

Although not always directly, the two companies have a long history.

EDS was once General Motors' IT department until it was spun out in the 1990s to look for more customers. General Motors remained a customer. Then HP bought EDS in 2008.

A source told me that General Motors did go to the market for alternative suppliers. But it has retained the bulk of the HP services.

HP has been criticised for changing EDS, which was seen as a compamy that defined IT outsourcing The fact that General Motors is sticking with it could be a turning point.

Robert Morgan at consultancy Burnt-Oak Partners says this is the most significant deal since HP acquired EDS. He also says it affirms that the supplier under the leadership of Mark Hurd has improved.

IT workers won't smash datacenters over cloud computing

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Cloud computing could be one of the biggest changes to hit the IT industry. Service providers are building cloud computing platforms and end users are currently implementing cloud computing strategies or piloting them. Few are ignoring it completely.

According to sourcing consultancy TPI 78% of its clients have had internal discussions about cloud computing.

This will mean a lot of IT functions transferring to suppliers.

But IT workers are unlikely to smash up datacenters in protest. Unlike the Luddites of the nineteenth Century who protested over new machinery that made textile work less laborious and meant job cuts.

But according to research carried out by CWJobs IT professionals don't appear to be worried about it as a threat to their careers.

On the contrary 75% of them are ready to learn new skills.

See more here.

Here are some cloud computing jobs being advertised on CWJobs.co.uk

What will happen is that more and more IT professionals will switch to suppliers. The very nature of cloud computing lends itself to being supported by suppliers. And it is the suppliers that are investing in building cloud computing platforms and it will be the suppliers that can benefit from economies of scale through multiple customers.

Moving to a supplier need not be the end of the world for an IT professional, I mean look at Capgemini's Bob Scott for example.

But businesses will need to keep people in-house to manage the cloud and work on future strategies.

Cloud computing could be revolutionary if organisations such as the UK public sector adopt it in full. This in turn will create opportunties for IT support, maintenance and innovation professionals.

Is the economic environment slowing outsourcing decisions?

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Equaterra's report on the European outsourcing sector revealed a significant jump in the number of people that think the economic environment in Europe is slowing or pushing businesess to re-think outsourcing plans.  

In the second quarter of this year 55% of sourcing advisors felt this way, compared with 36% that said this in the previous quarter.

However 54% of European companies did say they will will certainly or probably outsource more this year.

A number of people have contacted me asking for the full report. It is available free through us and we only ask for your details to help us understand our readers.

If you want to see the full report for free you can download it by clicking here.

Outsourcing need not mean sacking staff but repurposing them

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I had a meeting with a company called Bluesource on Friday and its COO, Andrew Mckeeve, had some interesting things to say about outsourcing enabling businesses to get more out of IT in-house IT workers.

Bluesource provides remote management if the server infrastructures that email/ communications systems sit on top of. Management of these systems is business critical in today's business environment with high volumes of data changing hands via email.

When you outsource to Bluesource you no longer require people to administer these systems.

Obviously businesses can make redundancies but this is a waste of talent. Why not, switch these workers, to something more strategic?

McKeeve says that many system administrators are very talented IT professionals and are wasted doing that job. "You don't want someone with a computer science degree pushing buttons."

Bluesource has started using this in its sales pitch and it is having enormous success. Since they started saying this about three months ago, the company has made more sales than in the previous three years, says McKeeve.

Don't take my word for it. One of Bluesource's customers is WWF - UK. IT head David Southern, said signing a deal with Bluesource has allowed it to make internal IT staff more efficient which has been a major bonus. "Bluesource really are an extension of our team and liberate our in-house resources to focus on other projects," he says.

So why has the company made more sales since it has been selling this as an advantage?

Perhaps IT directors are more comfortable outsourcing if it doesn't mean making their staff redundant

What is happening in the European outsourcing market?

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I have been blogging recently about the state of the European and UK outsourcing markets.

Following expert advice from consultancy Burnt-Oak Partners about how to take costs out of outsourcing contracts Computer weekly has been given access to exclusive research from sourcing consultantancy Equaterra

If you want to see the exclusive detailed analysis of the European market click on the link below.

You will be asked to fill in your details but this is free research.

Click this link for the report: http://www.computerweekly.com/Articles/2010/07/16/241993/CW+-Exclusive-EquaTerra-research-Taking-the-pulse-of-the-European-Outsourcing.htm]

See Tata Consultancy Services' latest results also.

Department of Health confirms IT decisions will be made by NHS trusts not centrally

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More on the Government's decision to end a buying agreement with Microsoft.

An enterprise agreement that enabled NHS organisations to buy Microsoft software as a group, some 800,000 desktops, at special rates has been ended because it apparently did not provide value for money.

Since I linked to the original story the government confirmed is now letting NHS trusts make their own buying decisions.

A Department of Health spokesman said:

"The Department of Health has already invested so that NHS Trusts are able to have access to the latest versions of Microsoft desktop software. Future investment decisions will be taken at a local level in line with the proposals set out in the White Paper published this week."

This is interesting for outsourcers in the light of the government's current attempts to cut the cost of IT.

The NHS move is significant because it reverses the IT procurement strategy of the NHS National Project for IT, which determined what NHS Trusts could buy.

According to a small technology company I recently spoke to: "A rolling back of the NHS National Programme for IT will benefit us because hospitals all over the country were holding back investment in their own IT initiatives."

This might suggest that standardisation might not be to of the government agenda.

I spoke to Sam Kingston, UK head at T-Systems yesterday and he told me about the importance of standardistaion to cut long term costs.

 

See also: ten ways the government could cut IT costs.

Government must pay up front to standardise or risks IT anarchy

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I had an interesting conversation with Sam Kingston today. He is T-Systems' UK head.

Not surprisingly we were talking about the government's challenge to IT suppliers to cut costs.

Kingston (pictured below) says what the government is saying to suppliers is that they are prepared to look at any form of technology to cut costs. He says open source software, shared services and cloud computing all have obvious benefits.

Sam Kingston T-Systems.JPG

But he warned the government still needs to keep control and must be prepared to spend money in the near term to save in the future.

He said the government needs to standardise more technology or risk a chaotic IT infrastructure. But standardisation comes at an initial cost.

Kingston warns if there is no central control and standardistaion "there could be a problem if the technology map is a mile wide and an inch thick."

Shame on you Big Blue as IBM worker crashes bank systems

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It is a bit of a worry when one of the workers at your outsourced service provider manages to close your business down for seven hours. It is even more worrying if you are a bank, which needs 24:7 365 days a year.

Well that's what happened to to Asian bank DBS when an IBM worker used an outdated procedure when carrying out routine work on a storage system.

Shame on you Big Blue

The CEO of the bank explained everything.

I wouldn't like to be the worker that made that mistake. It is also food for thought for anyone outsourcing critical systems.

Open source should target government desktops as Microsoft shunned

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The government's decision not to renew an agreement with Microsoft  for up to 800,000 NHS desktops could be an opportunity for open source suppliers to prove their worth.

According to an article on IT channel website Microscope.co.uk, the government did not feel the deal, known as an enterprise agreement, which aims to give lower prices in return for group buying was not value for money. It prefers individual NHS Trusts to buy what they want, rather than being forced to be part of an enterprise wide deal.

This must appear an opening of a door for two groups of suppliers. These are the open source software community and those selling and integrating thin client computing systems.

Open source software would help service providers make immediate costs in government IT spending because there are no license fees.

Thin clients, where the software sits on a central server and users connect via a terminal, is also a lower cost way of using Microsoft.

The Department of Work & Pensions recently signed a deal with Fujitsu to replace 140,000 desktops with thin clients.

The deal between Fujitsu and the DWP also saves millions on energy consumption because every workers doesn't have an energy hungry desktop PC. This is probably another good example of how suppliers should help the government meet its targets to cut IT costs.

See also ten ways for the government to reduce IT costs.


Could strike victory by Indian workers be the beginning of Indian wage inflation?

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I read an article this morning about a group of workers at a Nokia factory in India threatened to go on strike unless a pay settlement was reached. The workers were part of the Nokia India  Employees Progressive Union.

The workers got a pay deal. See the article here.

Could this lead to Indian IT workers demanding more money for their work. There was also a recent bout of strikes in China where unhappy factory workers were in dispute over pay.

The world could change if wage inflation hits the top two offshore IT destinations.

The wage inflation could be a long term challenge for UK companies offshoring to these destinations but the industrial action itself could be disruptive.

Ten ways government IT suppliers can cut costs

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The Government has asked its IT suppliers to cut costs. No figures have been officially announced but industry sources think the expected cuts will be 20% immediately and 40% over a number of years.

Everybody is asking how?

Well Robert Morgan, director at consultancy Burnt-Oak Partners, has agreed to give us the benefit of his experience on both the customer and supplier sides with a 10 point guide to making a 20% reduction in the cost of IT contracts.

Burnt-Oak Partners is an independent outsourcing,finance and M&A advisory specialising in securing sustainable strategic outsourcing. Its personnel have an average 15 years of outsourcing experience both as suppliers and as end-clients.

Robert is happy to answer questions directly by emailing him at robert.morgan@burntoak-partners.com or through the blog if you leave a comment.

To start with Morgan says all clients of IT services that want to cut costs should:
 
- Review original logic & minimum requirements you, the client imposed at the start of the contract.

- Question every element as to value to the business today and tomorrow.
 
- Understand and possibly model the transaction from each vendor's point of view.  Each vendor faces different cash, accounting and sales pressures.  Having a targeted strategy for each contract and each vendor is, in our opinion, fundamental.

His ten hints for cutting costs are:

1.    Contractual Flexibility - envisaged levels of flexibility are mostly never required, however allowances will have been built into the commercial (holding a price even if volumes decrease); service (exceeding peak traffic predictions without penalty fees) and business ("free consultancy" within limits) elements. Formally agreeing to moderate or remove the agreed flex should show savings. We would suggest that creating a gap analysis between the original contract and the current situation would help in identifying opportunities for adjustments.

2.    Power User requirements - Key business heads or departments (CFO or Commodity Dealing desks) are usually overly protected to ensure their buy-in and agreement to an outsourcing deal. Assurances here will have cost a lot of money - reviewing these demanding environments usually shows less than half of the contingencies are actually needed. Savings can be made by easing the delivery model into a more standardised form.  At the same time the notion of Power User may have "leaked" and surrounding users or departments managed to be upgraded at high cost but without real need.  With the effect of time the vendor allegiance to customer satisfaction can act against fiscal responsibility.

3.    SLA and KPI review - What parts of the business could downgrade their service levels and still function adequately? What SLA's am I paying the most for and why? Often significant savings can be achieved by downgrading.  The notion here is rightsizing the demand.  It is our experience that showing an openness to improving a small number of service levels while this process is taking place will unlock collaboration while only focusing  mainly on cuts creates position bargaining and yields less cost savings.

4.    Deployed Personnel - Are all the people focused and full-time on your projects? Under-deployed people are often occupied with other client work if your business is sub-optimal. If this becomes a regular occurrence significant and permanent savings are possible.  Pay special attention to travel; true availability; and starts and stops which are inefficient and costly.
 
5.    Redundant Applications - Suppliers track the usage and maintenance of all systems and can easily identify obsolete and little used systems which can be closed off .  We would recommend a systematic review of ALL applications to determine the degree of complexity and obsolescence.  In our opinion reducing complexity should become a specific target whether support is outsourced or not.  In parallel there should be an immediate and focus on automation of repetitive tasks with human activities.

6.    Integration versus running systems into the ground - you may find in reviewing the logic and strategy again that stopping a cross-platform project and merely running the system into the ground is cheaper.  But there must also be a clear strategy to decommission applications once they get close to the ground.  Too many situations involve humans preventing a natural decay of a technology or a process just to protect jobs or maintain comfort levels.

7.    Refinancing - Large-scale transformation projects and large asset purchases can be successfully refinanced at far cheaper rates than say three years ago.  Here again analysing the situation from the outside in is critical in order to estimate the amount of reasonable "give" the British government can reasonable request.

8.    Is there a case for Shared Services - consolidating into a giant bureau service will save mega money and can also lead to a strategy of restructuring large segments of services.  Using call centres as an example this strategy would bring together a process of efficiency coupled with a possible element of privatisation (either up front or gradual) and allow the government to extract very significant immediate financial benefits and, if partners are well chosen, long term benefits in cost and service while potentially bringing back to the UK a certain number of call centre jobs that have migrated offshore.

9.    Wage arbitrage - make better use of nearshore and offshore resources - 40-50% savings are possible on what is usually the largest single cost component - people.  We would recommend that this strategy be followed systematically for function's earmarked to be automated within 2 to 5 years.

10.    Pressurise the service provider - they know where the high costs exist and why they cost so much. Accept that the answers might be hard but real money can be saved.  Using a qualified, expert and independent mediator dedicated to contract would provide on-going governance improvements.


No sacred cows as Microsoft agreement with NHS is dumped

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In its bid to cut costs and look at different ways of doing things with IT in the public sector the government has canned an long running agreement with Microsoft.

The Enterprise Agreement, as it is known, covered the software requirements of 800,000 desktops across government.

Apparently the new government doesn't like national agreements and would prefer it if NHS Trusts made their own decisions about what to buy.

This is an opportunity for alternative suppliers to approach trusts with alternatives to Microsoft.

Could some other major suppliers see their lives made more difficult in the public sector as the new government seeks more value.

I wonder if Francis Maude mentioned this to Microsoft at their recent meeting.

Could the NHS National Project for IT be the next to go, opening up a market that has been dominated by a small group of suppliers?

UK Government needs to change more than IT suppliers to cut costs

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Since the government dragged its main IT suppliers into a room to talk about cost cutting, I have been on the phone to many industry experts as well as suppliers themselves.

I wrote this analysis about how the government and suppliers can achieve the IT cost cutting targets.  

From what I see on this occasion it looks like the feeling is that the suppliers should not just cut the costs by doing things like stripping services and offshoring work to low cost regions. Rather they should harness technology to change the public sector for ever and for the better.

There are lots of ideas floated in the analysis. These include shared services, cloud computing and flexible service levels. 

But what do you think?

 

 

Are you ready for changes to Microsoft licensing and pricing?

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Businesses and their IT suppliers should study the impact of five recent changes to pricing and licensing brought in by Microsoft, according to analyst form Forrester Research.

"Software sourcing professionals should study these changes and work with their
infrastructure, operations, and IT strategy colleagues to evaluate the implications for their firms," says Forerster

1. Office Pro Plus gets a 5% price increase.

2. Buyers get new licensing options for virtualised, mobile office deployments.

3. Microsoft shakes up Windows virtualisation licensing policies again.

4. Microsoft will cease selling Select agreements after July 1, 2011.

5. Software Assurance no longer has a 30-day grace period.

"While most of these changes are favorable for customers, Microsoft hasn't done enough to address concerns such as the mismatch between the cost and value of Office upgrades and the licensing complexity of desktop virtualisation," says Forrester

Infosys reveals what IT UK business sectors are about to spend on

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Infosys announced its results yesterday and this morning the company's European head, BG Srinivas, put it all in a bit of UK and Europe context for me.

Infosys reported solid results yesterday and said the US is growing faster than Europe.

Srinivas said European revenues if you discount the changes in currency declined 0.8%. So pretty much flat.

He says slower decision making and the fact that the UK was later into recession than the US means deals are not being signed off.

But the pipeline is good in the UK, he says, with financial services, retail, telecom and utilities sectors are all ready to sign off projects.

For example he says the financial services sectors are planning investments to support mergers and demergers as well as to meet new regulations. This means rationalising IT systems, decommissioning and standardising. On a regulatory from it is about ensuring legacy systems comply with new regulations.

The retail sector, according to Srinivas, is a sector focussed on the digital consumer. As such they are building platforms to connect them to consumers online. They are also investing in their business analytics systems and back end ERP systems.

Unilever has just signed off a £144m deal with BT Global Services. 

 

 

 

 

Could government cost cutting be China's Y2K moment?

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The UK government wants suppliers to cut their costs immediately and continue to do so over time. There is potential to reduce costs by using offshore locations to deliver services.

Indian companies do not appear on the list of top UK government suppliers for example. So there is scope to farm out more work to India.

But what about China? It is cheaper than India.

China needs a similar moment to the Y2K crisis if it is to catch India as an offshore IT location. Could the fact that governments across the world are trying to cut costs be its Y2K moment.

There are massive challenges in terms of security and IP rights but with the right management in place could China become a UK government back office? Who would have believed India would have ran the back offices of the West's biggest banks a few years ago?

I doubt it will happen any time soon. I mean people thought it was a scandal when some UK citizen information was sent to a datacenter in India never mind China.

But I couldn't resist throwing out the question after all the world is becoming a smaller place.

What makes a great outsourcing agreement?

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Outsourcing agreements are often controversial and to be honest people rarely sound that they are fully satisfied by what they get.

This goes for the suppliers and the customers.

We journalists tend to write about the deals that go wrong, with some relish, but this blog should be balanced. So here are some examples of great outsourcing agreements.

I have been following the story about the new government wanting its main suppliers to cost it less. At least it had the courtesy to tell them face to face.

It is a good debate. We have people that say the government is overcharged by 40% on IT contracts while others think suppliers can't go any lower on price. Whatever the argument it all boils down to cost. But cost isn't, everything is it?

But two other stories I have been blogging about recently made me realise that suppliers can be driven by enticements other than money.

Take Mahindra Satyam. Satyam before Tech Mahindra stepped in to rescue it was on the verge of collapse after its former chairman was found to have been misreporting its numbers.


At the time I wrote about how it was at risk of losing some of its major contracts. One of these was a contract to build, implement and support the event management software for the World Cup in South Africa.

As it turned out Mahindra Satyam kept the contract. The success or failure of this contract would be pivotal to the re-emergence of Satyam. What more would you need to drive you on? I spoke regularly to Dilbagh Gill, who was in charge of the project. His passion shone through as did all Mahindra Satyam staff when talking about the project.

Never mind the company's desire to be a headliner on more positive news, this was an important project to start with. Not many are in the public eye to the same extent. But add to that Mahindra Satyam's determination to succeed and you have the foundations of a great project. The World Cup has just finished and there was no downtime on the system.

The other story I recently blogged about is one won by Indian Supplier MindTree. This is part of the Indian ID scheme which will give 1.3 billion people unique identities using biometric technology.

It's a big project. MindTree has been awarded the contract to build the enrolment software as well as the application that links this to the biometric technology.

In a recent interview one of MindTree's directors told me how prestigious the win was for the company. His national pride stood out and his belief that the project would help alleviate poverty. He said of course the company has to make a profit.

See the first part of the interview with MindTree and the second part here.

Of course other great deals are achieved through suppliers being given more freedom to innovate and make money rather than being set rigid requirements.

An example of a good project where the customer gave the supplier license to perform is a deal between Scandinavian airline SAS and CSC.

The customer handed CSC full responsibility for all processes involved in putting passengers on a flight. CSC was given a fixed rate per passenger. It was therefore in the benefit of SAS to be more efficient to increase its profit. It was a great success.There must be lots more so feel free to describe them in the comment section. 

 



 

Well done Mahindra Satyam as the World Cup software acheives 100% uptime

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Just a quick blog post to say that the Mahindra Satyam software, which ran the World Cup tournament in South Africa, did not have a single instance of downtime.

The event management software ensured that all the people involved in the tournament whether spectators, players, staff or journalists are in the right place at the right time with the right access rights.

I spoke to the man in charge, Dilbagh Gill (pictured below), on Friday and he said there had been no downtime with 72 hours to go.

Dilbagh.JPG

Well the tournament is over now and there were no outages. Well done Dilbagh and Mahindra Satyam. I look forward the the next World Cup in Brazil when Mahindra Satyam once again runs the event software and hopefully Dilbaghj will blog about it.

Here are the five blog posts that Dilbagh wrote for this blog. Post 1, post 2, post 3, post 4 and post 5.




How can IT suppliers cut the cost of their sevices for the government?

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So the government met its top suppliers last week and told them to cut costs now and continue to do so. Minister Francis Maude sat 19 suppliers in a room to talk last week.

This could be a cut of 20%, according to a well connected source of mine.

As I am working on an analysis of how this can happen I thought I should put out question to the outsourcing community. How can suppliers cut their costs to support the government?

The suppliers will now be raking their brains to see how they can keep on-side with teh government and bring costs down.

To get the debate going here are a few ideas for cutting costs:

1 - Refinance the contracts? When the suppliers borrowed the money for some contracts, often quite a few years ago, interest rates were higher. Robert Morgan, director at consultancy Burnt-Oak Partners says there would be a one of charge for refinancing but the savings would outweigh this.

2 - Offshore more work? The top suppliers that the government invited to meet it did not include any Indian suppliers. Although most of the suppliers on the list have offshore capabilities there is an opportunity to get lower cost services from the pure play Indian firms.

3 - Government departments being more flexible? Could departments enable suppliers to offer cheaper services by tweaking the way they work? 

What do you think? Any suppliers out there with good ideas?

World Cup prize winner can't wipe the smile off his face

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One of the prize winners of the World Cup ticket competition held on this blog has sent us some photographs of his trip.

Judging by his grin he had a great time.

IT professional Steve Winterburn won a ticket to the Netherlands versus Uruguay semi-final in Cape Town. The tickets were donated by indian IT supplier Mahindra Satyam, which built and supported the software that ran the event in South Africa.

Having spent a lot of time in Africa myself I imagine the football was not the main attraction.

"The football was the reason I went, but it will be Africa itself which will be my over-riding memory," Steve told me.

He said: "Back at work this morning after my South Africa trip - I had a fantastic time, it's a fantastic country and the World Cup was a great success and a brilliant atmosphere, and thank-you again for the chance to win the ticket in the first place."

Thanks Steve.If any of the othe prize winners have any pictures please emalme and tell me how your trip was. You can also post comments on this blog post. 

Here are his pictures:

 

South Afica 1.JPG

South Afica 3.JPG 

 South Afica 2.JPG

Mahindra Satyam's World cup software had no downtime and 72 hours to go

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Mahindra Satyam's Dilbagh Gill, the man in charge of the event management software that is running the World Cup, says there has been no downtime on any of the applications and services it is providing.

 

"I hope there is none in the next 72 hours," he told me today.

 

Dillbagh says the fact that the technology has run so smoothly has meant he has had time to show 600 different people around to explain what Mahindra Satyam is doing. These people include customers, potential customers and technology enthusiasts.

 

He described the whole experience as awesome both personally and professionally.

 

He says during the event all Mahindra Satyam staff got to watch two matches each. He has met football greats such as Zinedine Zidane, Franz Beckenbauer and Michel Platini.

 

Here are links to all five of his blogs. Post 1, post 2, post 3, post 4 and post 5.

 

Also see an interview with Dilbagh. 

 

But there is no rest and Mahindra Satyam will soon start work on the 2014 World Cup finals in Brazil. Dilbagh says it all kicks of for him in September when Mahindra Satyam sets up offices in Brazil.

 

It will use the same software platform for the Brazil World Cup.

 

Then in July next year the preliminary draw event will be managed by the software. Then Federations Cup will run on the software, followed by the final World Cup draw event. Then the World Cup in Brazil .

Indian ID project will work because it is about alleviating poverty and not privacy

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This is the second part of my interview with Anjan lahiri from Indian IT firm MindTree, when we discussed the Indian biometric ID project.

See yesterday's post, which concentrated on the technology challenges.

MindTree has just been awarded a prestigious deal to build software for part of the biometric identification scheme in India. The first contract awarded on the project.

The biometric ID card scheme in India will see all 1.3 billion Indian citizens receive an ID that authenticates their identity through biometric checks.

It is a massive project not least because of the size of India's population but also its disparateness.So its bigger than the UK scheme that failed. Why will it work?

Lahiri says it will work because it is about alleiviating poverty and not about privacy like the UK ID card scheme.

"The poor in India have a problem in that they do not have an identity," says Lahiri. This he adds prevents them from opening bank accounts. He estimates that 1 billion of India's 1.3bn people do not have bank accounts.

He said this can cause problems when, for instance, someone is given a government subsidy. A large part of it is spent on travelling to the place to pick it up and another slice is taken by corrupt officials.

But giving someone a biometric ID means a local store can be used to dish out money in the knowledge that the right person is getting because of the unique identification. "We are creating financial access for 1 billion people and reducing transaction costs.

He also says poor women are almost always known by their son's name. "Imagine how hard it is going to a bank and opening an account." 

It is benefits like this that give the Indian ID card scheme the backing it needs. Companies like MindTree are proud to be involved. "We have to make a profit but it is a very prestigious deal for us," says Lahari.

So that's why the Indian ID scheme will work. Just to remind you below are some technology facts about the project.

- The biometric ID card scheme in India will see all 1.3 billion Indian citizens receive an ID card that authenticates their identity through biometric checks.

- It will sign 600million people up over the next four years.

- It is a massive project not least because of the size of India's population but also its disparateness.

- Each person registered will have an estimated 5 megabytes of data and the datacentre that will hold the information will have 4 Terabytes of data coming into it every day during peak enrolment periods. This will be about the biggest non commercial datacenter in the world.

For how long will there be no Indian firms among top government IT suppliers?

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It is worth mentioning that the main suppliers that met government Minister Francis Maude yesterday to discuss reducing costs did not include any Indian IT companies.

How long will this last I wonder? If they want to cut costs, up to 20% according to some, they will probably need access to lower cost labour.

That screams India, China etc to me.

This is the full list of suppliers that met Maude yesterday:

1. Hewlett Packard
2. British Telecom
3. Capgemini
4. Fujitsu
5. Capita
6. IBM
7. Telereal Trillium
8. Atos Origin
9. CSC
10. Logica
11. Steria
12. Oracle
13. Siemens IS
14. C&W
15. Microsoft
16. Accenture
17. Serco
18. G4S
19. Vodafone

 

BT strike threat could be averted as Union agree terms

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The strike of 50,000 BT workers could soon be a distant nightmare or dream because the CWU has accepted a revised pay offer of 3% over three years.

I say nightmare or dream because it could have been disasterous for SMEs and BT but good for BT's competitors.

There will be another ballot of members within weeks after the last one was tripped up in the eleventh hour following legal concerns.

For a reminder of why the union was unhappy about a 2% pay offer that was previously on the table see below.

BOX: Union gripes with BT


• BT made in excess of £1bn profit last year and exceeded forecasts by doubling its free cash flow to £1.9bn while making £1.75bn in cost savings - partly delivered through a pay freeze, 30,000 redundancies and changes to pension schemes, which CWU helped the company with.

• CWU rejected BT's offer of 2% plus £250 and a possible additional £250 based on meeting undisclosed targets next year. BT has claimed that the total payments would be equivalent to a 5.4% pay rise. However, this would only be true for seven people in the company who earn a salary of just over £14,000 and the final £250 would not be paid - if at all - until June 2011.

• A pay deal of 5% for CWU grades would cost the company 3.6% of free cash flow.

• BT executives have received generous bonus payments, including:

• Ian Livingston CEO - basic £850,000 plus annual bonus of £1,206,000, total up by 79% on 2009. He is also set to get a 6% pay rise this year, but has pledged to take a 2% pay rise and donate the rest charity.

• Michael Rake, chairman, total of £670,000 up from £630,000 - a 6.3% rise - in 2009 for working part-time.

• Hanif Lalani, ex-finance director, total of £1,166,000, up from £805,000 in 2009, a rise of 44.8%.

• Patricia Hewitt, non-executive director who helps to decide remuneration - £128,000 up from £75,000 for just a few days a month.

• Gavin Patterson, BT Retail CEO, total of £1,133,000, up from £698,000 in 2009, a 62.3% increase.

•Tony Chanmugam, finance director, is set for a pay rise worth more than 7%.

What went on at the meeting of government and IT suppliers?

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Francis Maude met 19 of the government's top suppliers yesterday and talked through plans to cut costs.


I spoke to one of my sources yesterday and was told that at the meeting the government asked for immediate savings this year and ongoing cost reductions.


He said the next phase will be interesting as the companies ask the government how they can do it.


Although my source said no numbers were mentioned in the meeting another well connected contact of mine said the government had set tough targets.


"I was not in the meeting but I was told the government wants a 20% cost reduction without the offer of project extensions," said my source. Normally when a customer negotiates a reduction in price they agree to extend the contract. Give and take.


And it does not end there, according to my source, with contracts currently in negotiation expected to have cuts more brutal than 20%.


The source said it is fine that the government asks private companies help cut costs but if the figures he has been told are correct it "shows a tremendous lack of understanding of how the suppliers work."


Jean-Louis Bravard, who is director at consultancy Burnt-Oak Partners and was previously a global head at EDS, said suppliers can help the government reduce costs significantly through long term projects.

 
"These can be more significant and can bring short term, cost reductions and improve performance.


He gave an example of government BPO which mixes outsourcing and mergers and acquisitions. Outsource at first but then encourage private companies to acquire the government operations. This would take wages and pensions off the government bill.

Open source chosen for first major contract for Indian ID cards project

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I interviewed Anjan Lahiri (pictured) today. He is one of the founders of IT service provider MindTree.
 
We talked about the Indian biometric ID cards scheme. There was too much for one blog post so I will focus on the technology for this post and write separately about some of the other challenges and benefits.

Anjan Lahiri Picture fav.jpg

MindTree has just been awarded a prestigious deal to build software for part of the biometric identification scheme in India. The first contract awarded on the project.

The biometric ID card scheme in India will see all 1.3 billion Indian citizens receive an ID card that authenticates their identity through biometric checks.

It will sign 600million people up over the next four years.

It is a massive project not least because of the size of India's population but also its disparateness.

Each person registered will have an estimated 5 megabytes of data and the datacentre that will hold the information will have 4 Terabytes of data coming into it every day during peak enrolment periods. This will be about the biggest non commercial datacenter in the world.

"The sheer size of it makes it challenging and path breaking," says Lahiri.

The first major contract has been awarded and this will see MindTree develop the enrolment system for the ID cards scheme. This involves building the application that will be used to register 1.3 billion people. The company will also design and build an interface that connects the enrolment system to biometric technology. It will have 50 dedicated developers on the project.

MindTree is using open source software to build the applications. This was the choice of the authorities in charge of the project. But Lahiri says open source such as Linux is scalable and mature enough for a project like this. Mindshare will use some vendor applications.

From a technology perspective the ID scheme will have three major segments, according to Lahiri.

These are:

1 - The datacentre build and population
2 - A services centre will have to be build to answer queries and solve problems
3 - Every single civic and public authority will build applications to use the data.

Lahini says the technology will not be the biggest challenge. "The technology is complex but we will build it. But imagine going out to 1.3 billion people and getting them enrolled."

That's enough for one instalment. The next will focus on why the Indian ID card scheme is likely to succeed where the UK equivalent failed.

.Net shortage blog post unearths .Net deluge

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Following my blog post yesterday about the high demand for .Net skills in the UK I have been contacted by a plethora of companies offering their services.

The first thing to point out is that it was only an article about demand for .Net services and not a request for services.

Another thing that struck me about the ten people that contacted me was they were all based in India.

Is this because there is a shortage in the UK, or is this just because the article was not understood to be what it was, a blog post by a journalist. Could it be true that there are communication barriers between the UK and India?

If there is a shortage I think we could well see a lot of offshoring to India by UK businessess. I was offered rates as low as $10 per hour.

Any UK .Net experts out their?

BT, HP, Capgemini etc meet Francis Maude to have their balls squeezed

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These are the suppliers that are meeting the government today to discuss how costs can be brought down. Apparently the top 20 suppliers to government. As there is only 19 there must be one missing.

It is almost exclusively IT suppliers.

   1. Hewlett Packard
   2. British Telecom
   3. Capgemini
   4. Fujitsu
   5. Capita
   6. IBM
   7. Telereal Trillium
   8. Atos Origin
   9. CSC
  10. Logica
  11. Steria
  12. Oracle
  13. Siemens IS
  14. C&W
  15. Microsoft
  16. Accenture
  17. Serco
  18. G4S
  19. Vodafone

This is what the OGC said of today's meeting.

"Today's briefing will allow CEOs the opportunity to understand the proposed process and discuss informally with the Minister (Francis Maude) and officials before the negotiation period begins

This negotiation programme will cover majority of Government's suppliers; conducted either centrally for the top suppliers with a portfolio of contracts across several departments, or via individual departments themselves for smaller suppliers.

The work is looking at outcomes with mutual benefits for both Government and its suppliers. We are also looking at ways to improve the way Government does business, improving commercial activity, streamlining processes and making Government a better client

This represents the first phase of a programme for key suppliers with portfolios across several departments. It is intended that all significant suppliers, not just the invited companies, will be engaged with during the programme."

National Police Improvement Agency leaves path clear for likes of Steria and Capgemini

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The CEO of the National Police Improvement Agency (NPIA), Peter Neyroud, says that better use of technology will help the Police save £200m by 2015.

The NPIA, advices police authorities on technology, was told by the coalition government to cut £30m in costs.

It will make £25m IT savings this year out of a total of £1bn savings across police forces.

Neyroud wants police forces to share back office functions.

Steria and Capgemini are examples of suppliers that are set up to help the police do this.

I recently interviewed Capgemini's head of UK outsourcing Greg Hyttenrauch as well as Steria's UK CEO John Torrie. Both talk a good game when it comes to IT services for police forces so I expect them to increasingly come up against each other in bids.

For example Steria recently won its first client for its shared services platform aimed at police forces.

Cleveland Police Authority became the first customer.The authority is spending £175m over the next decade on shared services and expects £50m in savings in that time.

Cleveland will be the first police body to use Steria to share services such as finance, HR, payroll, commissioning and fleet management in Steria's dedicated datacentres. When other forces are signed up they will use the same infrastructure.

If one police authority can save £50m over ten years, then £200m over five years is not that much when you consider there are 43 police forces.

John Torrie, CEO at Steria in the UK, says the Cleveland deal is a way forward for police forces meeting their cost cutting targets. "It takes costs out of the back office and protects the front line."

Capgemini is a proponent of using the cloud for shared services.

The use of share services also lends itself to the G-Cloud project.

 

 

Will G-Cloud be thrown out with the bathwater?

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I spoke to Karl Deacon, CTO at Capgemini today. He is closley involved in the G-cloud project. Capgemini are building a pilot of how a G-cloud might be built and work. He told me, as you would expect, things went quiet after the election. But he says there will soon be talks with the new people in government.

Lots of IT service providers have been working away on projects to help the government put together its cloud services strategy. This has been done for free. Although those involved must be hoping for a slice of the pie.

With the change of government and the massive cuts in public spending there is a worry that some good ideas might be dropped, such as the G-cloud. In the words of Dell Services' Ferenc Szelenyi, in an earlier blog, the government risks throwing the baby out with the bath water.

The G-cloud offers significant savings through the reuse of applications and no need to repeat development of code already written. See this interview with Karl Deacon about what the G-cloud offers government.

Then there is the massive hardware and energy savings because the applications are hosted in the cloud. The public sector uses an unimaginable number of applications and many of them are basically the same.

See also what Wipro is doing in the cloud in this article.

 

Will the Guardian regret an alleged strategic outsourcing mistake?

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Union Unite has criticised plans by Guardian News & Media (GNM) to outsource large numbers of staff to help it address problems cause by the economic crisis.

Here is a cut from the letter.

"If outsourcing goes ahead we believe that GNM management will have made a strategic mistake it will come to regret, one which its staff in their majority reject and which we believe you, it's readers, would also question. We urge management to reconsider and sit down with Unite and the NUJ to discuss alternative ways of dealing with GNM's current financial difficulties."

Read the full letter from Unite's John Stuttle that has been published on the Guardian website.

Also read a Computer Weekly article on the matter.

.NET developers in demand from UK businesses

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With businesses offshoring software development, by the truckload, it is good to see that there are actually some software skills in demand in the UK.

According to the latest REC/KPMG report on jobs, .NET developers are in short supply for both permanent and temporary positions.

So Microsoft's development framework for web applications is in demand.

Is this a good opportunity for home grown IT professionals or will the service providers step in and take the slack.

Karl Deacon, CTO at IT outsourcing giant Capgemini, says he is not aware of a shortage in .Net skills generally but thinks certain subsectors of .Net could have shortages. For example he said Capgemini was recently looking for developers with BizTalk skills but there was a shortage.

It could also be that .Net application in certain sectors is in demand, according to Deacon.

Over a billion biometric ID cards for Indians on the way

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The UK ID cards scheme was massively controversial, massively expensive and a massive waste of time in the end.

But compared to the challenge of giving 1.2 billion Indian citizens biometric ID cards it was a tiny undertaking.

Almost exactly a year ago I wrote about the ID card Indian project. The people that head up the project estimated it would cost £3bn in total compared to £5.3bn for the ID card scheme in the UK.

Infosys co-founder Nandan Nilekani is leading the project.

I blog about it today because there are signs that the project is moving forward nicely with IT supplier MindTree being awarded a software development and maintenance contract to support the complex software that will authenticate every Indian citizen using biometric technology. 

MidTree described it as an opportunity to serve its nation. Maybe the UK government could award more UK IT companies contracts to get the same level of commitment.

I met MindTree earlier this year and found them an interesting company.

 

Could HP's cull of EDS staff cause stress related illness to remaining staff?

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It seems the job cuts at HP  will never  end. It always amazes me just how big some of these IT suppliers have got over the years, in terms of the number of staff members.

Reports suggest that HP is cutting another 1000 jobs this year and 1000 next year.

This according to Peter Skyte at union Unite is on top of the 4000 already cut since HP took over EDS.

He says remaining workers would be in danger of developing stress-related illnesses.

"There are also serious implications for those who remain in their jobs and carry on service to customers and clients. Skeleton levels of staff will lead to stressed-out workers who struggle to complete an ever increasing workload."

Who will do the work as business picks up? The remaining workers will be expected to do more. The fact that remaining staff are constantly in fear of losing their jobs probably means they will do whatever they ask.

It is a good point made by Peter Skyte because we rarely see workers left in jobs as victims.

I know of workers that have been TUPE transferred to IT service providers from end user businessess that are suffering stress.

Atos announcement was confusing but is now interesting

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I was interested, although confused at first, about an Atos Origin announcement yesterday.

It has launched its first ever service direct to customers. Yes it is using the same e-ticketing technology that it supplies its rail company customers to go direct to consumers.

The website is called redspottedhanky.com. Don't ask why?

Foul! You say.

Well actually after my initial surprise and a bit of explanation of a press release, which usually need a bit of translation from business jargon and gobbledigook, I found it very interesting.

Interesting point one:

It enables rail companies to use a e-ticketing service as a pay as you go model. Rather than hosting the hardware and software themselves, and paying constantly, they can just pay Atos a commission when a sales is made.

The plumbing of an e-ticketing system is just a cost to a rail companies therefore they could completely outsource it. The service provider will reduce the cost per transaction over time and everyone will be a winner.

I wrote about an outcome based outsourcing agreement similar to this in an article recently

This was Scandinavian airline SAS outsourcing all systems involved with getting customers on board to CSC. As a result it was in the interest of CSC to cut costs because they were paid per transaction.

Interesting point two:

The rail industry lags behind the airline industry in getting repeat customers through things like loyalty schemes. The new Atos service will not only attempt to offer the best prices available but will introduce loyalty schemes.

Because Atos has a large customer base in the rail sector it is in its interest that these companies do well.

 

 

Indian fuel protest hits IT suppliers

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Just as I write about the risks of offshoring to a dictatorship the world's biggest democracy shows its own similar risks

I recently blogged about the strikes of factory workers in China and how these strikes could become a trend as low paid labour in China fight for more reward for their work. And better work conditions.

Yesterday in India IT firms including Infosys and Wipro were forced to close as a result of a protest against an increase in fuel prices in Bangalore. See this article for more.

Was anybody impacted by this?


 

BT pleased with union decision to cancel strike ballot and door still open for talks

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Following the eleventh hour shock of the strike ballot of CWU members at BT being called off, here is what BT had to say.

"BT is pleased that the CWU has withdrawn its ballot for industrial action. There were procedural issues regarding the ballot that we raised from the start and the union have now accepted this to be the case. Our door remains fully open to the union and so we hope we can sit down and resolve this matter. An amicable agreement is in everyone's interest and the withdrawal of the ballot provides both sides with a window of opportunity in which to reach such an agreement".

Like BA before it technicalities have compromised a strike ballot. BA stopped a strike earlier when the union mistakenly sent ballot papers to former employees.

Huge companies like BT and BA can afford to pay highly for the best legal advice so unions might have to be equally lavish.

BT strike ballot cancelled after BT "effectively" made legal challenge

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The Communication Workers Union has cancelled the strike ballot of 50,000 union members working at BT. It was due to give the result today but has cancelled the ballot following legal advice.

Here is what a dissapointed union said:

"The ballot has been cancelled following legal advice which clearly outlined that under the notoriously restrictive trade union laws in the UK certain technical breaches would potentially invalidate the ballot. CWU has today received an offer from BT to meet for further negotiations and the union will take up that offer whilst taking all necessary steps to allow a re-ballot as soon as practically possible if negotiations are unsuccessful."

Andy Kerr, CWU deputy general secretary, said: "We're bitterly disappointed that this ballot has had to be cancelled. It's devastating for our members and for trade union rights in the UK and of course it doesn't help to resolve the outstanding issues over pay which we have with BT.

"The legal technicalities on which this ballot has been cancelled again raise questions over the right to strike and the extremely restrictive trade union laws that exist in the UK. The law, in our view, appears to be outdated when it comes to the provision of information.

 "We will take all necessary steps to allow us to re-ballot our members as soon as is practically possible. In the meantime we will also be taking up an offer from BT for a meeting to see if there is a way to resolve this dispute without the need for industrial action."

 
CWU said it has received a series of letters from BT over the past few weeks which effectively amount to a legal challenge. On taking legal advice regarding the questions put to the union by BT the decision to cancel the ballot was taken on Monday 5th July.



Could half of BT's staff be on the brink of going on strike?

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I am waiting for the result of the ballot of CWU members at BT over whether to strike or not. I spoke to the union this morning ad a spokeswomen said the result will, as planned be this afternoon.

When the Electoral Reform Group recieved the post this morning it was going to work out the result.

The Guardian is reporting that half of BT's workers, some 50,000, could strike as early as July 12.

I have already blogged about the disruption in the SME sector and the long term problems a strike could cause BT.

SMEs face destruction in government spending cuts, not big IT suppliers

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I blogged recently about the impact the government's austerity budget could have on IT professionals. I wrote about the fact that IT projects could be cancelled putting IT supplier workers out of work.

I had a great response to this blog from a Kelvin Prescott. He talks about the real story being that while large IT suppliers might see profits drop SME suppliers could be wiped out.

Here is Kelvin's comment in full. Worth a debate I'd say.

"I'm sceptical about the Guardian's estimates of the numbers of jobs at risk - mostly because they underestimate how costly and time-consuming it will be to renegotiate the large contracts that comprise the majority of government ICT spend.

For me, the real story is the impact that the ICT moratorium will have on the small to medium sized enterprises.  It means that, for the next 3 to 9 months, pretty much no new ICT contracts will be signed. 

For smaller ICT providers, this has the potential to be fatal. A major cashflow hit is difficult to bear if your turnover is modest, and they lack the negotiating power to resist arbitrary price cuts from their biggest customer.

Larger providers are in a much better position, even if it doesn't feel like it.  Their contracts are usually long term, with high termination costs, and they will generally have the financial strength  to survive a short cashflow problem.  They also tend to be delivering the most critical services - the ones that, for all the bluster, public sector customers simply cannot afford to put at risk.

So, when the negotiations start, it will be the smaller firms that are forced to accept blanket price cuts, reductions in scope and long delays before new orders are placed.  This will drive SME's away from the public sector, or out of business altogether."

The new multi-sourcing is known as single-sourcing

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It seems that the term multi-sourcing is actually being called single-sourcing in some quarters.

Multi-sourcing in IT, from what I understand, is having multiple suppliers providing services.

Traditionally these suppliers would be managed separately, which was one of the downsides of an otherwise logical means of getting value for money. These days many contracts are multi-sourced with one supplier in charge of managing all the other suppliers. T-Systems' deal with BP springs to mind.

But I had a meeting last week with someone involved in putting together these multi-sourcing contracts. He said to me that this type of contract, where there are multiple suppliers and one of them manages the others, is now referred to as single sourcing because one company is responsible.

Confused? If so here is a article that might help you navigate the multisourcing contract minefield. Free advice from lawyers.

See how BP makes multi-sourcing work here.

Brazil and Murray crashes create 42% internet spike

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I thought it would be interesting to see how much internet traffic there would be on friday. The fact that Britain's great hope at Wimbledon was playing as well as Brazil in the World Cup was bound to drive internet traffic.

Managed service provider Star agreed to measure traffic within its customer base, made up of thousands of businesses. It reported a 42% increase in internet traffic when compared to a similar period before the World Cup and Wimbledon.

When England took on Slovenia on June 23 traffic was up 100%.

This shows that blind optimism is more of a driver of web traffic than football quality or a world class Scott tennis player.

Well Murray lost to Nadal and Brazil were beaten by the Netherlands so they could be in the blind optimism category next time.

See the graph below.

 

Thumbnail image for holland brazil murray nadal.JPG

Is outsourcing the answer to insurance industry concerns?

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I blogged last month about how the insurance industry is leading the pack in terms of signing UK outsourcing agreements.

The expectation is that there will be lots of mergers and acquisitions and they are sliming down in an effort to avoid shareholders voting to sell.

Today I wrote a news article about some research in the insurance sector. It states that mergers and acquisitions as well as meeting regulations are the major concerns of insurance professionals.

It also says there are concerns over improving IT systems.

So below is a pie chart of  all the major concerns, but where does outsourcing fit into this?

insurance pie chart.JPG

 

Apple gets its formula totally wrong

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Well not its marketing formula anyway.

I know this is not an outsourcing story but I couldn't resist putting it on the blog. I am sure a few of you are thinking about getting an iPhone 4 so this should make interesting reading.

It is also a lesson in customer service and proof that Apple can really do no wrong.

Below is a letter sent to iPhone 4 users explaining why there have been complaints about reception problems.

Apple is clearly very clever because the letter leaves you feeling anything but dissatisfied. It actually left me confused but it managed to avoid saying sorry.

Maybe that's why AMR says Apple has the best supply chain of all suppliers. According to AMR, which is part of Gartner, Apple is successful because it puts the customer experience first and builds the supply chain to support this.

Here is the letter sent to iPhone users by Apple:

Dear iPhone 4 Users,

The iPhone 4 has been the most successful product launch in Apple's history. It has been judged by reviewers around the world to be the best smartphone ever, and users have told us that they love it. So we were surprised when we read reports of reception problems, and we immediately began investigating them. Here is what we have learned.

To start with, gripping almost any mobile phone in certain ways will reduce its reception by 1 or more bars. This is true of iPhone 4, iPhone 3GS, as well as many Droid, Nokia and RIM phones. But some users have reported that iPhone 4 can drop 4 or 5 bars when tightly held in a way which covers the black strip in the lower left corner of the metal band. This is a far bigger drop than normal, and as a result some have accused the iPhone 4 of having a faulty antenna design.

At the same time, we continue to read articles and receive hundreds of emails from users saying that iPhone 4 reception is better than the iPhone 3GS. They are delighted. This matches our own experience and testing. What can explain all of this?

We have discovered the cause of this dramatic drop in bars, and it is both simple and surprising.

Upon investigation, we were stunned to find that the formula we use to calculate how many bars of signal strength to display is totally wrong. Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength. For example, we sometimes display 4 bars when we should be displaying as few as 2 bars. Users observing a drop of several bars when they grip their iPhone in a certain way are most likely in an area with very weak signal strength, but they don't know it because we are erroneously displaying 4 or 5 bars. Their big drop in bars is because their high bars were never real in the first place.

To fix this, we are adopting AT&T's recently recommended formula for calculating how many bars to display for a given signal strength. The real signal strength remains the same, but the iPhone's bars will report it far more accurately, providing users a much better indication of the reception they will get in a given area. We are also making bars 1, 2 and 3 a bit taller so they will be easier to see.

We will issue a free software update within a few weeks that incorporates the corrected formula. Since this mistake has been present since the original iPhone, this software update will also be available for the iPhone 3GS and iPhone 3G.

We have gone back to our labs and retested everything, and the results are the same-- the iPhone 4's wireless performance is the best we have ever shipped. For the vast majority of users who have not been troubled by this issue, this software update will only make your bars more accurate. For those who have had concerns, we apologise for any anxiety we may have caused.

As a reminder, if you are not fully satisfied, you can return your undamaged iPhone to any Apple Retail Store or the online Apple Store within 30 days of purchase for a full refund.

We hope you love the iPhone 4 as much as we do.

Thank you for your patience and support.

Apple

Read more about it here.

 

Could informal talks save BT from "commercial suicide"

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The result of the ballot of over 50,000 BT workers, over whether they want to strike or not, will be known on Monday (05 July).

A source told me that only informal talks have occured during the ballot with no formal pay negotiations so it looks like there will be industrial action if workers have the appetite for it.

The Communications Workers Union sent papers to members asking them what they want to do and recommending they vote for industrial action.

Both the Union and BT are keen to avoid strike but there has been no meeting in the middle.

The union wants a 5% pay rise but BT only wants to give a 2% rise.

A strike would be the first of its kind for over 20 years and could cause major disruption for businesses.

These days there is a lot of competition tpo BT and a strike could play into the hands of these alternative service providers.

 

Why the union is not happy:

• BT made in excess of £1bn profit last year and exceeded forecasts by doubling its free cash flow to £1.9bn while making £1.75bn in cost savings - partly delivered through a pay freeze, 30,000 redundancies and changes to pension schemes, which CWU helped the company with.

• CWU rejected BT's offer of 2% plus £250 and a possible additional £250 based on meeting undisclosed targets next year. BT has claimed that the total payments would be equivalent to a 5.4% pay rise. However, this would only be true for seven people in the company who earn a salary of just over £14,000 and the final £250 would not be paid - if at all - until June 2011.

• A pay deal of 5% for CWU grades would cost the company 3.6% of free cash flow.

• BT executives have received generous bonus payments, including:

• Ian Livingston CEO - basic £850,000 plus annual bonus of £1,206,000, total up by 79% on 2009. He is also set to get a 6% pay rise this year, but has pledged to take a 2% pay rise and donate the rest charity.

• Michael Rake, chairman, total of £670,000 up from £630,000 - a 6.3% rise - in 2009 for working part-time.

• Hanif Lalani, ex-finance director, total of £1,166,000, up from £805,000 in 2009, a rise of 44.8%.

• Patricia Hewitt, non-executive director who helps to decide remuneration - £128,000 up from £75,000 for just a few days a month.

• Gavin Patterson, BT Retail CEO, total of £1,133,000, up from £698,000 in 2009, a 62.3% increase.

•Tony Chanmugam, finance director, is set for a pay rise worth more than 7%.

 

 

Is BPO rise innevitable as businessess reshape post recession?

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BPO deals have been won this week by Accenture and HP Enterprise Services.

Could the number and size of BPO deals be on the up?

Businesses will be looking long and hard at BPO following the recession. If they outsource standard processess they can free up resources that can in turn focus on more strategic activities.

Following the recession businesesses have the opportunity to re-shape their businesses to meet new targets.

HP Enterprise Services has won a seven year BPO deal with medical technology giant Smith & Nephew, which will see the service provider provide finance and administration support to European operations. Through standardised services sourced from India and Poland thee multi-national company wants to streamline processes and cut the costs of its operations.

Meanwhile Accenture has bagged a five year BPO deal with Norwegian energy firm Statoil. Accenture will run its accounts payable functions.

The agreement aims to improve the efficiency and effectiveness of Statoil's accounts payable operations by re-engineering processes and increasing automation via Accenture's global network which links datacentres in Norway, the Czech Republic and India.

A legal view on how to manage new immigration rules

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Following my blog post giving the reaction to the new immigration rules from legal firm Dundas & Wilson, below is the alert the company has sent to its corporate clients.

 

Dundas & Wilson alert:

 

The Home Secretary announced yesterday that an interim cap on  aspects of  Tiers One and Two of the Points Based Immigration System will be introduced from 19th July 2010.  The purpose of the interim cap is to avoid a temporary surge in applications until the permanent cap is introduced on 1 April 2011. 

 

The interim changes will involve:

- Capping the number of Tier One (General) migrants at current levels.  Tier One (General) is for the most highly skilled workers who do not need a job offer to come to live and work in the UK.   The new cap will be referred to as a "grant allocation".  It is envisaged that the limit will operate on a monthly basis.  If the grant allocation has been reached in a particular period, and if an applicant would otherwise qualify, their application will be re-allocated to the following period for consideration.

- Increasing the number of points required to qualify under Tier One (General) from 75 to 80 points in addition to applicants having to have sufficient mandatory points for Maintenance and English language.  This will make it more difficult for applicants to qualify.  This change will not apply to Tier One (Investor), Tier One (Entrepreneur) or Tier One (Post Study Work) Categories.

- Tier One (General) applications that have been received before 19 July (but not decided by that date) will be decided under the current rules. 

- The points to be awarded for previous earnings under Tier One (General) will be adjusted so that those applicants whose prior earnings exceeded £150,000 will now be awarded 80 points rather than 75.  They will therefore still qualify under Tier One (General) without having to have additional points for other attributes.

-  The number of Certificates of Sponsorship that licenced employers can issue under Tier Two will also be limited.  It is planned that the number of employees to be sponsored under Tier Two will reduced by 1,300.

 

The Consultation Process

The mechanism for implementing the permanent cap, and the level of the cap itself will depend on the outcome of a 12 week consultation period which will close on 17th September 2010.  The consultation paper has been published on the UKBA website

The consultation paper states that the Government is committed to the introduction of an annual limit to the number of non EU economic migrants admitted to the UK and the intention of the consultation process is to consider and seek views on how the limit should work.   The Migration Advisory Committee has been asked to advise on the level at which the limits should be set.  One additional option being considered is whether a requirement should be imposed on sponsors to have private medical insurance in place for sponsored workers.

Conclusion

In the short term, there is a very brief window of time available before 19th July for certain Tier One (General) migrants to apply if they qualify under the current requirements (to avoid being affected by the stricter rules and the new cap).   In the medium term, employers will need to wait to find out what permanent measures will be put in place but it is clear that whatever rules are to be put in place, will be with a view to limiting migration and making it more difficult to recruit migrant workers.

 

Gartner gives with one hand and takes away with other

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I see that the plans by governments across Europe, to cut spending, have forced Gartner to re-think its predictions for spending growth in 2010.

Rather than the 5.3% growth expected earlier it now thinks the increased spending will be limited to 3.9%.

Doesn't seem much but somebody will notice a few hundred million dollars less in spending.

It could mean a lot less jobs for IT workers in the oustourcing community.

But yet again it makes me think of the mistakes that could be made cutting costs. IT after all can bring down costs and increase efficiency. Read this contribution to Inside Outsourcing made by Dell's EMEA services head Ferenc Szelenyi,

Have you entered our awards yet?

About this Archive

This page is an archive of entries from July 2010 listed from newest to oldest.

June 2010 is the previous archive.

August 2010 is the next archive.

Find recent content on the main index or look in the archives to find all content.

 

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