November 2010 Archives

How to cut software defects to 0.012 per thousand lines of code with software Big Brother

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I was with Chinese offshore software company Bleum last week. The company was updating me on its recent entry into the UK.

We talked about China's advantages. I thought price would be the main draw to China as Indian workers demand more money for their labour. But Bleum said this is not the case. It says the quality of its software is its real differentiator.

It claims to have only 0.012 defects per thousand lines of code. This is pretty impressive given that the global average is 4. It also says 35% of its software releases have zero defects.

But how does it do it? Its governance software known as Hydra is the answer it reckons.

This software watches each and every developer in near real time to check what they are doing and also makes suggestions to developers when they might be doing something that often leads to mistakes.

Click the image to enlarge Hydra screen shot.

hydra-2.JPGThere is also analysis of the information to enable Bleum to work out where faults normally occur. So the software learns and becomes more effective over time.

Bleum said it is important for the company to identify whether mistakes are related to people or processes

The end customer businesses also have an interface that allows them to keep check on the development teams dedicated to them.

Click on the below images to see more screen shots.

hydra-1.JPGhydra-3.JPG

China and Sri-Lanka try and get one over India in software testing

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Testing software is critical because the cost of fixing bugs once the software is up and running is extremely high. As a result software testing is in demand and is a growing market.

 

I recently interviewed Geoff Thompson of the TMMi foundation. TMMi is a testing methodology that ingrains testing into the software development  process. This way bugs are identified along the way. It is an alternative to hiring lots of bodies to test software when the development is complete and then having to fork out thousands of pounds to fix bugs. So the theory goes.

 

Thompson told me that Chinese and Sri-Lankan companies are currently interested in gaining TMMi accreditation to differentiate themselves from Indian software companies.

 

TMMi accreditation, which has five levels, is aimed at end user businesses that want peace of mind and service providers that want to put a rubber stamp on their testing practices. The first service provider expected to be fully certified is a Spanish company that will probably get the rubber stamp next month.

 

Software quality testing company Cast 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. Below is a list of the average number of violations per thousand lines of code for different programming languages, according to Cast.

 

ABAP   - 20

Cobol  - 89

.NET    - 169

J2EE     - 463

C/C++ - 438

 

The five levels of TMMi are:

1 Initial
This is basically chaos and the stage that companies are at when they have nothing in place when it comes to a testing process. These companies rely on their people to find faults, rather than processes. Testing is done ad hoc when the software development is complete.

2 Managed
When a company reaches this level it means testing is a core processes. This will include Design, strategy, planning and setting up initial models. Testing is separated from debugging at this stage.

3 Defined 
The testing phase is no longer seen as something that happens after coding is complete. Test planning is done early on.

4 Measured
Testing is now fully defined with measurable processes. There will also be peer reviews.

5 Optimisation
Testing is now completely defined and improvement to processes will be made through quantitative understanding of causes of software failures

Capgemini recruiting its way into the public sector

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Hot on the heals of its appointment of former NHS shared business service head, Ruth Ormsby, Capgemini has appointed a policeman of 30 years to head its division focussed on serving police authorities.

Roy Toner has been appointed to the newly created position of chief information officer of the Criminal Justice Sector at Capgemini UK Outsourcing Services.

The importance of understanding the businesses of public sector organisations is essential if IT suppliers are to help them meet their tough cost cutting targets without reducing service levels too steeply.

With hundreds of thousands of public sector workers set for redundancy, now could be the time for the private sector to pick up a top human resource. Not only do some of these individual have good understanding of business requirements in public sector organisations, but they must have good contacts as well.

On the subject of public sector employees moving to the private sector, I wonder where John Suffolk will end up. Apparently he has a farm, so he will have to get tired of that first. You never know the cold spell might get him back in an IT driving seat sooner than expected. Herding sheep in this weather doesn't sound fun.

 

Report reveals Indian IT suppliers are getting a second wind

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Equaterra is about to announce the results of its latest survey of the performance of IT service providers working in the UK.

The survey interviewed over 200 large businesses and analysed over 600 IT outsourcing contracts.

There are lots of interesting findings but I though I would start with the success of the Indian suppliers in this year's study.

The results show that in terms of general customer satisfaction Wipro is leading the way. Second is Mahindra Satyam and Cognizant is third.

I spoke to Lee Ayling, managing director at Equaterra last week. He says the Indians are coming back. I know they have never really gone away but they could be getting a second wind.

This second wind could be a sign of these companies maturing in the Western markets.

Ayling believes part of the reason for success this year is the fact that many of the Indian suppliers have built local management teams. This has given them a better understanding of customer needs. It also allows them to be close on hand when required.

He also says that some Indian companies have moved beyond their traditional application lifecycle specialisation to offer infrastructure management.

So ten years on Indian companies, which got their first wind as a low cost answer to the Y2K bug, are maturing into true globalised suppliers.

Measured across about 10 KPIs the Indians did pretty well.

Look out on Computer Weekly for a version of the full report available for free. When it is ready I will blog about it.

See an article about last year's report here.

E.ON makes it official with T-Systems and HP

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German utility giant E.ON has made its outsourcing deals with HP and T-Systems public.

As revealed in the blog almost a month ago the company has outsourced its datacenters and desktops to HP, with its network going to fellow German T-Systems.

The deals are said to be worth €3.2bn.

A well connected source told me that HP has paid well over the odds to acquire the assets from E.ON that it is going to take over.

As part of the deal HP has acquired datacenter and computing assets from E.ON. A source close to the deal said HP has paid about 25% over the odds for the assets.

Immigration cap about point scoring, not improving economy with highly skilled immigrants the scapegoats

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In this blog I tend to write a lot about the immigration cap in terms of its lack of control over the use of Intra Company Transfers (ICTs), but there is another important story that becomes from the cap and impacts UK IT.

Tier one immigrants, who are highly skilled, are the group that have been hardest hit. You could say while the businesses that use ICTs to bring in cheap labour have been let off the Tier ones have been used as a government scapegoat.

Tier one immigration visas were cut from to 1000. There were 6000 last year but the government is of the opinion that these people are doing low skilled jobs, such as flipping burgers and driving taxis.

But there are some highly skilled people, including IT specialists, that are contributing to the UK economy but will be shown the door. Unlike the big businesses that rely on ICTs they cannot curry favour with the government. These people that make their own way to the UK and find work themselves competing equally with locals are a soft target for a government desperate to fulfil a pre-election pledge.

One of my blog posts has had a discussion develop around it and a tier one immigrant, who is an IT worker (from his user name probably a programmer), has made his or her views known. Read the post and the comments here.

This is what tier one immigrant working in IT had to say about the immigration cap: "[The government]  tackled the visa category which was easier to tackle and does not involve EU or businessmen even though it makes the least difference. But hey, all that British public needs is that this government has fulfilled its promise of capping the immigration!

"Highly Skilled Migrants/Tier 1 General" are not same as Intra Company Transfers. To be eligible for Highly Skilled Migrant, one needs a masters degree, English language, age, experience and salary of £40,000 in past 12 months but no job offer. Nothing to do with any company or outsourcing. ICTs are the actual problem and they have not been touched! Highly skilled migrants pay all UK taxes and national insurance as any other UK citizen but do not get anything in return."

IT workers beware, Intra Company Transfers look likely to hit 30,000 in 2010

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According to official figures from the Home Office, the number of Intra Company Transfer (ICT) visas granted in 2010 is likely to hit 30,000.

This would be a significant increase on 2009, when just over 22,000 visas of this type were granted. It will also show the challenge facing the government attempting to reduce ICTs through a minimum wage theshold of £40,000 rather than a cap. The government hopes this threshold ill bring ICTs down to 11,000.

But there is clearly a lot of demand from business for them.

Figures from the Home Office show that after three quarters of 2010 over 22,500 have already been granted. So we could have getting on for a 50% increase in the number of ICTs granted in 2010 compared to 2009.

If the government starts offshoring work to cut costs I reckon this will get even higher. I am not surprised the government decided to exclude ICTs from its immigration cap.

ICTs are used by offshore service providers to bring low cost labour onshore and are seen by UK IT professionals as a major threat to their jobs. A large proportion of ICTs are IT workers.

Here are the figures:

2010:

Q1 - 7,305        Q2 - 7,165        Q3 - 8,050                    

2009:

Q1 - 4,355        Q2 - 5,665        Q3 - 6,090        Q4 - 5,920        Total 22,030

See the figures for yourself. Click this link and then click on table 1.1.

See this link to find out the number of ICTs entering the UK over the last decade and what occupations they have.



Is China a serious alternative to India for software development?

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I met up with Bleum today. This is a software services company that provides all of its services from China.

I first met Bleum in May when it was embarking on its first steps into the UK market. It had previously had customers in the US, including Walmart, and continental Europe.

But I got an update today.  Newly appointed UK sales director, Greg Leniston, is a former EDS and Perot Systems man, so he knows what it takes to win big outsourcing contracts in the UK.

Since my last meeting with Bleum it has been named a Cool Vendor by Gartner and appeared in the Deloitte Technology Fast 500, which ranks the fastest growing IT firms,

He told me that the company has lots of UK deals in the pipeline and should start announcing them in the next six months.

He also told me from his conversations with potential customers it appears they are looking to build software development capabilities in China as an alternative to India. "People do not want to put all their eggs in one basket in India and they are looking at putting some software development in China.

The CEO of one of the largest Indian global IT suppliers HCL Technologies, Vinnet Nayar, told Computer Weekly this month that China is a threat to India's dominance.

When I interviewed Bleum in May, the then UK head Nigel Grieve told me that China would need a Y2K like event if it was to catch India. But the banking crisis, recession and the government deficit problems combined add up to a bigger shockwave than Y2K.

One of the biggest fears about working with China is around IP. There are no IP laws that match those in Europe. William Stancer, vice president business development at Bleum told me that IP is not a problem in China if you pick the right partner. Bleum is US owned and the Chinese government has no stake in it, which means it has no influence.

Bleum uses a model where every customer has a separate development centre with different developers and tight security, including the use biometrics.

Another perceived handicap for Chinese companies providing software development to UK firms is a lack of spoken English in China. Bleum, which is US owned, is overcoming this by having a policy where only English is spoken at work. New recruits come in with basic English skills, which are improved through speaking the language all the time at work. The company also employs seven qualified English teachers.

To demonstrate the power of human resources in China Bleum gave me a recent example. It decided to try out developing the ATG web platform technology. ATG is often used on ecommerce websites. It trained up five people to build some dummy websites. Customers were interested so the company set up a development team dedicated to ATG of 80 people within three months. It is now building sites on ATG for its customers. Not many end user companies or suppliers could do this internally so quickly.

Customers can take services known as stealth offshore, where their software development is carried out in an unbranded centre.  They can move to branded offshore centres if they want to make people aware of their presence in China. This might support their future entry into the Chinese market, which many multi-nationals will be keen to do.

When I met Chinese supplier Vanceinfo back in September the company said multinationals that want to build business in China can increase their opportunities if they sign outsourcing contracts with China based suppliers.

Vanceinfo already has customers in the UK.

Damian Green reveals just how IT firms will sidestep new ICT rules

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I watched the Channel 4 news last night and found something within Jon Snow's interview with immigration Minister Damian Green very interesting.

They were discussing the government's new rules on immigration, including the raising of the pay threshold for Intra Company Transfers (ICTs). It is now a minimum of £40,000 compared to £24,000 before.

Snow asked Green whether the £40,000 pay threshold rule would reduce the amount of workers being brought in on ICTs.

Green responded by saying he thinks that businesess will bring people in for less than a year. It sounded like he was giving suppliers tips on getting around the new rule. Although it is quite an obvious one.

Here lies the problem for many UK IT workers.

IT workers will come to the UK on short tern projects. They will also be able to bring staff to the UK to learn how to do a UK job which they can then perform remotely. And I am sure offshore suppliers might find a way to rotate staff.

So these workers will not show on long term immigration stats and they will not be a drain on UK resources. So the government looks good.

Not if you are an IT professional who could have his or her job offshored and you are given the nice job of training your replacement to do your job remotely.

Reducing the figures on long term immigration looks good for the government because many of the UK population are concerned about immigration and the potential drain it has on resources. But IT workers will be no happier with the new rules because it will still be difficult for them to compete on price.

As a result it will still limit the prospects for the UK IT industry by reducing jobs for homegrown talent.

So it doesn't look like the pay threshold will do anything. Why does it not apply to all ICTs regardless of how long they are in the UK?

Association of Professional Staffing Companies (Apsco), which has campaigned about ICT abuse for years questioned the pay threshold being set at £40,000 .

Ann Swain, Apsco CEO said: "Whether the £40,000 minimum salary will reduce the number of intra-company transfers in the IT sector is debatable. The average UK wage for IT professionals is close to £40,000, and it is questionable how many workers earn less that that once they arrive."

"We will be seeking clarity from the Government on how the £40,000 minimum will be reviewed."

Has the government backed down on its immigration promise?

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The government has announced its immigration cap and from what I can see there will be no reduction in the number of workers coming form overseas on Intra Company Transfers (ICTs).

Theresa May announced a total limit on labour immigration for the 12 months from April at 21,700.

Tier one immigrants, who are deemed highly skilled, will be hit hardest and only 1000 will be able to enter next year. Tier two immigrants, who have a job offer in the UK, will actually increase from 13,000 to 20,700.

And there will, as David Cameron has already said, be no cap on ICTs. Although the government has put in place a policy that means ICTs staying over one year will have to earn at least £40,000.

The problem with that is many of the IT workers in the UK from countries like India are only here for a short time. They might be involved in a transitional IT project or learning about a customer. These workers only have to be paid a minimum of £24,000.

So there is likely to be as many ICTs as ever. There will probably be more if the government starts to offshore more work to cut costs.

It could be seen as counter-productive if the government increased the cost of ICTs just as it was about to make use of large volumes of Indian IT workers as it transforms government processes.

Also once employers have added living expenses on top of salary I think this will add up to over £40,000 for IT workers. Theresa May said nothing about clamping down on the practice of bundling salary with expenses.

 

 

Home secretary to announce immigration cap at 3.30pm today

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At 3.30pm Theresa May will announce the immigration cap that will start in April next year.

You can watch it live on Sky News here.

Speculation has it that the government will set the limit non labour immigration at 43,000 for the year beginning April 2011. This is the upper end of the range recommended by the Migration Advisory Committee (MAC).

I am interested to hear what is said about Intra Company Transfers (ICTs). Cameron said they will not be capped. The MAC said the should be.

If the government is to reduce net immigration to tens of thousands rather than 196,000 in 2009 it will have to somehow address ICTs which make up a large part of labour immigration to the UK.

South Africa is a low cost call centre option with investment funds on offer

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South Africa, like India, is a former British colony with the English language spoken throughout.

Like India it has a lower cost of living than the UK and lower wages. I met a group from South Africa last week. They were in the UK to promote what South Africa has to offer UK businesses in terms of voice based customer service offshoring.

They told me it costs 50% to 60% less to set up a call centre in South Africa compared to the UK. If you take some of the South African government grants another 10% to 15% can be shaved off.

Today the South African government has announced it is increasing these incentives.

These investment funds can be spent however the customer wants

South Africa is focussed in the UK for obvious reasons. The language and cultural similarities make it an ideal place for voice customer services.

Asda, British Gas and Virgin Media already use call centres in South Africa.

South Africa currently has 10,000 call centre seats supporting offshore customers, but wants to increase this to 30,000.

One of the biggest changes in recent years has been the completion of broadband links to Europe, such as the Seacom pipe.

Telco costs used to be a major proportion of overall costs when offshoring to South Africa. But telco costs have apparently fallen 85% since 2003.

Offshore IT worker exemption from new pay threshold makes influencial UK IT figure angry

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I wrote a blog earlier today about the fact that the government looks set to exempt IT workers from the £40,000 pay threshold likely to be put on workers in the UK on Intra Company Transfers. IT workers will instead by set a £24,000 threshold.

One regular contributor to this blog has sent in a link to a great blog entry by Richard Holway of TechMarketView. Thanks ArgieBee.

I thought I would share it so here is his blog post.

His views reflect many I speak to in the Industry. They believe bringin in low cost labour from overseas is damaging the long term prospects of the UK IT industry.

The government is likely to announce its plans to meet its target to reduce immigration tomorrow.

If the alternative threshold is placed on IT workers Intra Company Transfers will be difficult to bring down because a massive proportion of ICTs that have entered the UK over the last 10 years have been IT workers. See the figures here.

If you are confused about why IT professional are often unhappy with Intra Company Transfers, one look at these figures will clear it up. 

Government set to lower pay threshold for IT workers on ICTs

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IT professionals were recently given a glimmer of hope with a proposal to set the minimum salary for immigrant workers in the UK using the Intra Company Transfer (ICT) route at £40,000.

This promised to make it less attractive for businesses and offshore suppliers to bring offshore workers onshore. It was widley welcomed in the UK IT profession.

But according to the Sunday Times, IT workers on ICTs will get their own very special pay threshold. This will be £24,000, according to the report. This is where it is now.

Last week the Migration Advisory Committee (MAC), released its report on the level the government should set its proposed immigration cap. This is to enable the government to reach its target of bringing inward immigration to the UK down to tens of thousands per year by the end of this parliament. It was 196,000 in 2009.

I was at the launch and I asked about the absence of ICTs from the cap. Professor David Metcalf, who chairs the committee, said the government will have to reduce the use of ICTs if it is to meet its target. He said if there is no cap the government will have to make it more expensive for businesses to use ICTs. For example the £40,000 pay threshold.

If the pay threshold is not to be raised , what will the government do? Raise the cost of certificates of sponsorship is one option. 

IT professionals make up a massive proportion of ICTs. Take a look at these stats to see how many people came to the UK on ICTs over the last decade and what they were doing. 

The Sunday Times article says that IT workers will be allowed to move to Britain for up to a year as long as they earn at least £24,000.

But the fact that it is only for up to a year could be a way the government can fudge its immigration promise. Long term immigration is people that come for over a year.

The government has said it wants net migration to come down to tens of thousands. Will short term immigration be included?

Thousands of IT workers in the UK using ICTs are only in the UK to be trained so they can return offshore to do jobs remotely.

Offshore suppliers will be able to continue to send workers to the UK to be trained to replace UK workers.

Could Atos Origin face direct peaceful action by a disability action group?

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A Facebook group campaigning for better treatment of disabled people, known as Black Triangle, is to have its first ever meeting next week where members will discuss how to take its campaign against Atos Origin and the DWP forward.

 

I was contacted by a member of the Black Triangle group recently who told me the whole story about why the group exists. It is an interesting one.

 

The group represents disabled people which it believes are being mistreated by Atos Origin when being assessed for disability employment support allowance. Atos, through its Healthcare arm, uses Logic Integrated Medical Assessment' (LiMA) software to support medical professionals when assessing claimants.

 

To make a point the Facebook group, which has over 1300 members, took its name from the practice used by the Nazis of putting a black triangle on people in concentration camps that were too sick to work.

 

On Tuesday next week (23rd) members of the group will meet in Edinburgh to discuss what it should do next.

 

Sasha Callaghan, is a member of the group. She is a former President of the University and College Union.

 

She told me that the group believes that many people have had their benefits cut when they shouldn't have because of the system that Atos uses when assessing them.

 

She said the Facebook site was set up after a suicide of a disabled person which the group claims was brought on by having his benefits removed.

 

The group wants Atos removed and could soon take "peaceful direct action" against the company, she said.

 

Atos recently had the contract extended three years in a deal worth £300m.

 

I will follow this story so if anyone has any comments please post them in the blog. Or you can email me on karl.flinders@rbi.co.uk.

 

Government must make Intra Company Transfers cost more if it doesn't want to cap them

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I was at the launch of the Migration Advisory Committee's (MAC) report into the level the government should set the cap on immigration.

Perhaps the most interesting part, particularly for the IT sector, is the fact that the MAC thinks that Intra Company Transfers (ICTs) should be included in the cap. Unlike David Cameron who recently said they will not be included. The report was completed before Cameron announced this.

MAC chair, David Metcalf said if the government is going to achieve its target of reducing non EU immigration to the UK to tens of thousands a year by the end of this parliament, it will have to reduce the number of ICT visas granted. This is because they make up a huge proportion of total long term immigration to the UK which stood at 196,000 people in 2009.

In the absense of a cap on ICTs the government will have to find other ways. So rather than manipulating the quantity of ICTs allowed, the government will have to make it more expensive for businesses to use the ICT scheme to bring workers in.

The options include:

Raising the minimum salary level for ICTs, which the government is apparently considering.

Increase the charge on companies getting certificates of sponsorship

Stopping companies including expenses in total pay calculation. This allows them to bring in cheap labour.

So in effect the market will decide. Indian suppliers might have to increase their prices.

Think tank Migrationwatch gave us its take on ICTs yesterday. It has similar vioews to those expressed by Metcalf today.

The abuse of ICT visas in the IT sector explained by think tank

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Migrationwatch sent me a press release today explaining the controversial issue of the Intra Company Transfer (ICT) visa scheme and how it is being abused by IT firms to bring low cost labour into the UK.

This comes a day before the Migration Advisry Committee (MAC) is due to publish a report on labour immigration and in advance of planned debate in the House of Commons.

This blog features a lot of articles about this debate and I thought the Migrationwatch article is a good reference point.

Below is Migrationwatch's description of how an immigration scheme is being abused in the IT sector.

The abuse of ICT visas in the IT sector, by Migrationwatch

"The attached paper sets out evidence suggesting that this route is being abused. It calls for a number of changes, notably a minimum salary of £50,000 a year", said the think-tank.

1.  The Intra-company transfer (ICT) was intended bring in experienced and specialist staff to the UK offices of a multinational company. In the year to June 2010 over 57,000 ICT visas were issued [1]. It should not be used displace a suitable UK worker [2].

However it is being used in the IT sector to replace UK workers on cost grounds, either by helping to relocate the work to India or by filling UK based jobs with Indian workers.  This is an abuse of the ICT visa. The criteria for this visa should be strengthened, notably by raising the salary threshold to £50,000 to return this route to its original purpose.


ICT Visas

2.  The ICT visa is intended for employees of multi-national companies who are being transferred by their overseas employer to a UK branch of the organisation.  It was originally set up to fulfil three different kinds of business need:

  To fill senior management positions for a limited time
  To transfer knowledge (either to or from the UK)
  To offer international experience as part of a training programme

3.  Accordingly, there are three sub-categories [2]:

(a) Established staff - skilled employees that fill a post that cannot be filled by a settled worker.  This visa can be granted for up to 3 years and one month and can be renewed for a further two years. The minimum skill level required is S/NVQ level 3.
(b) Graduate Trainee - allows the transfer of recent graduate recruits to the UK for training purposes.  The visa can be granted for 12 months and is limited to graduate occupations and to a maximum of five visas per employer.
(c) Skills transfer - allows the transfer of new recruits to the UK to acquire the skills and knowledge they will need overseas, or to impart their knowledge to the UK workforce. It can be granted for 6 months and is limited to graduate occupations only.
Of these, the established staff route is the largest number and unless mentioned otherwise is the subject of the rest of this note.

4.  The ICT visa comes under Tier 2 of the Points Based System (PBS). A company has to apply for and is allocated certificates of Sponsorship (CoS). These CoS are then used to bring in people to the UK providing they meet the points requirements.   Points are awarded for the sponsorship itself and for qualifications, expected earnings, English language and available maintenance.   English language is not required unless the visa is for more than three years.  The point's requirements are met with a bachelor degree and a salary of £24,000 or a master degree and a salary of £20,000.  This visa is not subject to the Resident Labour Market Test (RLMT). Tier 2 ICTs applied for from April 2010 no longer lead to residency [3].

5.  In the year to June 2010 there were 26,500 main entry ICT visas granted with an estimated 18,500 dependant visas [1].   In addition there were over 12,000 renewals (main and dependant), making a total of 57,000. Dependants of those on an ICT visa have the right to work in the UK. 

6.  In 2009 half of all ICT visas issued went to Indian software workers. In 2008 three IT companies alone accounted for nearly 10,000 of the ICT work permits granted [4].

The IT sector

7.  UK companies often contract out a large part of their IT function to a third party provider to reduce costs. This provider can either deliver IT services 'onsite' in the UK or remotely 'off-shore' to the client company. Delivering IT offshore allows companies to develop facilities in lower cost locations.  The work might be both operational such as application, or project based (such as BA's new online booking system). For project work large parts can be developed in India but the design and delivery aspects are carried out in the UK.

8.  There is no shortage of IT workers in the UK.  IT jobs are not on the shortage occupation list and unemployment among computer science graduates was reported to the highest of any discipline at 17% [5].

Use of the ICT visa by Indian IT workers

9.  To facilitate outsourcing staff often with general IT skills are brought to the UK to gain knowledge of the client company and its operations before transferring with that knowledge back to India.  Other staff are brought in to deliver IT work 'onshore' for the IT provider to the client company.

Abuse of the ICT visa in the IT sector

10.  The requirements of the ICT visa of prior company knowledge and equal pay and conditions are intended to prevent the replacement of UK workers by imported workers. However this does not seem to be the case in the IT industry. The use of Indian workers with generic IT skills means it is not their skill or experience that is bringing them to the UK but the need to understand the host company that is planning to outsource its IT function. This seems to fall outside the original intentions of the ICT visa of prior company knowledge. Because the IT skills required are general this is also work that could be carried out by UK workers, again contrary to the rules of the ICT visa, guidance for which states "employers cannot offer a job to a non-settled worker if it means that a suitable settled worker will be turned down for the job or made redundant".

11.  PCG - the UK association representing freelancers and contractors, has been asking their members to report instances of abuse [6].  Members of PCG have made allegations including:

(a) ICT visas being used to facilitate outsourcing and displace UK workers:
Many PCG members allege having to train up their own replacements. When IT operations are outsourced, a firm can bring its overseas staff 'onshore' to the UK for a brief period.  Domestic workers are often tasked with training this 'onshored' worker, and when this training is complete the UK worker can find that their contract is not renewed, leading these jobs being removed from the labour market.
(b) Replacing staff in UK based jobs:
UK contractors are having their contracts terminated and replaced by Indians workers brought into the UK on ICT visas.
(c) Worse working conditions than their UK equivalents:
Some PCG members have alleged that  non-European Economic Area staff are made to work longer hours than their UK Counterparts.    PCG members have said that they believe some ICT workers are given very limited holiday entitlement can even be refused sick leave when ill.

12.  The Migration Advisory Committee (MAC) recently highlighted the use of tax free allowances for accommodation and expenses being included in the salary calculations under the PBS [7]. This evidence suggests that migrants are being used specifically to cut costs and replace UK workers who have the equivalent or better skills. This is not the purpose of the ICT.

Actions to limit ICT visas

13.  There a number of ways to strengthen the ICT visa regime that will continue to allow genuine senior or experienced specialist staff of multi-national companies to work in the UK:
a) Salary Requirements:  The minimum level could be raised. Migrationwatch has previously proposed £50,000.
b) Certificates of Sponsorship: The total could be capped, they could be auctioned or the cost increased substantially once a threshold for a company has been reached (e.g. the eleventh to cost much more than the first ten).
c) Expenses:  Expenses and accommodation must be removed from the salary calculations.
d) English Requirement: This could be introduced.
e) Resident Labour Market Test:  could be introduced for IT jobs which are most open to abuse.  This test needs to be strictly enforced to ensure these roles are advertised widely via the numerous technology job sites and at the proper UK rates.
f) Improve the monitoring and enforcement of the visa conditions: This includes ensuring that the salaries and the working conditions of the foreign workers are fair and do not undercut those of British workers

Recommendations

14.  The following are our main recommendations:
(a) The ICT route should be retained but returned to its original purpose
(b) The salary threshold should be raised to £50,000 a year (except for graduate trainees). 
(c) The cost of the certificate of sponsorship should rise dramatically once a company has been issued with a certain number set as a proportion of their total UK staff.  This would allow companies to bring in small numbers of senior staff but act as a disincentive to those companies that are bringing in large numbers of IT workers.

References

Number includes main and dependant, entry and renewal visas: Control of immigration: Quarterly Statistical Summary, April - June 2010

Tier 2 of the Points Based System  - Policy Guidance version 10/10

UKBA

4 Hansard 20th October 2010 Col 755 W

5 BBC News

6 Meetings and material from PCG- The Voice of Freelancing

Analysis of the Points Based System Tier 2 and dependants, Migration Advisory Committee, August 2009

"We are back" says Mahindra Satyam's European head, as the supplier has its year zero

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This week's financials for Mahindra Satyam signal a new beginning for the company following the billion dollar internal fraud that was revealed almost two years ago.

The results themselves did not scream out and grab you as perhaps the results of Mahindra Satyam's Indian counterparts recently did. But the fact that it has audited books will hasten its recovery.

The company reported pretty flat revenues for its second quarter compared to the first quarter. Revenues remained similar to the previous quarter at around $270m. Profits were down, which was largely down to pay rises said the company.

I was with the company's head of Europe Vikram Nair today and he told me that things will pick up now that the company has audited books to show potential customers.

He says the company has not been able to get into a lot of deals because it has not had audited accounts since the fraud of almost two years ago. Audited books are a prerequisite for many customers.

Now that it has the books it can start competing for more deals.

He described how about 40% of deals usually land on your desk without having to go out and find it. This is because analysts and consultants and the like recommend the services of suppliers.

But after the fraud this dried up. He says it is now coming back.

But Nair is not focussing on the business that lands on the desk. The company's European salesteam has doubled in size over the last 12 months.

In the private sector Nair says financial services, retail, manufacturing and travel and logistics are sectors that are leading recovery.

He says one of Mahindra Satyam's main accounts in Europe has increased its spend with the company four times over since June.

He is also excited about the public sector prospects and says he looks forward to finding out what the government wants so Mahindra Satyam can show what it can do. I will blog separately about this.

The highs and lows of a life turned upside down by IT offshoring

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From January until April this year I had a guest blogger, known as the ousted IT Blogger. Basically this is a guy that had his life turned upside down when his job was offshored to India. Well, after he had trained his replacement to do his job anyway.

In the face of surging offshoring and the prospect of the government sending jobs overseas, I thought I would repeat the entire series of blog posts written by Inside Outsourcing's ousted blogger.

This will show people how offshoring a job to cut costs can have a high human cost.

Read the entire series here:

Part 1: Ousted IT Blogger speaks out

The first post made by the Ousted IT Blogger was on January 19. He had already been out of work for some time.

In this blog he described how he lost his job as part of an offshoring agreement with an Indian supplier.

He talked about the injustice of service providers taking advantage of a loophole in the UK immigration system which works against thousands of UK IT professionals every year.

Part 2: Ousted IT Blogger hits jobcentre

Part two saw the Ousted IT Blogger relay the depressing experience that is going to the jobcentre.

Part 3: Ousted IT Blogger on recruitment agencies 

Recruitment agencies get the Ousted IT Blogger treatment in the third part of the series.

Part 4: Ousted IT Blogger on Nasscom and ICTs

In this part Ousted IT Blogger vents more displeasure at the lack of policing if the Intra Company Transfer visa system.

Part 5: Ousted IT Blogger forced to scrape job barrel

The fifth part of the series saw the Ousted IT Blogger describes the experience of having to start applying for jobs that you are not really suited for.

Part 6: Ousted IT blogger's redundancy makes him fit and softens his feet

In this part the Ousted IT blogger talks about how redundancy has made him fitter.

Part 7: Industrial relations trouble makes ousted IT blogger smile

The industrial relations troubles of companies that have transferred workers to suppliers are the subject of the seventh blog post from the ousted blogger.

Part 8: Ousted IT blogger doesn't need to scrape the jobs barrel anymore

A landmark was reached in this post. The Ousted IT Blogger had been unemployed for six months at this point. The DWP stopped paying him Jobseekers Allowance so he has £64.30 less every week.

Part 9: Ousted IT blogger has refreshing change but competition for jobs is fierce

In this post the Ousted IT Blogger describes a good experience with a recruitment agency. But he reveals the fierce competition in the IT jobs market.

Part 10: Ousted IT blogger has highs and lows but occupies himself

Part ten of the series explains how job seekers should expect highs and lows.

Part 11: Our ousted IT blogger has landed a job

Could Government offshore work by stealth to avoid negative headlines?

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The jury is still out on whether the government will offshore lots of work to slash costs.

 

Countries like India cannot be discounted as destinations for public sector organisations to have their business processes completed at much lower cost.

 

The problem for the government and public sector organisations is this will involve redundancies. Lots of them potentially.

 

This would mean an unpopular government and would be an expensive strategy as workers, some of which will have decades of service under their belts, will have to be paid off.

 

But is there an alternative that people are happier with. I was at a presentation the other week about the next year in outsourcing. Someone mentioned the NHS Shared Business Service in reaction to a question about offshoring government work.

 

What he said is that through the joint venture between the NHS and Steria the NHS has offshored work gradually without the negative headlines that go with it.

 

NHS SBS is a shared business service that uses an Oracle platform and a single set of processes to run the back offices of NHS trusts. About 100 NHS trusts now use the service.

 

It has been a success. It promises trusts up to 30% cost savings and even paid the NHS back £1m this year.

 

When the service was first set up, half the workers, some 300, were immediately in Pune India when SBS was set up and this has grown to 1200 as new business has been added.

 

The NHS trusts that decide to use the service will obviously have to make redundancies. But over the years there has not been a huge backlash against trusts offshoring work through SBS. Not many people realise thousands of NHS jobs have even been offshored.

 

So could that be the way to offshore in the public sector?

 

1- Set up a joint venture between private business and government department.

2 - Look for work within that public sector family, such as police forces, NHS trusts or fire services.

3 - Gradually offshore work as new customers are added.

Woman who ran successful NHS shared service talks about the cross government opportunity

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Ruth Ormsby headed up the Department of Health's Shared Business Service (SBS) before switching to Capgemini a few weeks ago.

I met her yesterday to ask her about the government and shared services.

With the coalition set on cutting the cost of government a strategy to move to shared services seems inevitable. After all, many public sector organisations use the same business processes, but currently have separate IT and staff doing the work.

A contact recently told me that "anyone with an ounce of intelligence can see that shared services are a good idea in government."

And SBS, according to many experts I speak to, is one of the few successful shared services in the public sector. The joint venture between the Department of Health and Steria now runs the back office processes for 100 NHS trusts.

It uses a single Oracle system and one set of processes. It guarantees 30% cost savings for its NHS trust customers. In 2009 the joint venture, which began in 2005, made its first profit and this year paid £1m back to the NHS. Money that can be invested in the front line. More doctors less back office staff.

No wonder Capgemini was keen to get Ormsby on board. Not the only supplier that was interested either.

Ormsby felt her work was done at SBS and wanted another challenge. Convincing civil servants to move to shared services, and as a result make redundancies, would have been impossible in the past. But things have changed.

"We are in a completely different place now because of the new government and the financial problems. The public sector is now recognises the need for shared services."

She says there is more activity at the moment.

Although Ormsby believes there is a shared services opportunity across government she thinks that it will gain momentum in parts of the public sector "where there is a family."

She is referring parts of the public sector such as the police and education, which are similar to the NHS in that they are made up of lots of local organisations. "These organisations have the same back offices but do it differently."


 

Who will Dell buy in services push?

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Dell announced to the world yesterday that it will acquire to build up its services business.

I wonder if we will see some smaller European players consumed. It might have a bit of competition from Oracle.

The US hardware giant got its services business going with the take over of Indian supplier Perot Systems in 2009 for £2.4bn. Dell has some bold claims about what the purchase of Perot means.

A source of mine told me Dell was a bit naive when it bought Perot Systems because it gave it a smaller services footprint than it expected. Maybe that's why it needs to keep on spending.

This is what Dell Services has globally today:

41,000 Employees Globally
12.8 Million Desktops and Notebooks Supported
Over 2.5M Desktops Managed
Over 5,000 SaaS Customers
28 Delivery Hubs in North America, Europe, and Asia
60 Expert Tech Support Centers
7 Global Command Centers

Dell has just bought SaaS integration  firm Boomi.

Which government IT projects face being cut or re-worked?

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I blogged yesterday about the government's progress report on its various plans to cut costs.

The document entitled: Business Plans: Check progress on implementing our policies, is available here.

I have already written about the progress being made in its plan to integrate IT across central government and get value for money. See the post here.

The document also reports on progress being made in other areas of IT. One of which is the decision on what IT projects to scrap.

The government says it has already identified the first tranche of projects and programmes to terminate through the major project review and the review of internal ICT projects.

In January it will agree which of these projects and programmes should be terminated or re-scoped. And then it will begin decommissioning.

In February the government will develop a process for ongoing review of future projects.

Then in December next year it will begin the "publication of regular status report on identified projects and programmes verifying decommissioning."

I must admit I have not seen the final list of projects to be scrapped. But I did write about some that had been scrapped and others that could be on the chopping block. See the blog post here.

Scrapping and re-scoping  IT projec ts has been costly in the past. See this for 105 examples that send shivers down the spine.


 

The government publishes progress report on IT overhaul

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The government has published details on the progress it is making on its plans to make government more efficient.

 

In a document entitled: Business Plans: Check progress on implementing our policies, the government outlines the progress it is making on its IT overhaul.

 

Click here for the document.

 

Here is a summary of the progress of the government's four part plan to integrate ICT infrastructure across central government, and improve value for money in ICT. 

 

1 - Increase the CIO's power to integrate ICT across government.

 

The government has completed this apparently. I never saw any announcements but it is long overdue. Giving the government CIO the teeth to implement a government-wide strategy that is adhered to by department CIOs is a good thing. Completed

 

2 - Draft ICT infrastructure strategy, including government cloud computing strategy.

 

This has also been completed.

 

3 - Begin regular publication of performance details of all ICT projects above £1m.

 

This should have started in September and is now overdue

 

4 - Complete the first version of a cross-departmental asset register.

 

This will start in May next year and end the same month.
 

Europe hands UK 20,000 more Indian IT workers every year, says leaked document

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It seems the new special relationship between India and the Europe is set to mean 20,000 IT workers from Indian will be permitted to the UK.

According to a Daily Mail article documents leaked to MigrationWatch, suggests a deal is done to permit between 35,000 and 50,000 work permits a year to skilled IT workers.

Because Britain has the biggest IT industry it would have to accept the most. Britain would apparently accept 20,000 compared to 7,000 by Germany and 3,000 by France.

Here is the full story

I blogged about this in October.

During the general election campaign the Tories promised a cap on the number of workers entering the UK. It seems that it will introduce a cap but make many exemptions.

The government has already said ICTs will be exempt from the cap. It is these ICTs that make up the majority of overseas IT workers in the UK.

There are high unemployment amongst computer science graduates in the UK.

Will £40,000 minimum salary curb intra company transfer immigration loophole?

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The alleged abuse of the Intra Company Transfer (ICT) scheme could diminish through a minimum salary level set for workers using this route into the UK.

The government is reported to be about to introduce a minimum salary of £40,000 for ICTs.

This follows the outrage sparked by the exclusion of ICTs from the final immigration cap.

The £40,000 minimum salary should help stop suppliers bring staff in from low cost locations, and pay less than their UK equivalents. It will also give a fair deal to those overseas workers in the UK.

"This should be some good news for UK IT workers and for underpaid workers sent to the UK," said one campaigner.

Most campaigners against ICT abuse are not against overseas workers coming to the UK. They just think it is unfair that UK workers can't compete because the overseas workers are not paid appropriately.
 
It seems I got a mention in a Home Affairs committee.

If IT professionals think they have it hard, what about the poor comedians, models, magicians and acupuncturists?

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The Daily Mail wrote an article about the upcoming immigration cap yesterday.

It uses some of the figures I blogged about in July but is worth mentioning following the government's decision to exempt Intra Company Transfers (ICT). A decision which unemployed IT professionals in the UK will find it hard to take. IT workers form overseas are the largest group that use the ICT route.

The ICT route can also been used by commentators, comedians, ice hockey coaches, magicians, acupuncturists, disc jockeys, models, and polo grooms and players. In recent years, businesses have even brought in waitresses from outside the EU.

Although when you look at the figures , not many of these groups have come to the UK on ICTs over the last decade. In fact most the occupations mentioned by the Mail saw no immigration to the UK using ICTs. Not like the Daily Mail to blow an issue like this out of proportion.

The Mail has got the figures from the same source as I did, answers to a question from Tory MP James Clappison. Well I actually got them via a contact.

Again here are all the figures on immigrant workers in the UK, what they do and where they come from.

 

 



 

Cognizant watching public sector opportunity

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Earlier this month I blogged about what the Indian suppliers are planning I the public sector. I wrote how Cognizant is retaining its private sector focus.

I spoke to Cognizant UK head Sanjiv Gossain this morning and he told me about the companiers current approach to the UK public sector opportunity.

Cognizant is being very considered in its approach.

He said the company is definitely watching the sector but because it is in a state of flux it is not going to jump in headlong.

"It sounds like there is an opportunity but it also sounds like it is a dynamically changing landscape.

But the company, which has bits and pieces in the UK public sector, is not ruling out a push into the sector when things settle down and the actual opportunity is clear.

The company acquired London based consultancy firm PIPC in May. PIPC gave it a public sector footprint.

Gossain told me that public sector clients have similar needs to those in the private sector. "People want flexibility, predictable costs and efficiency."

Cognizant has been outperforming the market recently. It reported 43% increase in revenues for its latest financial quarter compared with the same period a year ago. It reported $1.2bn revenue in the third quarter of 2010 compared with $853m last year and expects the full year 2010 to see total revenue of $4.55bn which will be at least 38% higher than 2009.

Gossain says UK customers are spending but remain cautious.

Agile is a skill in demand

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Contractors with Agile software development methodology skills are currently in demand according to figures from CWJobs.co.uk and businesses will soon be looking for permanent staff with these skills.

Agile has entered the top ten of contract skills in demand for the first time this year according to CWJobs.co.uk. It will inevitable enter the top ten permanent skills in demand soon, according to the website.

Following the recession Agile could be more popular because of the fact that the methodology involves the business more than other methods of developing software. Could it be that because money is tight Agile is up?

And how are the software suppliers on Agile?

 

 

2011 set to be IT services M&A frenzy

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A couple of things this week have prompted me to write a post about the possibility of a rush of mergers and acquisitions in the ICT services space next year.

First I received a press release from ICT mergers and acquisition (M&A) specialist Knight Corporate Finance. It said 2011 is set to be a year of ICT consolidation. Then I went to a speech by Robert Morgan, director of Burnt-Oak Partners, who always has his finger on the outsourcing pulse.

Also in September T-Systems CEO Rheinhard Clemens said the European ICT suppliers will need to undergo a series of mergers if they are to compete with the big American players.

Combined this paints an interesting picture of how the supplier landscape might change next year.

Knight Corporate Finance says the valuation of ICT businesses are increasing, managed services are on buyers agendas and ICT companies only selling equipment and professional services, and not services paid for monthly, will not increase in value.

The company says that the convergence of things like voice and data and IT and Telecoms, through M&As, will become a reality in 2011.

The speech by Morgan was about the year ahead for outsourcing. Consolidation will be rampant next year as suppliers set themselves for recovery and develop capabilities to deliver services in different ways.

Here are some of his predictions:

- Dinosaurs will continue to eat dinosaurs. Big service providers will acquire competitors to build scale.

- Tier two providers will partner for pay as you go services and might end up merging with partners. Tier two suppliers do not have the financial resources to create an infrastructure for pay as you go services themselves.

- The European cloud opportunity will be for European companies. Continental European businesses will not want to put there transactions in US clouds. The Telcos in Europe have the resources and the opportunity to build European clouds.

- Indian suppliers will buy but these acquisitions will not market changers. This will include European firms.

Final immigration cap will not stop offshore IT workers taking UK jobs

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IT workers from India and other offshore locations will continue to flood into the UK as the government's promised immigration cap looks set to exclude Intra Company Transfers (ICTs).

According to reports, the government is about to disappoint the UK IT profession by excluding ICTs from the cap that replaces the interim cap.

I blogged about the cap yesterday but have since been sent some articles which reveal more than I knew at the time.

In September blogged on whether or not ICTs would be included in the final immigration cap. It seems we have the answer already. And it is no.

According to an article on the BBC website, Prime Minister David Cameron, speaking  in the House of Commons said: "Intra-company transfers shouldn't be included in what we are looking at."

The Financial Times earlier revealed that Ministers are working on plans to exempt many  ICTs from the immigration cap "after fierce lobbying by business."

The ICT scheme allows IT suppliers to bring staff to the UK if they have a UK operation. This rule was initially designed for highly skilled workers with knowledge that couldn't be obtained elsewhere. For example the CEOs of large US companies setting up operations in the UK.

But IT professionals allege that suppliers, particularly those from India, abuse this system and use it to bring in low cost workers to replace UK workers at their customer sites.

About 80% of immigrant workers are in on ICTs with thousands IT workers from India. At the same time there is a high rate of unemployment amongst computer science graduates, which is 17% for those that graduated last year.

The Association of Professional Staffing Companies (APSCo) has already said a cap that excludes ICTs would be nonsensical.

Last month Mark Lewis, a lawyer specialising in outsourcing at Berwin Leighton Paisner, said reaction to the cap from big business has been negative and could influence the government's decision. It seems he was spot on.

Click here for the figures about the number of immigrant workers in the UK, what jobs they are doing and how many are in on ICTs.

Immigration cap report will be published November 18

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I blogged this morning about the fact that the Migration Advisory Committee is yet to publish its report on the immigration cap. It appears it will be published this month on the 18th.

The report to government will influence the immigration cap that replaces the current interim one.

"On 18 November 2010 the MAC will publish its report to the government on the level for 2011/12 of the annual limits on economic migration to the UK under Tier 1 and Tier 2 of the points-based system," said MAC. 

It will appear here on the morning of November 18. Mark it in your diary and send me your thoughts when it is published.

Has the immigration cap turned from vote winner to thorn in the government's side?

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The much anticipated report on the immigration cap by the Migration advisory Committee is clearly taking longer to finalise than expected.

The report, which will probably influence government policy, was originally due in September. It was then pushed back to "some time in October," but as we sit here in November there is still no sign of it.

I called the Home Office press office at the beginning of this week and an officer told me it was not on the list of publications for this week.

Could it be taking longer than expected because there is lots of uncerainty following the backash to the cap?

When campaigning prior to the general election the Tories used the immigration cap as a way of appealing to the thousands of Brits worried about their jobs going overseas. And it is an issue that politicians need to address because some voters are unhappy. 

Before the election I contacted the Tory press office to ask what they would do about the high numbers of immigrant IT workers and Damian Green, the then shadow immigration minister, came back with an immediate response. Read it here.

The speed of the response suggested to me the Tories had no doubts about the immigration cap. 

IT workers from oversees, particularly from India, are in the UK on Intra Company Transfers (ICTs). This is a visa given to workers that are entering the UK to work for an employer that has a UK operation. Many believe this system, which was originally designed for senior executives at US headquartered companies, is being abused.  See this post for the hard facts about the number of immigrant workers in the UK.

The problem for the Tories now that they are in power, albeit sharing power with the Liberals, is that businesses are against it as well as the Liberals as it happens.  Vince Cable, a popular figure in the coalition, has spoken out against the caps.  Even organisations that have campaigned against abuse of ICTs, such as APSCO, don't think caps are the best solution. See the mixed response that the immigration cap received here.

Another contact of mine, in the outsourcing sector, said this when I asked him about this post. "Another point you need to factor in is that Cameron went to India to encourage more investment in the UK, not helped by the fact that the temporary quota was announced just before.  It doesn't help his case - and he would look foolish in the light of his stated purpose of going to India (first overseas trip, of course, as PM) if he was going to make the lives of highly skilled Indian migrants difficult. So some of the delay may be about the substance, numbers, and presentation of the quota, with India in mind." 

Last month Mark Lewis, a lawyer specialising in outsourcing at Berwin Leighton Paisner, said reaction to the cap from big business has been negative and could influence the government's decision. Or the government might just raise the cap significantly, making it innefective.This is what Mark Lewis said:
 
"Having announced that they would introduce a quota of highly skilled workers from outside the EU, the government introduced a seemingly low interim quota. It is now facing a backlash from UK industry.
 
"They could use the backlash and say they have listened to concerns and either remove the cap or increase it.
 
"This could be a way out for the government. It could be a clever way of getting out of a pre-election commitment to the quota."

Are small IT suppliers ready to serve public sector?

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The government is determined to give SME suppliers better access to government contracts. It hopes to have 25% of suppliers to government to be from SMEs and this week introduced measures to help SME's win government business.

The nature of IT, particularly software development, means a company need not have lots of staff to have a technology public sector organisations can benefit from.

I must admit the term SME can be confusing in itself. A midsized company can have thousands of workers according to some, while others might say this is companies with between 50 and 250 staff.

But Federation of Small Businesses (FSB) head of public affairs Stephen Alambritis says in this case the government is talking about companies with up to 250 staff.

One interesting point is that from next month the government will introduce a standardised pre-qualification questionnaire for SME suppliers. In the past every time an SME wanted to sell to a government department. But the new rule means they only have to do it once and if successful they do not have to do it again.

Alambritis told me that the announcement "is good as far as it goes" but all the good intentions will be undone if the SMEs cannot access money.

Last month I wrote a blog post about a company called CSA Waverley. This is a company with only 26 staff. It's a small supplier that has successfully implemented and supported a national computer system for 28 years for the NHS, which is one of the biggest employers in the world. It also works with hundreds of local authorities.

It was recently put on the government's Buying Solutions  and is now a preferred supplier, so it is approved to sell to thousands of public sector organisations.This will enable it to sell to thousands of extra customers. This will inevitable create jobs within the company and increase choice for public sector organisations.

Director Steve Nicholls says about 75% of UK IT suppliers are SMEs. "Having more SMEs in any marketplace has got to be good because they tend to be very niche with more vertical knowledge."

The Policy Challenge Report published by City University London's Centre for Information Leadership offers seven practical proposals that government could adopt to achieve the policy objective of increasing SME take-up while being compliant with EU legislative requirements.

Read a preview and download it free here.

Indian CEO warns of business threat from China

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One of Computer weekly's journalist recently met HCL Technologies' CEO, Vineet Nayar.

Amongst other things he warned Indian IT services companies to be prepared to change their ways or lose business to Chinese companies.

He says that IT buyers will go to China for the same reason they went to India. To get lower cost services.

China has 350,000 computer science graduates every year and they cost less than their equivalents in India. Chinese service providers such as Bleum and VanceInfo are currently targeting the UK market for growth.

I recently met someone from a Chinese software company and he was not afraid to say that one of China's selling points is the fact it is much lower cost.

I recently met Ashok Soota, one of the pioneers of offshoring to India. He is a former president of Wipro. He said when Indian firms posed a threat to Western companies they were ignored, which ultimately meant they could take massive market share. The western firms then thought 'if you can't beat them join them' and set up their own low cost Indian resources. For example IBM has 100,000 workers in India, some 25% of its total.

Read my interview with Soota here.

But it seems the Indians are ready for the challenge. Read Nayar's comments in this article.

I asked Thomson Reuters global head of Enterprise Information Mike Powell about his experience with Chinese software development. Thomson Reuters has development centres in Hong Kong and Beijing.

He said it gives the company access to a large number of highly skilled developers and allows it to scale up quickly.

German utility giant Eon agrees €3.2bn outsourcing spend with HP and T-Systems

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I have been told, by good sources, that German energy giant Eon has agreed to spend a total of €3.2bn with HP Enterprise Services and T-Systems for various IT services.

According to sources, the company has handed HP the contract to run its desktops and datacentres with T-Systems taking control of the networks.

The deal involved HP buying some of Eon's assets said one source.

Serco has its wrists slapped by government for trying to pass the buck

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Serco has had to apologise to its suppliers after trying to get them to reduce their costs so it could meet the cost cutting targets set on it by the government.

 

According to an article in The Telegraph, Serco, which is a major IT supplier to government, wrote to its major suppliers asking for a 2.5% rebate in return for still being considered for future contracts.

 

The government is furious according to the report. This is against the spirit of the cost cutting. It was supposed to encourage suppliers to find innovative ways of providing more for less.

 

In July government minister Francis Maude met the CEOs of the government's major IT suppliers to ask them to reduce the cost of services. The government said it was willing to listen to suppliers for ideas about how to cut costs.

 

The Telegraph article quoted a Cabinet Office spokesman as saying: "We unequivocally disagree with and are highly critical of the approach taken by Serco. Francis Maude will be calling them in to explain themselves."

 

According to an article on The Register Serco has apologised. "As a company that values our relationships with all our supply chain partners, large and small, we deeply regret this action and apologize unreservedly to them for the concern that this has caused."

Indian IT suppliers hurt by need to pay UK based intra company transfers the going rate

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Back in March I blogged about some changes being made to the law regarding Intra Company Transfers (ICTs). These changes included an acknowledgement that certain offshore suppliers were not paying UK based staff as much as they should . A clampdown was also announced.

According to an article on Indian website, Indianexpress.com, it seems the changes, introduced in April, are having an impact on some Indian suppliers.

Infosys, Wipro and Mastek are mentioned in the article as companies that have taken a hit on staff costs after adjusting their practices to fall in line with the clampdown.

One offshore worker based in the UK told me: "When I came in September 2006, on my work permit my gross salary was written as £31,695. My gross salary paid till March 2008 is less than what was written on work permit."

The biggest complaint in the UK about the ICT scheme is that it is unfair because it is impossible for UK workers to compete with offshore staff coming to the UK because they are paid less.

In March the UK Boarder Agency seemed to acknowledge this practice. A statement then suggested companies have been using tax exemptions to multiply up net salaries to an artificial figure.

Here is an example given to me by an expert. "An ICT is paid net salary and allowances of £25k; this would be a gross salary of £31.5k if full income tax and employee national insurance were paid, and this is the artificially high figure put on the Certificate of Sponsorship; the ICT's employer has a dispensation from HMRC to exempt part of the ICTs salary from tax, and only pays £3k income tax and employee national insurance. Therefore the ICT's actual gross salary is £28k."

Add this up thousands of times and it is a lot of cash.

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