September 2010 Archives

Who said Indian suppliers lack innovation?

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BA and Tata Consultancy Services (TCS) have created an SAP system for the airline to support aircraft maintenance.

IT bosses often refer to outsourcing suppliers as "extensions to the IT department." This agreement is an example. It also questions the constant accusation, that I hear, that Indian firms don't innovate.

The service is for aircraft maintenance, repair and operations (MRO) and is built SAP. It is called "SWIFT MRO". See story here.

Aircraft maintenance is about as business critical as it gets for an airline.

BA and TCS already have UK Innovation Lab in Peterborough, which opened in 2007. The lab offers users a multi-supplier IT environment where they can develop, incubate and pilot IT projects, using the latest technologies.

It is a great way to get some money back for all your IT investments and a way of helping a long term partner win business. Good in the post recession climate.

RBS UK IT staff morale down as offshoring takes hold

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In the last couple of days I have been contacted by a couple of members of the Royal Bank of Scotland's (RBS) IT team.

One RBS IT worker told us that the internal jobs board at the bank earlier this week that there were 67 jobs in the technology and services division. But only 6 were in the UK while the rest were in India.

RBS has a lot to do to repay the government after the bail out of the bank. But it seems that UK based workers at the bank are suffering as more and more IT roles are outsourced to Indian service providers.

The bank is making UK IT staff unemployed with the axing of 1,000 technology jobs as part of a cull of 3,500 positions across the company announced earlier this month. It is increasing its offshoring.

The Unite union says RBS plans to offshore upwards of 500 technology roles to India.

RBS said the movement of jobs to locations such as India is a result of its global nature. "As we work to rebuild RBS and repay the taxpayer for their support we continue to streamline our business to ensure that we remain competitive. The movement of roles between countries reflects the global nature of our business and the need to locate our people close to the customers they serve. However unlike many of our competitors we remain committed to our long-standing principle of situating customer contact work within the country or region where the customer is located."

But RBS sold its retail and commerce business to HSBC in July. Although it said it still has business there. On that same press release RBS said: "India is also one of four key locations globally for Business Services hubs with centres in Mumbai, Delhi and Chennai employing over 8,000 people. Combined, these operations make India one of the largest employment bases for RBS."

RBS said that a significant proportion of the redundancies, announced earlier this month, across its operations and IT divisions were as a direct result of the EU ruling to sell part of our UK branch network.  It said as a result of having 2 million less customers it will need less back office staff

Back in May a contractor at RBS said the bank was gradually sending more jobs to India.

Will intra company transfer loophole be closed in immigration cap report next month?

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A report being put together by the Migration Advisory Committee (MAC) about the immigration cap will be published some time in October. But will it include the dreaded Intra Company Transfer (ICT) loophole within its scope?

One campaigner for reform to ICTs told me today: "The MAC's task is incedibly difficult. The government's target, [to cut immigration], will be very hard to achieve and unless ICTs are included in the cap or the ICT numbers excluded from the immigration figures, then it will be impossible."

I was expecting the report this month but as it is the last day I put a call in to the Home Office. A spokeswoman told me the much anticipated report will be out next month. But there was no exact date.

The report is expected to be used by the government when it devises its immigration cap which will replace the current interim one in April.

Campaigners who claim that the immigration system is abused to allow overseas IT workers into the UK want the final cap to be different to the interim one which they believe is nonsensical.

The interim cap does not include workers in the UK on ICTs, which actually account for thousands and IT workers are by far and a way the largest part of this group.

See how many immigrant workers are in the UK and what they are doing as well as how many are in on ICTs here.

ICTs were created to allow very senior staff at large US companies to work in the UK without too many hurdles. But over time many low skilled jobs have been included and IT staff in the UK are losing their jobs to overseas workers who even come to the UK to be trained to replace UK them.

The issue was raised the other night by 5 Live investigates. Listen to the broadcast it was included on in this podcast.

It has also unearthed divisions in the coalition government with Vince Cable speaking out against the cap. The Liberals were against the cap but it survived coalition talks.

There are accusations that the ICT immigration loophole is destroying the UK IT profession, although many believe it is just changing it.

According to Sir Andrew Green of Migration Watch, while speaking at a recent Home Affairs Select Committee which discussed immigration the use of Intra Company Transfers (ICTs) to bring in workers from overseas is a major cause of the high rate of unemployment amongst computer science graduates, which is 17% for those that graduated last year.

The ghost of Satyam is laid to rest

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Following the announcement of Mahindra Satyam's latest annual results its European head told me the company "has put the past to rest."

Vikram Nair also told me some of the IT service provider's plans going forward.

In its last full year the company reported a loss of £17m. This is actually quite good compared to £1.241bn losses the year before. This was after its former chairman admitted that he had been cooking the books for years.

And the business was actually profitable although there were many exceptional items as a result of the fraud and following restructure. Profits from the business operations were 3.5% in 2008/09 and 8.5% in 2009/10.

The company is hiring as well. When news of the fraud broke in January 2009 Satyam had 44,000 staff. It now has 27,000 but will add 3,000 over the next 12 months.

Nair said the results announcement has put to rest the whole Satyam scandal and in mid November when the company announces its half year results its condition will be clearer.

He said all the lawsuits are done and dusted, although some class action suits from shareholders remain.

The company has paid back all the money it borrowed to keep afloat during the fraud. It had to borrow money to pat staff and suppliers for example. It now has £450m in cash.

On its strategy going forward Nair said the strengths of software company Satyam and telecoms specialist Tech Mahindra will be combined to offer customers technology and communications.

"This was a game changer for the Mahindra Tech group because before this we only did communications. We now want to be a globally recognised ICT supplier.

He said the combination of communications and software will give Mahindra Satyam a strong position as a cloud supplier. He said the company has already had a major trial of a cloud service because its event management software used by Fifa at the World Cup in South Africa was cloud based.


Lehman Brothers in London opens to tie up loose ends

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Two years after its collapse staff at Lehman Brothers in London's Canary Wharf are back.

I was talking to a former IT worker at investment bank Lehman Brothers today. He told me a lot of the former staff, as well as workers from administrater PWC, were in to tie up loose ends. The investment bank may have collapsed just over two years ago but there are still investments out there that need to be dealt with.

This shows just how complex the investment banking business is. Apparently the staff, most of which are at other banks now, are being paid the going rate. It also demonstrates the importance of expert knowledge both of IT and the investment sector.

This is why outsourcing core business is often a step too far. Imagine if all the work was outsourced. Cleaning up would surely be much more difficult.

Robert Morgan, director at consultancy Burnt-Oak Partners, says this is a good indication of where the knowledge sits in a business.

"The knowledge attrition you get from outsourcing is something that most people do not pay attention to.

"It is critical when you plan outsourcing that you do understand where the corporate memory is. It is the people that have it and not on the systems."

He says tying up Lehmans will probably cost hundreds of millions and take another 5 years.

The collapse of Lehman Brothers also triggered off an apocalyptic financial crisis which claimed many lives. See here for some of the biggest victims.  

Mahindra Satyam has cut its losses as ship steadies

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Indian IT supplier Mahindra Satyam seems to be steadying its ship. In 2009 it made massive losses of £1.241bn following the billion dollar fraud, known as India's Enron, committed by its chairman B Ramalinga Raju.

Its books have now been audited and it has cut its losses to £17m for 2010. So you could even say it almost broke even.

I have written virtually hundreds of articles about the fraud and then Satyam's eventual take over by Tech Mahindra and rebirth as Mahindra Satyam.

It is good news for the company and its loyal staff if it gets back on its feet. One of the things that stood out to me about Satyam was that the fraud was an isolated case and its customers and industry analysts had a lot of good things to say about it.

At the time of the fraud Satyam had more than 600 customers in 66 countries receiving services such as software development, business process outsourcing, as well as support for suppliers such as Oracle and SAP. Customers included Unilever, Sony, Tesco, Boots, Nestle and Fifa.

I was also impressed about how open the company was with the press following the fraud.

I am interviewing the head of Europe at Mahindra Satyam tomorrow. I will ask Vikram Nair about the year ahead and blog about it tomorrow.


Is offshoring reducing IT pay in London finance sector?

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The recession and increased offshoring to cut costs are both affecting IT pay levels.

A report from recruitment consultancy Robert Walters has revealed a drop in pay between 2009 and 2010 for IT professionals in London.

The report I have seen is for IT professionals in the Banking & Financial Services sector and the Commerce & industry vertical. Both, for the London region, show similar declines in pay levels.

Here are the findings for the Banking & Financial Services sector:


                                                Permanent salary per annum £s                         

                                                2009                 2010                              

Head of IT/CTO/CIO                    £120-180k         £110-170k

Head of Product Line IT              £120-180k         £100-150k

Head of Infrastructure                 £100-135k         £100-130k

Development manager                £110-140k         £100-120k

Programme manager                  £100-130K         £100-120K

Developer/Quant Developer         £80-130k           £80-120k

Head of Application support        £85-125k           £80-115k

Senior Technical Architect          £80-110k           £80-100k

QA Manager                              £75-100k           £70-90k

Project Manager                        £75-110k           £65-100k

Senior Java Developer                 £65-95k             £65-95k

Business Analyst                       £70-90k             £65-85k

Excel/VBA Front office               £70-90k             £60-80k

Junior Java Developer                 £50-65              £45-60k

Business Analyst (junior)            £45-65              £40-60k


Contracts in the sector saw their daily rates drop also. Lloyds banking group last year told its IT contractors it was cutting pay by 15%.


What do Google and Apple have in common with HCL and Cognizant?

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I had a meeting the other week with a supplier with an interesting way of showing how well it is doing. What better way than to group yourself alongside Google and Apple?

The intelligence arm of HCL did some number crunching on the Bloomberg database using 3 criteria.

Sorry for passing on marketing talk but I think when IT services firms are ranked alongside the likes of Apple and Google it is evidence that it is a hot market. Even a hardened journalist like myself can find some marketing blurb interesting. After all I haven't got time to number crunch.

The fact that all the companies ranked have recorded over 30% growth over the last five years despite recession is a clear message that IT outsourcing is getting bigger.

These three criteria used were:

1 - Over 30% compound annual growth rate for the last 5 years
Of the 3302 companies in the IT sector only 307 achieved this.

2 - 2009 revenues over $2bn
Of the 307 left only 11 achieved this.

3 - Market Cap greater than $5bn
Only six companies achieved this.

Here are six of them in no particular order.

1 - Lenovo Group
2 - Cognizant Tech
3 - Apple
4 - Google
5 - HCL Technologies

6 - Amazon

"Corruption and inefficiency" blighted India's Commonwealth Games, says Indian private sector

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Should India's Commonwealth Games have been organised by the private sector?

I was talking to a senior executive at one of the big Indian IT service providers about the fiasco which has so far been the Commonwealth games, which is due to start in Delhi next month.

National teams and individuals have voiced concerns over the state of facilities. TV reports have shown collapsing bridges and dirty athlete accommodation.

But this shouldn't happen in a country which is now one of the biggest economies in the world. India is growing economically at an astonishing pace and its IT industry is a driving force. When I meet companies such as TCS, Infosys, Wipro, Mahindra Satyam, HCL and Cognizant I am impressed. They have great processes and are highly efficient.

So I asked this senior executive what has gone wrong with the India Commonwealth Games.

He told me in no uncertain terms that the event should have been organised by the private sector.  He told me that "corruption and inefficiency" is at the heart of the problems being experienced currently.

In China by contrast the Beijing Olympics in 2008 was a massive success and an amazing spectacle. The London Olympics also promises to be a massive success. And this is only the Commonwealth Games. Not as big as the Olympic games.

If any corporate in the UK saw reports on the Commonwealth Games fiasco in India they might be somewhat hesitant to outsource to India. But the world's biggest companies can hardly look beyond India for IT services. And remember the World Cup in South Africa went very smoothly and it was an India supplier that virtually ran the event logistically. Yes Mahindra Satyam's event management application for FIFA went without a glitch.

Remember the guy in charge was posting blogs here.

The software that costs the most to fix once live, revealed

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A survey by software quality testing company Cast, known as appmarq , has today revealed the typical costs companies could face fixing code after software has been rolled into the live environment.

The company says the average cost of fixing software bugs after release is $2819 per thousand lines of code. Cast says the typical business application has 374,000 lines of code.

And here are Cast's figures on the average number of problems in code, for different programming languages, that are serious enough to cause business risks.

Violations per thousand lines of code:

ABAP   - 20

Cobol  - 89

.NET    - 169

J2EE     - 463

C/C++ - 438

Government software applications are the hardest to change

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Public sector applications are the most difficult and costly to change according to a report published today.

The appmarq report, from software quality benchmarking firm Cast, carried out analysis of 288 applications at 75 organisations across the UK.

The research looked at organisations in the following sectors: energy and utility, financial services, insurance, IT consulting, technology, telecom, manufacturing and public sector.

The report found public sector applications to be the most difficult and expensive to change

From the sample Cast found that the median public sector application changeability score is 25% lower than the highest changeability score, which is the IT consulting sector.

Additionally public sector application changeability is 11% lower than the second lowest changeability median score, which is the Insurance sector. Cast said the findings are only a guide and it cannot yet generalise this result to the entire portfolio of public sector applications.

The findings put into perspective the challenge facing the government's cost cutting plans. New suppliers will need to change systems to support cost cutting.

The government outsources 75% of applicants compared to 50% in the private sector, says the report.

Immigration fault line in coalition gets wider

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Interesting article in the Mail today. Apparently Vince Cable's claims that the immigration cap is damaging UK businesses could be a load of rubbish.

Apparently the three firms, that were cited as examples of those struggling to find staff because of the cap, have not even used up all their permitted visa allocation.

You can read the story for yourself here.

The immigration cap, which the Liberals were against, survived the coalition negotiations.

IT immigration loophole debate hits the mainstream

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BBC 5 Live last night featured the controversial subject of the Intra Company Transfer or ICT for short.

Find a podcast of last night's broadcast, 5 Live investigates, here.

In the time given the show could not really delve deep. It spent a long time on the subject of fraudsters pretending to be US military and conning vulnerable women out of cash.

But what it did display is that the ICT abuse, which has a massive impact on IT workers, is a story.

If it gains momentum the government might be pressured into including ICTs in its immigration cap.

They are currently not included which is nonsensical according to some.  This is because thousands of immigrant workers, particularly on IT, are in the UK on ICT visas.

To see now many IT immigrants are in the UK on ICTs click this link.

SMEs too loyal to staff to outsource IT jobs

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I did a blog post last week about the potential for SMEs to outsource IT in large volumes.

I have since had some interesting reaction from the National Outsourcing Association (NOA), which predicted in January that this would be the year of SME outsourcing.

It seems there are lots of things holding this back, such as loyalty to staff. But the next year and a half will see SME's outsource more IT.

Bharat Vagadia, the NOA's SME Director said: "Although it's true that the SME community has not embraced more strategic outsourcing in the way we had envisaged at the start of the year, the signs are still promising.  There are a number of reasons why SMEs have not yet warmed to outsourcing, including the fact that they are typically extremely loyal to their employee base.  Many SMEs also need educating as to the value of outsourcing and offshoring, and with limited budgets in place, they can feel that  they are not able to seek the right level of advice.

 "However, I still think that we'll see SMEs wake up to outsourcing in the next 12-18 months.  The underlying drivers are all in place to make outsourcing a success in the sector, and more and more suppliers are beginning to target SMEs, as it's obvious that there's an opportunity there for them.  For example, Tata are rolling out a dedicated SME offering in India as a testbed which, if successful, will make its way over to the UK.  Increased interest from suppliers should mean an increased level of education for end-users - and that could be the breakthrough that's needed for outsourcing to succeed."

Offshoring IT is not making UK computer scientists the largest unemployed group, says BCS

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This blog has been focussing quite heavily on the potential damage to the UK IT industry caused by offshoring work to lower cost locations.


I recently quoted the latest figures from the Higher Education Statistics Agency (HESA) which revealed that recent Computer Science graduates have the highest proportion of unemployed recent graduates.  Some 17% of 2009 graduates of computer science are unemployed say the figures. And many of the other 83% might not be doing a job related to their degree.


This blog post has had a lot of reaction. Although the majority of comments came from the "offshoring is destroying the UK IT profession" camp there are counter arguments.

I have contacted the British Computer Society (BCS) to get its view and got some interesting feedback.


Bill Mitchell, director of BCS Academy of Computing, says it is not the case of offshoring and outsourcing is destroying the UK IT industry it is just that the low skilled jobs are being outsourced.


And he said the HESA figures are misleading because only 71% of the computer scientist category is pure computer scientists. "The figures are correct, but they aggregate various IT related degree courses under the title of Computer Science.


Mitchell is very positive about the job opportunities for pure computer scientists at good universities.


Here's what he had to say:


"If you have a low skilled job there is a higher chance of your job being outsourced but if you are a software developer developing complex software you are very much in demand."


"When I've spoken to anybody from a good university they say almost all their graduates are getting jobs."


"We have spoken to several businesses and they say there is a shortage of computer science graduates."


"One or two of the large companies we have spoken to are going to Eastern Europe or the Middle East because there is a shortage of Computer Science graduates in the UK."


"If you look at all industrial sectors across the European Union 25% of all business spending on R&D is spent on IT. This compares to 13% on pharmaceuticals."


Here is the breakdown of the computer science category according to HESA.


Broadly-based programmes within computer science   0.15%
Computer science          71.11%
Information systems      20.10%
Software engineering     7.71%
Artificial intelligence      0.68%
Others                          (no figure)

"The term Information Systems is also confusing. It means very different things to different Universities, so that the amount of computing content in a CIS degree is very variable," add Mitchell.







Why did the DWP and Atos not want to release details of a £47m deal?

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The Department of Work and Pensions is being forced to reveal some of the details of a £47m Gateway contract with Atos Origin.

Peter Collingbourne made a request for details of the contract in December 2007, and some of the requested details were released. Other parts were refused because the DWP argued that releasing the details would damage it own and Atos' commercial interests.

Collingbourne, who from what we can work out, is a Phd student in a department of Computing at Imperial college is a serial FOI requester. Here are his requests.

A tribunal has now ruled that many of the previously withheld details, apart from the
financial model and the location and specification of the Atos data centre, will now be released.

Atos was the sole bidder for the contract. Does anybody know why the information was requested in the first place and what could be interested.

The DWP has 30 days, from 20 September, to provide the information.

Here is a story about this on


Here is the ruling


Immigration cap a nonsensical political gesture, says APSCo

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I have been writing so much recently about the alleged damage offshoring is doing to the UK IT profession. I thought I would put out the Association of Professional Staffing Companies' (APSCo) latest comment on the immigration cap to get a discussion going.


The government realised, before it was elected, that the immigration of skilled workers to the UK was a political hot potato. It also realised that if it promised to reduce the number of non EU workers entering the UK most voters would be happy. So the Tories promised a cap. This got a mixed response at the time from the IT industry but the public were in general up for it.


APSCo like many was against the idea of a cap in principle.  Ann Swain, CEO at Apsco, told me at the time that there was nothing wrong with the current system but it was being abused.


She was unhappy that companies, mainly Indian IT suppliers, were abusing the Intra Company Transfer (ICT) rule. ICTs allow companies to bring in foreign staff if they have operations in the UK. But it was really designed to allow large companies bring in senior staff, not low paid workers.


Because ICTs do not require a work permit they are not included in the government cap. About 80% of immigrant workers are in on ICTs with thousands IT workers from India. According to Sir Andrew Green of Migration Watch, while speaking at a recent Home Affairs Select Committee which discussed immigration the use of Intra Company Transfers (ICTs) to bring in workers from overseas is a major cause of the high rate of unemployment amongst computer science graduates, which is 17% for those that graduated last year.


APSCo is calling on the government to include ICTs, within the immigration cap, says.


Ann Swain says the cap in its current form is nonsensical because it excludes ICTs. "The Government is determined to push ahead with a cap, but if intra-company transfers are excluded, it's largely a political gesture that will do little to restrict the influx of non-EU IT workers to the UK."


"We urge the Government to include intra-company transfers within the cap. A reduction in the number of intra-company transfers would be compensated for by increased employment within the existing pool of resident IT professionals."


"Most workers coming to the UK on intra-company transfers have generic skill sets that are readily available in this country. We are certain that a large proportion of these roles, if advertised at UK market rates, could be filled by the resident labour market."


She adds: "A cap is a blunt instrument that would struggle to provide the flexibility that UK plc needs. How would employers access specialist skills once the immigration limit had been reached?"


Here his comment made on this blog by IT workers BobF who is disillusioned with the increased offshoring of UK jobs.

"From the responses and back pedalling we have seen in recent weeks on the ICT immigration cap I have come to the conclusion that it's all over for UK IT staff, unless maybe you desire a career in management.

My advice is to retrain to another type of work, preferably one which is not susceptible to outsourcing or on-shoring, or failing that emigrate.

When I think of the IT industry we had in the 80's, and what we could have become I feel deep sadness.

Like so many other Industries and developments within the UK, an opportunity wasted in the name of short term profit."

Not many positives there.

Is the SME about to become the biggest IT services battleground?

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I keep being told by analysts and suppliers that the SME sector, particularly the medium sized companies, are on the verge of taking up IT outsourcing in large volumes.

I suppose it all started in January when the National Outsourcing Association gave its ten outsourcing predictions for 2010.

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

Since then I have had the same message from other organisations. Most recently Gartner. At its annual outsourcing and IT services summit this week the analyst firm said midsized companies were the most important targets for the European  IT suppliers. This is the result of the introduction of industrialised services. This is where a supplier builds a service, available in the cloud for example, and makes it available to multiple customers.

Suppliers will be prepared to invest in building services platforms if they can sign up lots of customers. Industrialise services promise up to 80% cost savings over traditional services.

And suppliers are looking at the SME. Tata Consultancy Services, India's biggest IT supplier,  told me it was trialing cloud services for SMEs in India. The plan was that if it is successful this could be transferred to other regions including the UK.

Also see: IT suppliers should come out the closet over SMEs.

It will be less disruptive for SMEs to move to these industrialised services because, for many, they do not have to replace existing outsourcing contracts, because they don't have them. For large enterprises there will be major challenges in renegotiation deals and checking the small print.

Gartner's Linda Cohen said although industrialised services will be available at the click of a mouse businesses will need a "parachute when signing deals the new way."
This parachute will be in the form of consultancies and legal advice.

Another thing that Gartner predicts is that offshoring by UK organisations will double in the next five years with the SME sector contributing significantly to this rise.

Neither open source or proprietary software should be default choice in government?

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There has been lots of talk recently about the UK government increasing its use of open source software to cut costs.

Service providers are being expected to slash costs so the choice of software is vital.

For a long time commercial software from companies such as Microsoft have dominated the public sector. But things are changing. For example a deal with Microsoft was recently scrapped.

In response to a parliamentary question cabinet minister Francis Maude, who is at the heart of government IT cost cutting plans, said: "The Government are committed to using more open source solutions where possible."

But speaking at a Westminster eForum event, about free and open source software today, the Business Software Alliances senior director of government affairs Francisco Mingorance warned against the government choosing a default preference between open source and commercial software.

"Public entities should procure the software that best meets their needs--based on functionality, performance, security, and cost of ownership--and avoid dogmatic preferences in favour of open source or commercial software. Governments that attempt to favour one software development model as superior in terms of a particular variable risk making incorrect choices among the full range of solutions available in the marketplace."

Mingorance said the proprietary versus open source controversy no longer exists in practice. He said instead, so-called mixed source applications and hybridisation are becoming increasingly prevalent.

But its not as simple as that and there will also be challenges associated with this.

I had a conversation with a software testing expert when I was at the Gartner outsourcing event this week and he told me the challenges the public sector will face if it has a wider variety of software.

Jitendra Subramanyam, who is director of product strategy and research at software testing supplier Cast, says when you have a patchwork of systems there can be problems. This is related to the fact that systems have to interact.

"These problems are not usually with the systems themselves but when different systems interact with each other," he says.  These boundary points are difficult to manage.

He says the more you go for best of breed systems, the more attention you have to pay to the entire system infrastructure.

Vinay Joosery, EMEA VP with open source business intelligence vendor Pentaho welcomed the  comments from Mingorance as a clear sign that open source software can no longer be considered a niche technology. "Open Source is not for everything, but with this sort of an economic advantage, government users, such as the NHS, need to think very hard why the alternative is better."


Offshoring IT will double in five years but what about IT graduate unemployment?

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I wrote a blog post last week about the fact that Computer Science graduates are the largest group of unemployed graduates in the UK with 17% of recent graduates unemployed.


There was a great debate about whether offshoring was the main cause of this. Not everyone thought so. One thought 17% might not be very good.


Well, if offshoring is the main cause of Computer Science graduate unemployment, there could be trouble ahead. I have spoken to Gartner's Ian Marriot today about the likely growth of the use of offshoring by UK businesses and he says it will probably double in the next five years. He says this is due to factors such as confidence in offshore services meaning businesses offshore a broader range of services. He also said the small, medium business sectors as well as the public sector are expected to offshore more work.


Also, according to Gartner, the recession has caused 38% of CIOs to offshore more work, 44% offshore the same amount and only 18% offshore less in 2009.


The figures from the Higher Education Statistics Agency (HESA) show that 17% of 2009 computer science graduates were unemployed. This is the highest and the average graduate unemployment is 10%.

As this blog post got so much reaction I though I would give the figures for the previous three years, back to when the study began, so we can monitor how the number of Computer Science graduates are unemployed has changed.  

Recent graduate unemployment rates


Computer science 17%
Communications 14%
Architecture 13%
Engineering 13%
Creative arts 13%
Business studies 11%
Maths 10%
Languages 9%
Biological science 9%
Law 6%
Education 5%
Medicine 0%


Recent computer science graduate unemployment rate 2005 to 2008.

2007/2008 - 14%

2006/2007 - 10%

2005/2006  - 11%


Computer Science was the largest unemployed group out of all subject categories in each year of the report.

Obviously the recession has had a major impact on recruitment opportunities for computer science graduates.


If anyone with an ounce of intelligence thinks shared services in government work, why hasn't it been done?

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My colleague is attending the 360۫۫IT show in Earl's Court this week.

She wrote this story about the inevitability of businesses outsourcing more IT.

One interesting point raised was made by Mark Hall, director of IT at HMRC. He said the government is going to have to share services across departments and he described it as a "no-brainer going forward."

I am sure the IT leaders in government have long held this view but it is good that they can now come out and talk about it in terms there being no alternative.

Lee Ayling, managing director at sourcing consultantcy Equaterra,  has also worked within government contracts as a consultant says "shared services in government has been a no-brainer for a long time."

He said he cannot think of two departments more suited to sharing IT services than the DWP and HMRC yet they both have IT agreements with two separate suppliers.

There is still an attitude of building kingdoms in the public sector, he says.

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

So IT leaders such as Mark Hall at the HMRC will have a bit of preaching to do.

One contact of mine said "anyone with an ounce of intelligence can see that shared services are a good idea in government."

I am keen to find out the views of people that don't agree.

Cloud spending accounts for 10% of external services spending

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According to the latest research from Gartner 10.2% of external IT services spending is going on cloud computing.

The worldwide study suggests that suppliers need to have strong cloud strategies as businesses are increasingly moving away from traditional IT models. Rather than owning the assets and paying license fees they are seeing the value of cloud services, which include pay as you use pricing.

See the Gartner announcement in full here.

This fits neatly with Gartner's prediction that 30% of IT services will be industrialised by 2015.

The cloud must have risen above hype by now. Read on to see what I mean.

Forrester also recently commented on the upheaval to the IT services space that cloud computing will contribute to.

Sourcing consultancy TPI has even launched a dedicated cloud computing unit and the service providers are clearly getting ready for the growth in cloud services.

For example I recently visited a Capgemini datacentre that is geared up for an increase in demand for cloud services.

Wipro also has a bold cloud computing strategy which could be about to hit Europe.

Capgemini has an interesting cloud computing deal with Royal Mail. 

I wrote a blog back in June about which suppliers might be ready to satisfy cloud services demand.

Is Deutsche Telekom going to acquire an IT services firm?

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Following the CEO at T-Systems saying that European IT services firms need to have a few mergers and acquisitions if they are to compete with US companies I had a think who could buy who or who could merge.

Then the obvious struck me. T-Systems is owned by Deutsche Telekom, which is the kind of company that could make an acquisition or two.

Then I looked at Gartner's list of top IT service providers in Western Europe. In 2008 - 2009 T-Systems was the sixth biggest with a market share of 3%. Look at the list on this post it shows how dominant the US companies are and might give you some ideas of which companies might be involved in M&A activity soon.

Or will the US companies continue to buy European footprints? And what about the Indians?


How do you keep an offshore IT relationship fresh?

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I had a quick interview with the CIO of Insurer Aegon. Frank Dijkstra is CIO of the non-life business at Aegon.

He was at the event to do a presentation about the company's software development outsourcing deal with HCL. This is a six year old deal which has been a success and has matured over time.

I also did a blog post on Monday about Morrison Utility Services, which had offshored software development to Zensar, giving its reasons for offshoring.

Both CIOs said of lower cost software development and maintenance were important factors factors such as flexibility and access to skills on demand were also important.

Dijkstra at Aegon said the company first outsourced software work 10 years ago and about six years ago it decided to offshore.

"We saw things happening offshore but our European outsourcing partners did not have an offshore capability then so we signed a ne partner," he says.

The new partner was HCL.

"Cost was one of the drivers but there was also a bit of dissatisfaction with our European partners."

He said as the contract has matured cost is becoming less important. "The main reason for using this model is agility and flexibility. We can react quickly to changing business opportunities.

This flexibility and agility has paid off as the insurance industry has transformed as a result of the web. Today consumers use websites to buy and compare insurance products for example. As a result HCL has been involved in the development of web portals for Aegon.

Offshore service providers are often criticised as not being innovative. Aegon's experience with HCL is different according to Dijstra. He says HCL is treated as an in-house resource and Aegon challenges HCL with ideas and HCL returns with innovation ideas.

Who are the top Western European IT service providers?

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A colleague asked me the other day who are the top ten IT service providers in Western Europe? I must admit I didn't really know the answer but while attending the Gartner outsourcing and IT services summit I got one.

Better than that here is the top 15 in Western Europe by revenue according to Gartner. In the second table I have the same 15 in order of revenue growth over the last year.

Useful reference point for any outsourcing enthusiast. I am trying to think if any of these companies will merge or acquire.

What do you think?

Interesting to see that combined the big Indian suppliers only account for 2.4% of total revenue in Western Europe. So lots of room to grow for them.

The second table show the companies that are growing the most.

Top 15 IT service providers in terms of Western European revenues

Company        Market share          Revenue in Euro\millions
IBM                7.8%                      10.853 
Capgemini      4.7%                       6.573
HP                 4.4%                       6.112
Accenture       4.3%                       6.050
Atos Origin     3.4%                        4.733 
T-systems      3.0%                        4.117
BT                  2.8%                       3.971    
Fujitsu            2.5%                       3.858    
Logica            2.4%                       3.449
SIS                2.4%                       3.364
TCS               0.8%                       1.079
Wipro             0.5%                       749
Infosys           0.5%                       737
Cognizant       0.3%                       392
HCL               0.3%                       372

Top 15 IT service providers in terms of revenue change in last year

Company                      Revenue change 2008-09   

Cognizant                                +41.7%
HCL                                        +27.2
Wipro                                      +4.8%
TCS                                         -1.1%
Fujitsu                                     -1.8%
Atos Origin                               -3.6%
Capgemini                                -4.0%
T-Systems                                -4.2%
IBM                                          -6.5%
Logica                                      -8.0%
HP                                           -10.9%
BT                                           -10.1%
Infosys                                     -11.7%
Accenture                                 -13.0%
SIS                                           -16.4%


Offshoring not just about cost for Morrison Utility Services

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I interviewed Graeme Cross yesterday at the Gartner Outsourcing and IT Services Summit. He is the head of business systems and development (CIO for short) at Morrison Utility Services.

He told me why the company offshored its software development to India and it was not just for cost savings.

Morrison Utility Services is the company that lays pipes and cables and other things on behalf of utility companies.

The company's most important IT system is its Work Management System. This system will kick into action whenever a client, such as a water, gas and electricity companies, request a job. It sees the process from request through completion and right to payment.

Each customer has its own sub system.

Morrison moved from in-house development when it decided the technology it had was not delivering the functionality it needed. It wanted to harness mobile technology and web based services.

One of the main problems it was having is that its staff are mobile and had to be given access to their own desktops wherever they were. So it wanted to move IT systems to the cloud. It could not move legacy systems to the cloud because they were too old said Cross.

It moved to's platform as a service. It was able to develop its own applications on this platform.

But the company did not have the skills set it needed in its 12 strong software development team. It decided it needed to outsource.

It looked at TCS, Wipro, Logica and Zensar Technologies.

It chose Zensar Technologies. This is about the 10th biggest Indian IT service provider.

So the benefits for Morrison according to Cross were:

Lower cost - because software developers cost less in India
Flexibility - because it can flex up and down the number of developers it uses at any one time
Access to skills - because its in-house team did not have the cloud and mobile development skills it needed

Gartner IT Services Summit gets brighter start

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Just arrived at the Gartner Outsourcing and IT Services Summit at the Park Plaza in Westminster. As you can see it's a bit brighter than yesterday.




big ben2.JPGI have just arrived at the press office. I am alone and there are plates of breakfast goodies and lots of coffee (see picture below). This is the life. I could have been stuck in Sutton.




breakfast.JPGWhen I finally stop stuffing my face I will be blogging a bit more. So keep an eye out.




stuffing face.JPGYesterday had a heavy focus on how we are entering an era of IT service industrialisation. This is where suppliers will build a service and many customers will use it. "One to many" to be more concise.


Today I have a few customer interviews and other interesting facts to write about.



Here is one of my blog posts from yesterday:


IT will become more strategic as outsourcers industrialise the IT foundations.



Russians unhappy with India focus at Gartner summit

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Just a quick bit of live news from the Gartner Outsourcing and IT Services.


Jeff Sampler from Siad Business School, Oxford did a presentation: Developing Strategic Shock Absorbers.


I wasn't actually there but a contact told me his focus on India upset the sponsors in the pavilion who were from the Russian Software Group.


He was talking about the amount of young and highly skilled workers there are in India.

It's time for IT services revolution, says Gartner

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I blogged earlier about the opening presentation of the Gartner Outsourcing and IT Services Summit.

I wrote about the focus on the industrialisation of IT and how the IT services sector is currently embarking on a seismic shift with the arrival of low cost IT.

Next up was Gartner analyst Linda Cohen. She naturally followed up with a presentation about the challenges facing businesses moving to the new wave of low cost services. She said it is time for an outsourcing revolution.

 "We have never seen so much renegotiation and restructuring of contracts than in the last few years.

But "the work we have seen renegotiating and restructuring is not going to make things better."

"They are the same old outsourcing but with a lower price in exchange for longer deal times."

She said outsourcing and outsourcing contracts have not changed in line with business and technology trends.

She said businesses have changed from being monolithic and regional to being virtual and global, technology has gone from mainframes and PCs to broadband and PDAs, but outsourcing deal structures have stayed the same.

She says the old way to do a contract, which make up most contracts today, would include the following:

- Assets, both people and equipment, transfer to the supplier
- contracts would be long with lock ins
- There would be tactical service level agreements
- Systems would be highly bespoke
- The operations would be on the premises of the customer or supplier

But things have changed and Cohen says deals should be done in a new way. Standardised services will be delivered to multiple customers. 

The model will look like this:

- Free of assets changing hands or with very little
- Contracts should be short term or pay as you go - easy on easy off
- There should be business focussed KPIs
- Services should come in a box
- The services should be factory based

She warned that businesses will need a parachute in the form of support when moving to this model.

IT will become more strategic as outsourcers industrialise IT foundations

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Gartner said at its Outsourcing and IT Summit today that 2010 marks the beginning of a new era in outsourcing. They talked about how outsourcing has already seen massive upheaval and is about to be shaken to its core again.

The next phase (number 3 below) will see industrialised IT delivered for up to 80% less cost and IT departments focus on doing things that are more strategic .

Ok here goes.

1 - Traditional outsourcing: 30 years ago IT began to be outsourced. Suppliers said we will take your costs and reduce it by a further 20%. This has created a $280bn industry.

2 - Offshoring: Then we had the emergence of offshoring. This was in the late 90s. This was IT outsourcing that took the customer costs and knocked 30% of. In ten years it has created a $70bn industry.

3 - Industrialisation: But now we have a scenario where the suppliers can take the customers' costs and take off another 60% to 80%. This is through one to many standardised services. This creation of low cost IT services will create a $150bn industry over the next 5 years.

One of the key messages from Gartner on this new era was: "Be ready for low cost IT and to increase the contribution IT makes to the business."

This comes from an interesting study Gartner did with CEOs of big companies about the future role of IT.

88% of CEOs expect IT's strategic contribution to increase.

10% don't think it will change.

2% think it will decrease.

I wonder who the 2% were?

 "If 88% of CEOs want to increase business value contibution you do not want to make them unhappy," Gartner warned CIOs.

See the other posts from the Gartner event so far:

Gartner talks outspourcing industrialisation.

Is Gartner trying to tell the government something?



Gartner talks outsourcing industrialisation

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I have just watched the first couple of presentations at the Gartner Outsourcing and IT Services Summit.

Just to get started here is a little post. I am hoping to blog throughout the event so will keep posts short.

On Friday I blogged about Gartner's prediction that 30% of IT services, in Western Europe, will be industrialised by 2015.

The keynote and the presentation that followed had a strong focus on industrialisation. Basically these are standardised services that can be offered to multiple customers. They will often be delivered via the cloud and will be paid for in relation to their usage.

Analysts Claudio Da Rold and Ian Marriot did the opening presentation.

Here are some of the sound bites. Sorry if some are obvious.

"The European economy is moving."

"Cloud computing is reshaping the services market."

"We are moving very fast to industrialised services. Cloud computing is accelerating this."

"The economic crisis lead to the development of industrialised services."

"There is a slower recovery in IT services and revenue growth for suppliers will be low for several years."

"It is possible for service providers to develop, implement and deliver a one to many service." This could mean 60% to 80% cost cuts.



Is Gartner trying to tell the government something?

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I have just arrived at this year's Gartner outsourcing event. It is being held at the Park Plaza Hotel on Westminister Bridge,

big ben.JPGI think Gartner might be dropping a hint to the Government holding the event so close to the Houses of Parliament .

Maybe I will see Cable and Osborne here. Well that's if they are still friends.

Is outsourcing to nearshore destinations a happy compromise for local government?

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The government needs to cut costs across the public sector. Nobody is safe.

Local councils could soon have services delivered from locations thousands of miles away.

It's hard to picture local services being delivered at the other side of the world but cost cutting pressure might make this a serious consideration.

Perhaps offshore destinations might be a step too far and nearshore destinations such as Ireland and Scotland might be seen as a happier compromise.

Director of UK Public Sector at Dell Services Tim Sheppard believes so. IO would be interested in hearing people's views.

He said: "With stringent government cuts imminent, we have seen the likes of Northamptonshire and Cambridgeshire County Councils sign long term framework deals for the services of an ITO provider, costing between £70.5 million for their IT services. With many of these services certain to be offshored to destinations far and wide, the classic offshoring versus nearshoring debate is re-emerging. Many organisations including ourselves, provide both near and far offshore locations.

While one cannot deny its benefits, offshoring is not necessarily the best strategy for local government and careful consideration needs to be taken before any rash decisions are made. Some councils are just not suited for offshoring, with aspects such as staffing and local culture posing obstacles that could cause more harm than good. Furthermore, for certain tasks, offshore staff will simply not have the level of skill and knowledge required to complete the necessary local activities.

Therefore, it is my view that nearshore outsourcing holds many benefits to that of offshore outsourcing for local governments. The outsourcing solutions provided by the near countries such as Ireland to their customers will not have much difference in their time zones and thus can provide services in the same time zone as their customers do. It also helps to avoid problems that can evolve due to language, culture, legal affairs, infrastructure and technology. Furthermore with nearshoring, cost effective structures are available, so it becomes less expensive and easier to travel and communicate for the customer."

HCL's Employees First Customer Second is more than shallow marketing slogan

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I met up with HCL Technologies last Thursday and was left feeling that HCL is a bit different to many IT service providers I have met before.


Representatives weren't preaching about contract successes, HCL's financial results and customer wins speak for themselves, but it was talking about how its success over the last few years is the result of giving employees more power and making management transparent.


The company decided to change the way it operated five years ago when CEO Vineet Nayar, embarked on the company's Employee First, Customer Second (EFCS) strategy. I have written about this before but now, following the meeting, I have a bit more to explain. I must admit when I was first told about it I thought it might be a shallow marketing slogan. But it turns out it is a huge transformational programme.


Read more about HCL's Employee First.


Harvard press has published a book about the strategy, written by CEO Nayar. It is apparently selling like hot cakes. HCL kindly gave me a copy so when I finish it I will tell you more.


HCL believes this strategy has helped it prosper during the recent recession and now puts it in a very competitive position coming out of recession. This is because it didn't make anyone redundant. It says its competitors might find themselves short on the right human resources.


And the company is doing well. HCL reported global revenue of $2.186bn in 2009 which was 27.6% more than the $1.713m in 2008. Almost 30% growth in a downturn. 

Datamonitor said HCL Technologies was number one in traditional IT outsourcing space 2009-10  in The Black Book of Outsourcing.


HCL says its success is down to its EFCS business transformation.


Some of the points of EFCS:


- The interface between the company and the customer, ie the employees, are seen as the most important parts of the company
- Workers are encouraged to use their own initiative and make decisions themselves
- In an employee's annual review they get to score their managers. These scores are published on the internet and if they are low they may even be expected to resign.
-Complete transparency within the company


Other things that make HCL different:


- It grew its services business without Y2K
- Says it does not have the well known brand name but is doing well
- It has a Global Customer Meet where customers run the agenda and not HCL
- HCL didn't make any redundancies during recession
- During the downturn it increased its European workforce by about 50%
- It is now the 60th biggest global player in revenue terms.
- 80 to 85% of its employees in Europe are locals

Gartner says 30% of IT services to be industrialised by 2015

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Monday sees the annual Gartner Outsourcing Summit in London. This year's two day event will be at the Park Plaza Westminster Bridge hotel in London.

What will be Gartner's message?

I will be there in Monday and will go Tuesday if it proves to god to miss so I will blog from the event.

But here is a taster of what is to come. This is a sneak preview from Gartner vice president and distinguished analyst Claudio Da Rold:

"Ten years ago, we accurately predicted turbulent and revolutionary changes in how users buy and providers deliver IT services and developed a framework, the "Four Worlds of Services", which has proven to be a highly effective representation of the major dynamics of the IT services market for both buyers and providers. Our vision was based on the expectation of a long-term transformation of this market through the concept of "tectonic shifts" -- that is, relatively long periods of quiet and preparation, followed by a sudden change."

"Today we see how the industrialisation tectonic shift is clearly ongoing and accelerating, after having achieved the point of no-return and more than 50 per cent of the expected impact. Due to the accelerated signals of the development of cloud-based services and technology, we forecast that by 2015 industrialised services will represent more than 30 per cent of the IT services market."

If you want to register here is a link.

Anyone going? 

Immigration caps are damaging the UK economy, says Vince Cable

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It is as official as it could be when the business secretary says it. "A lot of damage is being done to British Industry" by the cap on work visas, enforced by the government.

Yes Vince Cable said this in an interview with the FT.

See a video of the interview here:

Since I started writing about the possibility of a cap in February. I have had mixed responses from industry experts about the impact it will have on IT,

He did not mention any damage being done to the IT sector. The Indian IT suppliers were against the caps.

Vince Cable told the Financial Times in an interview (see video below) that he has examples of the cap making recruitment difficult for UK businesses.

He told the FT: "I've got a file full of examples. This is not just people whingeing," he said. This blog said the same thing in February.

The immigration cap survived the negotiations between the Liberals and the Tories when forming a coalition. In contrast to a cap the Liberal Democrats wanted an amnesty on people in the UK illegally. They also had a plan to have immigrants live in the regions where their skills are in demand. 


Why don't IBM and Accenture get a harder time over offshoring IT roles?

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I was talking to a senior executive at an Indian IT service provider recently and as always the subject of offshoring roles to India harming UK staff came up.


He says Indian firms get a rough ride compared to their Western competitors in regard to offshoring IT jobs.


The blog has recently featured some posts about the so alleged damage being done to the UK IT profession. The post I linked to got lots of reaction.


As a balanced blog about outsourcing I try and get both side of the story so here is the executive's comment.


"IBM and Accenture do not get the hard time we get."


He is talking about the fact that IBM has over 100,000 staff in India providing IT support at low cost and Accenture which also has thousands of India based staff.


So why don't western companies with large India based workforces not get such a hard time?


It could be because journalists, like me, forget to put the same pressure for answers to the big Western companies.





European IT service providers and the challenges to consolidate

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Following my blog post yesterday about comments made by T-Systems CEO Reinhard Clemens, about the need for European service providers to merge to compete, outsourcing industry veteran Jean-Louis Bravard gives his reaction to the comment.

Jean-Louis is a director at consultancy Burnt-Oak Partners. He previously held a global executive role at EDS.

Here is his take on Clemens' comments.

"I think Reinhard Clemens is absolutely right.  Outsourcing is not unique in facing a world in which size matters.  However there are many ways in which to grow and growth by acquisition is extremely risky.  There is empirical evidence that about 50% of M&A does not produce the expected value which is about the same "success rate" as outsourcing!  Imagine adding M&A unto outsourcing.

To push the point even further and looking back at the past few years we do not see much positive in acquisitions, especially when outsourcing firms decided to acquire consulting firms.

I am not that impressed by the argument on financing as when all is said and done neither IBM nor HP are banks and there is a limit to their might and risk appetite.  Furthermore there are specialists [consultants] who can structure and place outsourcing debt.  In other words funding internally may be an issue but it is not and has never been a show stopper.

Now let's think about this hypothetical case of a large European firm buying another one.  Obviously there is a lot of synergy at the headquarters and beyond that the first level of true value will be regional.  Today no European firm is probably large enough in all 27 European countries to take on all IT services to a Top50 European firm while an IBM or an HP can show presence in each country... and beyond.

Our first point is that reach is key.

Our second point is cultural.  How probable is it that the integration between large local players will work.  We are doubtful although we see a much higher probability of a Tier 1 from country A buying and integration a tier 2 from country B.  The case of Logica in France or Atos in Holland would seem to show that such a play has merit, but highly depend on the chosen business model and especially the availability of leadership.

Our last point is the market.  Right now some of the third party advisors are pushing for small and short deals and while this is probably a bad idea for clients it reduces the probability of mega-deals at European level thus reducing the attractiveness of aggressive M&A.

So in conclusion and while we believe consolidation in European outsourcing will come, we do not see it as rapid as some as there have been enough opportunities for such transactions lately.  A wild card could be one or more large Indian (and later Chinese) players buying their way in to accelerate their growth and attack IBM, HP and some Tier-2's in their back garden.

Last but not least, when acquisitions are considered we do recommend defining & executing a clear communication plan to the impacted clients as well, explaining the value which will hopefully accrue to them if the acquirer does not overpay!"

Top five reasons to offshore IT and cheap labour still number one

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Following my post yesterday about the latest findings of Capgemini's Executive Outsourcing Survey about where people offshore IT here is the top five considerations when choosing where to offshore IT.


I am afraid cheap labour still leads the pack with a massive 79% of senior executives at corporates saying the cost of labour is a top consideration when choosing a destination. I presume they prefer lower cost labour.


According to the Capgemini survey the top five factors listed by executives in choosing an outsourcing destination are:


Labour costs (79%)

Technology & infrastructure capabilities (62%)

Skilled labour (61%)

Language proficiency (49%)

Economic stability (44%)


So despite constantly hearing that offshoring is not about cost it seems nothing has changed.

Is offshoring making Computer Science graduates the largest unemployed group

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I always get mixed message from the IT industry about skills availability. One side says there is a skills shortage while another says there is not. Some say there are good opportunities in Computer Science and some say there are not.

The offshoring of IT work is always seen as a major hinderance to the UK IT profession. I could porobably do an entire blog or two dedicated to this subject alone.

I recently wrote a blog about how UK IT professionals are themsleves migrating for pastures new.

Here are some interesting figures that contribute to the debate:

The figures from the Higher Education Statistics Agency (HESA) show that Computer Science graduates are the largest group of unemployed graduates in the UK.

These figures are from July and show that 17% of 2009 computer science graduates were unemployed. This is the highest and the average graduate unemployment is 10%.

The continued offshoring of IT work and the use of Intra Company Transfers (ICTs) to bring in workers from overseas is a major cause according to Sir Andrew Green of Migration Watch.

His comments were made in a Home Affairs Select Committee which discussed immigration yesterday - see it here.

Here is a blog post I did earlier with the statistics on the number of immigrant workers in the UK and how many are using the ICT route. 

Also thanks to Argiebee for you contribution.

Here is the full unemployment rate for 2009 graduates in different professions.

Computer science 17%
Communications 14%
Architecture 13%
Engineering 13%
Creative arts 13%
Business studies 11%
Maths 10%
Languages 9%
Biological science 9%
Law 6%
Education 5%
Medicine 0%

Thanks to David who provided a link to the stats in a recent comment to this blog post. The full article is here: HESA figures on unemployment rate for 2009 graduates by profession

Are businesses ready to look beyond India for IT services?

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Hot-on-the heals of acquiring a 55% stake in Brazil's largest IT service provider CPM Braxis for €233m Capgemini is talking up Latin America as an outsourcing destination.

In its second annual Executive Outsourcing Survey Latin America was the third favourite region to offshore services.

India was way ahead with 60% of respondents outsourcing there. China was number two with 27% using it as a source of services, but Latin America was not far behind with 25% of those surveyed revealing they received services from the region.

According to the survey, which interviewed 300 senior executives at Fortune 1000 companies, 69% of respondents said the cost of labour was the top reason for offshoring to Latin America. The technology and infrastructure capabilities in Latin America were seen as important attributes by 49%, the skilled labour by 48% and economic stability by 44%.

The survey was carried out online by Harris Interactive.

But like China, Latin america probably needs a Y2K type moment to catch India. The recent recession might help but is unlikely to have as big an impact.

Capgemini said as the economy rebounds, companies are looking to use outsourcing more strategically which includes considering locations beyond India.

Here are recent blog posts about Latin America's biggest economy Brazil and its potential as a destination for IT services .

Is Brazil a hidden IT gem?

Open source could be Brazil's IT offshoring advantage

Brazil IT's four day flirt with the global CIO community ends

Do Brazilian IT professionals need to be proficient in English?

Brazil faces cultural challenges to break IT outsourcing

Brazilian says English language skills in short supply in Brazil

Indian IT service providers too tyrannical for Brazil



How can the government benefit from more IT innovation?

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Government supplies are dominated by a fairly small amount of suppliers. About 20 for IT.


The coalition government has set its stall to place about 25% of government external expenditure with SME suppliers. Remember the government has also decentralised the NHS IT programme by giving the power to buy to NHS trusts. This will open up opportunities for smaller suppliers local to trusts.


Small IT firms are often seen as more innovative.


But something must change in the way the government buys if this is ever to happen.


City University London has prepared a paper for Computer Weekly suggesting how the government can do this.


Here is a summary of the article. To download this paper for free click the "download here" tab within the summary article. You will be asked to fill in some details

Is government IT standardisation finally arriving?

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IT suppliers and the government have begun signing agreements related to the governments drive to cut the costs of IT contracts.

From some of the comments made it looks like the suppliers will get their wish of working with multiple government departments with standardised services.

It seems the French companies have been the quickest off the mark with Capgemini today joining Atos Origin as the first two to sign a Memorandum of Understanding with the government.

These companies are obviously saying the right things. One source close to discussions told me the government had received a mixed response from suppliers.

Details of what was agreed have not been made available but it looks like there are going to be more opportunities for the suppliers to standardise IT.

I say this because Atos Origin said: "The agreement marks the start of a new single-client approach to engagement with central UK Government."

Meanwhile Capgemnini said : "...we have also put forward cross-government solutions, which will help achieve an efficient joined-up government in future".

IT standardisation is seen by experts as an important development if the government is to cut the cost of IT.

So as it is the French companies nleading the way could Steria be the next to sign an MOU with the government? 

Chinese IT services providers can be a gateway to Chinese economy for big business

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Multinationals that want to build business in China can increase their opportunities if they sign outsourcing contracts with China based suppliers.

This is the view of a China based IT services firm I met today. I blogged about the company, known as VanceInfo last month.

VanceInfo is similar to a company known as Bleum in that it carries out the majority of its work and has the vast amount of its human resources in China. But it is listed in the US and owned by US and European investors.

According to an IDC report VanceInfo is the biggest supplier of outsourcing services to the US and Europe from China.

David Chen, president at VanceInfo, says that multinational businesses based in the west, such as banks and retailers, are all trying to get into the Chinese market. He says that because of the challenges breaking into China it would be an advantage for these businesses to contract Chinese service providers to support them.

VanceInfo employs over 10,000 people. 95% of these are in China.

It already works with US and European businesses with 60% of its current business R&D work for technology companies such as Microsoft and Cisco. For example it has 900 dedicated staff in China carrying out R&D work for Microsoft.

Chen acknowledged that there are fears related to Intellectual Property in China. but he says if large technology companies, whose IP is everything, can offshore work to China anyone can.

The other 40% of its business is IT outsourcing. It carries out a lot of work to support the Asia/Pacific regions for large multinationals. It now wants to increase this as well as work in other regions for the same customers. It will eventually target customers anywhere in the world.

Some examples of the businesses it currently serves are:

- Expedia where it has 300 dedicated staff working on application development and data warehousing projects.

- It supports the SAP system used by BMW in China.

- UK based Trading software company Patsystems also uses VanceInfo to support customers and for software development.

The company also works with UK based banks. Although it would not tell me which it said it provides services such as: credit card processing, regulatory reporting for China, BPO services in North Asia as well as software development.

The company is about to ramp up its UK sales and marketing operation. It only has a few people now but is about to increase this. In its efforts to win more US business it has this year increased its US headcount from 30 to 150.

Here are other blog posts I have done recently about China.

China needs a Y2K to overtake India

Does China offshoring need a Western Hand?

Was the NHS IT project scrapping a neatly balanced trick?

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Now that the dust has settled following the government's decision to abandon the NHS National Project for IT in its current form, in favour of a less centralised format, we can reflect.

That is exactly what Robert Morgan, director of outsourcing consultancy Burnt-Oak Partners, has done for us with the concise piece of opinion about what went wrong.

This is Robert's opinion piece.

"The coalition government has performed a neatly balanced trick in cancelling the NHS National Programme for IT. It artfully appeals to:

•    Common sense by abandoning centralisation nationally - always doomed to be hugely political and divisive even if it could have been implemented, which was always in doubt

•     The individual trusts who have now been handled back decision making so long as decisions support the existing national structure

•    Service providers will have to fight each competitive bid at the various Trusts, but will no doubt make larger margins along the way

•    The Whitehall mandarins who feared the advent of vast compensation claims from the service providers for stopping the programme, had this skilful compromise not been crafted so well (all existing obligations will be honoured)

•    The headlines in the media that another £0.7bn of savings has been found with no staffing loses or other awkward issues being highlighted
In one sensible move all critics have been silenced.

Huge potential litigation from another area has also been avoided - that of clinical negligence. Behind the scenes most management knew that "going live" would most likely have failed.

Vital data either not being available or being lost coursing failures of critical medical decision making around treatment, history of symptoms and medication, pre-theatre prep, etc. Systems failure here would have risked lives, reputations and resultant claims running into billions.

This project was recognised as the world largest single IT project, worth close to £13bn over its life-time. As you would expect the project suffered from various expected and unexpected problems.

The government for instance negotiated each of the major contracts separately and failed to standardise terms and conditions, ways of handling disputes, definitions of obligations and commercial remedies. This non-standard approached added hugely to the government oversight of progress and amending procedures.

BT suffered £1.2bn in write-offs; Accenture's inability to make a profit forced their exit and not for the first time in huge governmental projects, severely hurt their prestige; Fujitsu was dismissed by government and there is still an unanswered claim of £0.7bn in this regard. CSC extended its share of revenues when the others fell - but are they making money overall?
The government insistence on using a small software house (iSoft) to play a pivotal role at the heart of the system should and did ring alarm bells. What followed next was more akin to an Ealing Studios farce with both system and scalability failures; financial uncertainty and faltering, followed by rescue and close investigation. Still it worked in the end.

With a dependency on IT like nothing before it, perhaps this government will be less ambitious and consequently achieve far more. Let's hope so."

Why Capgemini will never build another datacentre?

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I had a look around Capgemini's latest datacentre facility this week. The Merlin site in Swindon is a bit different though.

The reason Capgemini will never build a datacentre again, as I said in the headline, is because it will buy existing premises and fill them with mini datacentre modules.

Empty shellWith cloud computing seen by the technology industry as the way forward, service providers will have to have much more data centre capacity.

For example there is Capgemini's cloud computing deal with Royal Mail. And read here for more about Capgemini's cloud computing strategy.

The Capgemini facility is built for the cloud and will not allow its customers to put out of date kit in it.

We will be writing much more about this because it could be the datacentre of the future. But here is a bit more information and some exclusive pictures.

The interesting thing is Capgemini has taken a modular approach and rather than building a new 3,000 square metre site has taken over an unused factory and will assemble mini datacentres within it.

modules and floor.JPGThis says Paul Anderson, the man who project managed the facility, will be the way Capgemini and probably everyone else will build datacentres.

Click here for a picture gallery that gives a sneak preview of the site in Swindon.

Capgemini believes this will be the most sustainable datacentre in the world. It is power efficient and re-cycles and re-uses almost everything for example. The site is a former Honda factory no longer in use, so there was no need to build a new facility.

Even the manufacturers of the equipment for the facility are expected to use sustainable methods.

So it is just a shell and not actually a datacentre. But the shell can contain 12 modules which are mini datacentres. This could double though if it place modules on top of others.

Not only is it sustainable but it is incredible secure. It felt like a cross between a prison and a space station with CCTV, biometric readers and of course intimidating perimeter security.


Biometric reader.JPG

UK IT workers are leaving the UK because they are fed up

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The number of overseas workers in the UK is driving local talent out. Below is an account from a UK IT professional about why he decided to leave these shores for pastures new.

The post below was in reaction to a blog about the possibility of the UK government offshoring lots of public sector IT jobs. This is a warning to IT professionals and UK plc.

By BobF

"I just got fed up with it all, after 18 years contracting (continuously) I have now taken a permanent job in the Netherlands, this after 6 months out of work and another 6 months working for very low money in the UK (sent out 1,400 CV's in the 6 months I was out of work; I usually do apps support work for SQL, Java & .NET on UNIX/Linux/Windows web apps so hardly due to an obsolete skill set).

 Things have definitely changed for the worse in the last 4-5 years as the Intra Company Transfer bandwagon has run out of control in the UK, most of the companies I've worked for have had literally hundreds of Indian Intra Company Transfers staff on board (including a few major Government projects), and I've been to some places where even the network infrastructure and PC/Server support staff are Indian Intra Company Transfers (rotated on a yearly or 6 monthly basis of course).

 I quite often get calls from agents for jobs in the UK, and they say they can't get experienced people with skills to which I usually laugh sarcastically, and it usually ends with them asking me about living costs and accommodation and if there is much demand for recruiters over here!

UK industry is making its own bed and will have to lie in it, when was the last time you saw anyone under 30 being brought in for a trainee role who wasn't Indian Intra Company Transfer?
Since I have been working in Europe I have met many experienced UK IT workers who have moved for the same reason as me, everyone I have spoken too has said they are very unlikely to ever move back."

Thanks for you contribution to the Inside Outsourcing BobF

Also see the numbers of non EU workers in the UK

Does NHS IT announcement raise more questions than it answers?

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Ovum made an interesting point in reaction to the Department for Health's announcement about the NHS IT project.

Here are her comments. I am interested to hear more so please comment on this post.

Cornelia Wels Maug, senior analyst at Ovum said the statement raises more questions than it answers.

"How will this move affect the needed modernisation of the UK's healthcare IT? Will this not add further to the many delays that we have already witnessed?

"Who will lead the overall process and oversee that interoperability of systems, which lies at the core of a modern healthcare system, is ensured and sets a timescale to work to? Another important question arises regarding the spending restrictions that the government imposed on IT projects which are no longer allowed to be in excess of £1 million. Will this also apply to the healthcare sector?

"It will certainly have an impact on the UK's IT services landscape, resulting in less business for the largest suppliers to the NHS, but opening the stage for competition for smaller vendors who were excluded from this business before."

Which IT services firm will Oracle buy?

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I had an interesting email from a reader in the US yesterday. He is Stephen Jannise who is an analyst at a company called ERP Software Advice. He wrote an article about Oracle's next move likely to be in the services space and that an acquisition is likely.

Mark Hurd's move to Oracle from HP is the trigger says Jannise.

"While Hurd was at HP, he strengthened the services layer of their stack through the acquisition of EDS. Now, he has to do the same for Oracle, and I've listed six major IT services firms that could help him accomplish that goal.

HP bought EDS, Dell acquired Perot Systems and Xerox took control of ACL. So Oracle could be next to fork out on an established service provider.

Oracle has plenty of cash. It is also a regular acquirer. But who will it buy?

According to the article here are some potential buys and why they are potential according to Jannise. I have linked to some blogs I have written about these companies recently.

1 - Capgemini

2 - Infosys

3- Tata Consultancy Services

4 - Wipro

5 - Accenture

6 - Unisys

7 - Cognizant

Here is the full article by Stephen Jannise.

Also see: Can Mark Hurd make a success of Oracle?

NHS IT project scrapped as central control is abandoned

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The NHS National Project for IT (NPfIT), has finally abandoned its control from the centre approach.

Major changes to the way the NHS will buy IT was announced today.

The writing was really on the wall when the Department of Health ended an agreement with Microsoft, although not part of NPfIT, it offered trusts lower prices but basically forced them to buy Microsoft.

A Department of Health spokesman said at the time:

"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."

Suppliers such as BT, Fujitsu, and CSC are amongst the suppliers with contracts as part of the NHS NPfIT. NHS trusts will now be free to purchase IT systems locally, although existing contracts with the two main supplier to NPfIT, BT and CSC remain in place for those trusts that wish to use them.

The Department of Health said today in regard to the NHS NPfIT overhaul: "A new approach to implementation will take a modular approach, allowing NHS organisations to introduce smaller, more manageable change, in line with their business requirements and capacity.  NHS services will be the customers of a more plural system of IT embodying the core assumption of 'connect all', rather than 'replace all' systems.  This reflects the coalition government's commitment to ending top-down government and enabling localised decision-making."

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 top of the government agenda. Could this risk IT anarchy with a huge technology map. 

Can governments really ban offshoring in this day and age?

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US state of Ohio's decision to ban the offshoring of government work to countries like India has triggered a debate that could be an important one for the UK as the government looks for ways to cut costs.

Ohio State has prohibited the spending of state funds on services provided offshore in countries such as India. Other US states could follow suit as they attempt to create more local jobs.

With public sector cost cutting increasing the likelihood of UK public sector jobs being outsourced higher tha ever before, the Ohio stort is relevant.

Ohio Governor Ted Strickland (a Democrat) was quoted as arguing that offshoring undermines economic development and has unacceptable business consequences for his state

This is exactly what one of Inside Outsourcing's readers said in a thoughtful blog comment recently. I later blogged about it here.

NASSCOM, which represents Indian IT suppliers, said this in a statement. "Ohio state's proposed ban on outsourcing of government IT projects comes at a time when the November elections to the United State Congress and Ohio governorship are drawing nearer. The ban can only be viewed as counterproductive to the US government thrust on reducing public deficit and possibly lead to an increased tax burden on its citizens,"

But the question is could the UK do a similar thing?

It wouldn't fit well with the government's recent visit to India aimed at increasing business ties which was welcomed in India.

Is the offshoring of IT destroying UK living standards?

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I receive so many well thought out comments on this blog that people spend time on I feel obliged to do them justice and feature them in individual blogs.

I recently wrote a blog about the prospect of the UK government offshoring thousands of IT jobs.

Below is a comment left on that blog by a reader. It is not for the faint hearted.

Comment below by BobF on what will happen if offshoring continues as it is going.

"Here is what is going to happen.

More and more companies, and the Government will offshore or onshore work for the cheapest price possible.

Profits, and the tax take will fall gradually over the years in the UK as more and more UK citizens are unable to find work, and onshored workers have their salaries paid in their home countries and due to ICT pay tax in their home countries too, not the UK.

The larger benefit bills will probably lead to a financial crisis or outright economic collapse within the UK (Already underway)

Profits for companies will rise in the countries where outsourcing takes place, as workers there become more affluent due to having work and jobs, wages will rise as competition increases.

Eventually these companies and the Government will find that UK workers are a "bargain" as they are as cheap or cheaper than the offshore staff (Cue articles about how talented, intelligent and generally wonderful UK staff are hence the move back to the UK, nothing to do with salaries, honestly!).


Eventually we may end up with world wide parity of salaries and this stupidity will end, however the cost for developed Western economies workers will be grim, the next few decades will probably see great financial distress and general unhappiness for everyone in the UK, and a general collapse in living standards."


See the blog post BobF was commenting on and other comments to that blog here.

Is European IT outsourcing coming back online?

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Gartner is the latest company to announce predictions for the outsourcing sector.

And its latest research on European outsourcing brings some cheer. It found that about 53% of organisations in Europe will increase their outsourcing budgets in 2010.

The National Outsourcing Association (NOA) had similarly positive news back in April.

I wonder how the UK is growing in comparison to mainland Europe. Back in June a contact told me that mainland Europe was growing but there wasn't much activity in the UK.

If you want to see what's going on in the outsourcing sector in Europe download this report from Equaterra for free.

Mark Hurd: From scoundrel to Oracle in 31 days

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It has been an eventful month for former HP CEO Mark Hurd. After being ousted at HP in early August, following a sexual harassment investigation, he now finds himself having to slum it as co president at Oracle.

Life is tough at the top.

Here is a timeline of Hurd's eventful 31 days:


07 August  - Hurd forced to resign after a sexual harassment investigation revealed dodgy expense claims.


09 August - Revelations that the sexual harassment claim against Hurd, which was proved false, was made by a 50 year old former soft porn actress.


09 August - The search is on to find a replacement for Hurd.


10 August - Oracle boss Larry Ellison says HP has made a big mistake getting rid of Hurd.


13 August - Hurd and other HP board members face lass action lawsuit.


14 August - News breaks that Hurd could pocket $40m from HP.


06 September - Hurd in talks with Oracle about an executive role.


07 September - Hurd replaces Charles Phillips as co president at Oracle.


Is there something making IBM workers uneasy?

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I wrote a story back in April about comments made by IBM's head of human capital management, Tim Ringo.

He told Computer Weekly's sister publication Personnel Today that it could reduce its workforce from 399,000 today to 100,000 in 2017. He said IBM would re-hire the workers as contractors for specific projects and, when necessary, use crowd sourcing.

Here is the full story.

The reason I write about this now is because today the story is being viewed by thousands of people. We can see how many people are reading articles and this stood out like a sore thumb.

Is something going on at IBM?

The reason I ask this is because a spike like this for an old story usually means a development.

Shamed former HP CEO Mark Hurd could be going to Oracle

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The dust of Mark Hurd's shock resignation from HP has not even settled and reports have it that he is in talks with Oracle.

Mind you when the news broke that Hurd was forced to resign following a sexual harassment investigation and the revelation of some expenses that did not meet HP standards, Oracle's CEO Larry Ellison did say HP were idiots to get rid of Hurd.

In a letter to the New York Times following Hurd's HP exit Ellison said: "The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago," he said

"In losing Mark Hurd, the HP board failed to act in the best interest of HP's employees, shareholders, customers and partners."

All those former EDS staff at HP, who have longed for the moment of Hurd leaving, will have there joy dilluted if the former CEO walks into another top job after pocketing loads of money exiting HP.


Government disappointed with some IT suppliers cost cutting proposals

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A source close to the negotiations between the government and its main IT suppliers has revealed a mixed response from suppliers.

And the government is happy with some and not with the others.

The split seems to be along the lines of those offering standardised services and asking for the government making dealing with it easier, and those offering price cuts and asking for contract extensions.

Obviously those offering standardised services and a streamlining of government procurement are offering bigger long term cost reduction. It is these suppliers that are proving popular with the government.

The others are not going down that well.

I wonder which suppliers fall into which group.

Here are the suppliers if you want to have a guess.

HP, BT, Capgemini, Fujitsu, Capita, IBM, Telereal Trillium, Atos Origin, CSC, Logica, Steria, Oracle, Siemens IS, Cable & Wireless, Microsoft, Accenture, Serco, G4S, Vodafone

Government distances itself from the £800m IT cost cut claim

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The Cabinet Office told me this morning that the £800m IT and outsourcing government savings being reported is not accurate.


The figure is referring to the initial saving the government has been able to gain from existing supplies contracts.


In July Francis Maude met the CEO's of the government's top IT suppliers to find ways of cutting costs.


But a Cabinet Office spokeswoman told me the process is not complete and they do not even know the figure. She said: "The savings will run into the hundreds of millions but it is too early to say."


I am sure the £800m figure has come from a good source so I look forward to seeing how close to this it is.


Any guesses?

Why are Indian software firms having problems finding local staff?

Karl Flinders | 4 Comments
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Interesting story in the FT about Cognizant having trouble finding engineers in the US to fill roles.

The company says that the shortage of US engineers forces it to fill roles from overseas.

Wipro said something similar to me recently and Infosys is having similar trouble according to the article. There have been some interesting comments about the post I did about Wipro's struggle.

But is the shortage of US and UK  a case of students not getting into software engineering because they know they will struggle to find work because they are expensive compared to their counterparts in countries like India?

I must admit if I was currently weighing up my career options I might be reluctant to be a software engineer with so much work being offshored. 

RBS job cuts will seem tiny if government offshores its IT work

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If the UK government chooses to outsource and offshore IT jobs in the public sector the UK job cuts made by the Royal bank of Scotland (RBS), which now totals more than 20,000 since it was bailed out by the taxpayer, will be massively dwarfed.

Tax payer owned RBS is a good example to use when describing the cost advantages of offshoring IT and back office functions.

Although companies often talk up the value add that can undoubtedly be gained by sending roles offshore it is the low cost that is usually the driver.

News of more job cuts at RBS yesterday, which includes significant numbers of IT workers. Is a headline hitter.

But another interesting story behind this is how RBS has gone from being a company reluctant to send jobs overseas to one that has offshored work to a centre in India that it gained through the acquisition of Dutch bank ABN AMRO.

A source of mine told me there were several banks with numerous offshoring programmes waiting to be signed off so there could be more bad news on the UK IT jobs front. But this will be nothing compared to the carnage if the government decides to offshore work.

Ovum recently suggested that the government might have to offshore thousands of jobs. We know there is scope for it too, with Indian IT suppliers not amongst the major suppliers to government.

I wrote a blog recently asking whether the government could really offshore thousands of jobs and had some very interesting comments. Click this link and follow the discussion.

Capgemini's Brazilian buy will give it resources such as open source skills

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After writing a series of blog posts about Brazil as a destination for IT services I thought Capgemini's latest acquisition was worth a mention.

The French IT services giant has taken a 55% share in Brazilian IT service provider CPM Braxis for €233m.

Brazil has a really established IT services sector which serves a huge internal market. The Brazilian government is currently throwing money at the challenge of winning offshore IT business with international companies.

The deal will give Capgemini access to the large Latin American market and offer it more options in terms of services for its international customers.

Brazil apparently accounts for nearly half the total Latin America IT services market, which is worth about $23bn.

CPM Braxis, which has over 5,500 employees and over 200 clients, is big in the financial services sector. It provides application outsourcing, enterprise application services, infrastructure integration and infrastructure services.

Capgemini has the option to buy the company outright in the future.

José Luiz Rossi, Chief Executive Officer of CPM Braxis, said being part of Capgemini said being part of Capgemini will help the company grow its internal and external business.

 "Joining a group with the worldwide reach of Capgemini is a great opportunity, in the high-growth IT services market in Brazil. We will expand our client base by making our services available to Capgemini's international clients present in Brazil, and will also be able to offer Capgemini's global expertise to support our major Brazilian clients in their international development projects."

Brazil will become the Group's sixth largest country in terms of headcount, with more than 6,200 employees.

Here are some previous blog post I wrote about IT services in Brazil.

Is Brazil a hidden IT gem?

Open source could be Brazil's IT offshoring advantage

Brazil IT's four day flirt with the global CIO community ends

Do Brazilian IT professionals need to be proficient in English?

Brazil faces cultural challenges to break IT outsourcing

Brazilian says English language skills in short supply in Brazil

Indian IT service providers too tyrannical for Brazil

Accenture is very confident right now

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Accenture's UK managing director, David Thomlinson, told Computer Weekly that the company is "very confident" at the moment.

He says there are big opportunities across all sectors of the economy as customers see opportunities.

In an interview with Computer Weekly Thomlinson revealed some of Accenture's plans and observations. Just for a taster he said the public sector cuts could be an opportunity and he also described how the company is exploiting opportunities in new international markets.

See the full article here.


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