December 2010 Archives

Centrica changes its outsourcer portfolio

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Utility company Centrica is about to announce major changes to its IT outsourcing strategy.

A contact of mine has filled me in.

HP and Fujitsu will replace T-Systems in the datacenter and on the desktop. Meanwhile T-Systems will continue working with Centrica's SAP in the cloud and will work on the development of smart grid technologies.

I doubt T-Systems can compete with HP and Fujitsu on price for desktop and datacenter services, which are commoditised services these days.

Capgemini buys CS C (not that one)

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Today seems to be the day for French IT services companies buying German IT services companies.

First we had news that Atos Origin is acquiring the IT group of Siemens and now Capgemini is taking over German company CS Consulting.

Are we entering a phase of mergers and acquisitions in the European IT services space?

Rheinhard Clemens, CEO of IT services company T-Systems, told Computer Weekly back in September that mergers and acquisitions were vital if European service providers are to compete with US giants.

Here is a list of top 15 Western European serice providers according to Gartner.

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



Atos Origin to buy Siemens IT group

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It looks like the IT services consolidation has hit Europe big time, with Atos Origin set to take over Siemens' IT operation for 850m Euros.

The companies said this will create a European IT champion.

Here are the full details.

I will write a full article later today.

Businesses taking advantage of outsourcing by insourcing outsourcers.

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Another software supplier bought by customer

Standard Life has paid £42m to acquire sales automation software maker Focus Solutions.

The move is another example of a big business taking over a supplier to guarantee it gets the most out of software.

The London Stock Exchange bought Sri Lankan software supplier Millennium IT back September 2009 when it decided to replace its core trading platform.

These are examples of businesses wanting to take advantage of the skills and IP of suppliers while retaining control in-house.

Owning the supplier gives the customer the resources required to support the software and control of the software's development. With business critical applications full outsourcing is a step too far.

It also means that when changes need to be done to the software they will be quicker because the skills will be in-house and therefore there is no need to communicate what is required to a supplier. After all you might not be the supplier's to priority.

 

Equaterra report available free here

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I have written quite a few articles as a result of getting a sneak preview of Equaterra's latest research of IT service providers.

Each year, Equaterra undertakes an investigation into organisations' satisfaction with their outsourcing service providers.

The research results are recognised as the most extensive and representative 'perception study' on the issues of Information and Communication Technology (ICT) sourcing in the marketplace today. This comprehensive research study is conducted in a number of European countries using a common format to enable Europe-wide analysis and conclusions.

Click here to download the management summary of Equaterra's 2010 research into IT service providers. This requires registration to Computer Weekly.

Main findings:

1. The economic climate is still increasing the demand for outsourcing in the UK

2. Cost reduction and flexibility goals dominate, but other drivers become more important

3. Global sourcing remains a dominant element in organisations' sourcing strategies

4. There was a slight decline in the quality of customers' abilities to manage and govern service providers

5. General satisfaction with outsourcing increased compared to last year

6. Many European-based service providers have lost ground against the Indian service providers on general satisfaction


 

Can the UK preclude China for offshore IT services?

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The government needs to cut its costs and IT is one area where it can do this without compromising services. In theory that is.

The government has made it clear that it wants offshore companies to bid for government work. The coalition government has already been cosying up with India. And lets not forget it left Intra Company Transfers out of the immigration cap, which was seen by many as a compromise to keep India on side.

But the government has also been out to visit China.

It makes sense. India and China are the two fastest growing economies and they have massive populations who might want to buy British made goods and services. But the catch is that these superpowers in the making will want something back.

Big IT contracts with the UK government could get the ball rolling.

I met a senior executive at a Chinese software house recently and he told me he asked a government official if Chinese IT companies have a chance winning UK government contracts. The government official told him: "We do not preclude China."

In the past the government has not really offshored that much to India in comparison to the private sector. So if it to make the leap now and offshore loads of work. why not China as well?

A UK consultant told me recently that if the government is to cut its IT costs it must adopt private sector mentality, which includes offshoring work.

And China is already being used by lots of Western companies even though you do not hear as much about it as the work being done in India.

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.

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.

| am attending a media briefing with the China-Britain Business Council (CBBC) next week so look out for more on China IT. If you have any thoughts please comment.

Government invites IT suppliers to vent their anger about unfair procurement rules

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We know the government wants to work with a broader set of IT suppliers. But we also know it is very difficult for many IT suppliers, particularly SMEs, to jump through all the procurement hoops.

The government realises this and has created a website where suppliers can tell the government what problems they are having.

Click here to tell the government about your IT procurement frustrations.

The website must have been launched on December 01. Since them there have been loads of comments, 43 in a day and a half is good going. It seems there are lots of frustrated SME IT suppliers. See the comments here.

Small, cheap, open source and off-the-shelf IT is what the government wants

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The Telegraph has reported on comments made by Cabiet Minister Francis Maude, when speaking to the CEOs of the government's big IT suppliers.

He talked about reducing the size of deals and opening up the sector to more suppliers. He also talks about using off-the-shelf technology and open source software. Of course we all knew this, but it is always good to have it reaffirmed. Especially when it is coming from politicians.

No more easy margins is the message. Maude is reported to have said: "The days of the mega IT contracts are over, we will need you to rethink the way you approach projects, making them smaller, off the shelf and open source where possible.

"We will expect you to be transparent in all your dealings with us and for the terms of the contracts we sign with you to go up online."

Click here for the full Telegraph story.

The private sector is has been moving away from mega-deals for years and this is currently accelerating.

Will Indian IT firms have a field day as economy picks up?

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Earlier this week I blogged about the latest report about suppliers from Equaterra.

The report revealed that Indian suppliers such as Wipro, Cognizant and Mahindra Satyam were doing well in the eyes of their customers. The company's UK boss told me part of this success was down to the fact that these suppliers have built local management teams. This gives customers a warm feeling.

Last week Jean-Louis Bravard, director at sourcing consultancy Burntoak Partners, said something similar in an opinion piece he did for Computer Weekly .  In fact he goes as far as saying Indian suppliers could be on the cusp of a period of success.

Jean-Louis was  previously global head of financial services at EDS so he knows a thing or two about what it takes to be a true global service provider.

"Indian suppliers may have a field day if they develop a strategy of strong local presence leveraging their huge home advantage. In that I see firms such as HCL, Infosys or Wipro thrive if they have the courage to use M&A to create solid outposts and acquire a more diverse sales force than the current one," he said.

Read his full opinion piece here. He talks about the suppliers that could win or lose in the recovery.

Just to remind you the Equaterra study revealed that Wipro was the best supplier in terms of general UK customer satisfaction. Mahindra Satyam was second with Cognizant third.
So are the Indian suppliers now becoming true global players with management teams local to their customers?

With the Indian suppliers bringing up the rear in Gartner's top 15 European service providers list (in revenue terms) there is certainly room for them to increase their European footprints.

For example, in 2008-09, IBM had a 7.8% sghare of the UK market and India's biggest supplier TCS only had 0.8%, according to Gartner.

HCL has just won a deal in Sweden with financial services group OP Pohjola. The deal combines local and offshore support. "We are confident that our scalable and localised delivery set-up, combined with our focus on value added services will increase the effectiveness of OP Pohjola", said Liselotte Hägertz Engstam, head of Nordic region at HCL Technologies Sweden.

HCL is attempting to increase its local workforces in Europe.

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About this Archive

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

November 2010 is the previous archive.

January 2011 is the next archive.

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