August 2011 Archives

Smart metering project puts billions of pounds on table for IT suppliers, but are cost overruns inevitable?

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The UK's smart metering project is gaining momentum with the announcement of two major tenders.

The government estimates the total cost of the GB Smart Metering Implementation Programme (SMIP) to be £11.3bn.

ICT Suppliers have already been alerted by the Department of Energy and Climate Change (DECC) of two large workloads.

One is related to the communications infrastructure that will transport data from smart meters in homes and businesses to a central hub and to utility companies. This deal could be worth up to £4.5bn. Read more here.

Then there is an IT contract worth up to £240m on offer. Read more here.

But how will the government avoid a situation where budgets are blown away?

In July Margaret Hodge MP, chair of the committee of Public Accounts, suggested that there a significant overrun would not be a surprise.

"At the moment the estimated cost is £11.3 billion, but all our experience suggests that this budget will be blown.

Also, for the money spent to provide value, we all have to change the way we behave. It is not clear how the Department will stimulate this behaviour change. And, as technology changes, the Department will have to be properly flexible to respond with up-to-date technology for the smart meters. These uncertainties can drive up costs more than planned.

We will keep a close eye on project progress, and would urge the Department to address the risks identified in this report."

Add to this the fact that the general public are not really behind a project that will increase costs in the short term and you have a recipe for disaster.

A survey, which was commissioned by smart meter technology provider T-Systems and carried out by the Economist Intelligence unit revealed, in June, antipathy towards the government's plans to roll out smart meters to 30 million homes by 2020. Consumers are more concerned about the financial costs of using smart meters than the environmental costs of inefficient energy use. Fears of initial price rises and a lack of evidence on future savings could de-stabilise government plans to reduce energy consumption through smart metering, according to the survey of 1,000 consumers.

Rob McNamara, is manager of SmartGrid UK, which was set up by IT industry body Intellect to bring together IT companies, environmental organisations, government, regulators and consumer groups to coordinate the multiple stakeholders and advise the government on the project. He is conscious of the importance of getting consumers onside. At the same time he says the DECC has got its ship in order.

He told me this morning that DECC has set solid foundations since last August. He added: "If you want to avoid problems you have to ensure there is consumer engagement and that consumers understand what smart metering is about."

India confirms tough data law will not apply to Indian BPO suppliers

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The Indian Data protection law, which was introduced a couple of months ago, created uncertainty in the outsourcing sector.

The new law looked like putting lots of extra work on suppliers providing BPO. A few lawyers I spoke to at the time said it was still quite unclear how the law would hit Indian outsourcers but it did seem clear that they would be hit in some way.

But the latest is that BPO companies in India will actually be exempt from the rule and will rather have agreements with the companies they are working for. So no change then? Read the Times of India article about it here.

Nasscom, the industry body representing Indian suppliers said at the time that clarification would come.

The law, the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, was introduced earlier this year. It is hoped that it would alleviate fears that data such as credit card details are at risk when handled by an Indian BPO, because no data protection law existed. But it looked like it was going to place a major burden on the Indian suppliers.

The new rule is section 43A of the Indian IT Act. According to the Times of India in May the rule states "that a corporate shall have to obtain permission through letter or fax or email from each client before collection of sensitive information. Thus, BPOs will have to inform the client regarding purpose of usage before collection of such information, if they go by the new IT rules 2011."

This would create additional work and potential hurdles for Indian suppliers obtaining consent from the customers of their clients.

Kit Burden , Lawyer at DLP Piper said, at the time the law was being talked about, that there has been a lot of panic, mainly from the US.

He said after going through the legislation he interpreted it as meaning the consent only has to be given once. This would be given by the controller of the data, who would be the client of the service provider.

He welcomed the new legislation and he says if Europe accepts it as being as strict as its own it would negate the need to put workarounds in contracts.

He told me today that there was a storm in a teacup. "There is no way the Indian government would introduce anything that would jeopardise one of the success stories of its economy."

Is this a cop out by the Indian government or was it always the plan?

Why is the UK border Authority still using pay rates from 2008 to limit immigration?

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When the UK Border Authority (UKBA) this week announced that net migration had gone up I couldn't help following up on a story I wrote a few months ago.

In the IT profession the big criticism of the immigration rules is the fact that IT workers from overseas, particularly India, enter the UK on Intra Company Transfers (ICTs). For example if an Indian IT supplier has a UK operation it can bring staff from India to work in the UK.

ICTs are not included in the government's immigration cap. As a result as long as their employer does not break the rules they are free to bring in as many as they like.

But there are rules, which the government "tightened up."

So in March the UKBA published rules about how much overseas workers doing particular roles should be paid if they are granted entry.

It was good news for UK IT professionals because it meant IT workers brought to the UK from offshore locations such as India, will suddenly be a lot more expensive. As a result UK workers were more attractive.
 
Here are examples of the changes that were announced.
 
- IT or IS director minimum salary was £83,200 a year in 2010 and is now £92,628, which is about an 11% increase.
 
- Minimum pay for a computer services manager leapt from £43,000 to £53,516
 
- Software managers or programme managers have to get paid at least  £57,837 now compared to £40.500 last year.
 
-Systems developers working onshore had to be paid at least £31,200 last year but will now earn £41,891. And Systems Auditor minimum pay moves from £34,600 to £47,880.
 
-Analyst programmers had a minimum of £29,100 in 2010 and now a minimum of £35,719
 
-The programmer minimum was £26,000 and is now £31,243, while the software engineer minimum jumped from £30,100 to £36,578 and the systems administrator minimum pay moved from £28,000 to £36,634.

But this was short lived and the new figures were only published briefly before being pulled because of "errors."

Steve Lamb, regional operations manager at the UKBA Agency said: at the time: "We have been alerted to errors in two of the recently published Codes of Practice and these are now being corrected. In the meantime, the previous codes have been reinstated onto our website."

The UKBA reverted to the 2008 figures. And today it still has the 2008 figures as the guide. Hard to believe that it has not sorted out the errors yet.

This is really annoying the company that provides the government with the data, SSL. George Molyneuax at SSL told me that not only are the figures from 2008 but they are also base the figures on the lower quartile of the sample and do not differentiate regions. We all know that London jobs are much higher paid than the North of England for example.

From the 31 December when the government's contract with SSL expires the government will not be able to use SSL unless it consults SSL about which data it uses in the future.

Molyneuax said he would insist the figures used are the average not the lower quartile and he wants them to do it by region because London skews the figures.

So why were the figures published in March so wrong and why is the UKBA still using SSL's 2008 data?

Former Lehman Brothers IT COO gives tips on using the Scrum development technique

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James Martin was European IT COO at Lehman Brothers when the investment banking giant collapsed in 2008.

He has since spent time at a couple of major banks and returned to the remnants of Lehman Brothers to tie up loose ends. The investment bank may have collapsed just over but there are still investments out there that need to be dealt with.

James has now set up a company to provide online performance benchmarking for small and medium UK firms. The company, Firmrater, was launched in August 2011.

As a small group of people they had to outsource development. He wrote a very interesting article describing his experience using the Scrum development method. It was a big change for someone used to huge corporate IT projects.

Just for a taster here are James' top Scrum tips.

1. Produce fully detailed functional specifications before starting development
2. Create minimal administrative documentation: focus on the product
3. Use online collaboration tools with a minimum of meetings and phone calls
4. Carry out rigorous testing based on the specifications
5. Use written change requests which include time and cost impact
6. Provide a "low distraction, high freedom" working culture for the whole team

Chicken in a Scrum:  A client's view of Scrum Rapid Development

By James Martin


"Having spent the best part of 25 years in IT, when we decided to set up our own online business and develop a bespoke application from scratch, we had enough experience to know that nothing runs quite as smoothly as it should when it comes to technology development projects.

I spent most of my career working for large corporations and struggle to remember very many projects that genuinely completed on the original time or budget. The volume of change requests usually knocked plans off track and functionality was often dropped for the now infamous "Phase 2". Not really a criticism, more a case of the traditional project development methodologies and working practices used by many large firms.

If your own money is tied up in a development project you clearly need to do everything you can to make sure the time and cost stays under control and you get the product you need to launch your business.

Having spoken to several web application development firms about technologies and methods, I was intrigued by the Scrum approach and wanted to find out more about it. I have worked with various rapid or agile methods in the past but not seen them succeed as well as they should, so this is how I became a "Scrum Chicken" for the first time.

Nobody has a crystal ball so producing a traditional project schedule in advance is fraught with risk. Why not abandon the detailed schedule altogether? You can't slip interim milestones if you don't have any and you can't add padding into them either.

The Scrum approach, which breaks a project into small pieces and tackles them as quickly as possible made a lot of sense to me, so I was sold. Of all the methods we could have chosen, we put placed out bets on the one which seemed, at face value anyway, to be relatively unstructured and with minimal documentation around it.

To give ourselves the best chance of producing the application in the shortest possible time and at the lowest cost, experience dictated that we produce detailed specifications describing all functions along with a mock-up of each web page. The key problem I have seen in IT development projects is a general lack of specifications before coding starts.

Detailed specifications are critical if you want to get a realistic fixed development price before work begins. Change requests cost time and money for all concerned so we spent several months refining the specifications with our Scrum Master before seeking a price to develop the application. Taking this approach, we ironed out a lot of the potential hazards before work started. The developers were able to quote a fixed price along with an overall timescale which was recorded in the development contract.

Overall we spent about 5 months (48% of total project duration) producing the specifications, which was time very well spent. To accelerate the start of development, placeholders were left for text content as this could be dropped into the application later. This enabled us to work on the website content in parallel with development of the application and cut the launch timescale by several weeks.

The Scrum development team then took over while we focused on the non-IT tasks that you have to put in place when starting a new business. I received a handful of clarification requests and one progress email each week. No meetings, no phone calls. That alone saved us all a great deal of time which would otherwise have been spent travelling and talking rather than coding and testing. The focus throughout was always on the product with very few distractions or interruptions. Clarifications and decisions were generally handled by email within a few hours so the Chicken did not impact the Scrum. It was a very dynamic "real-time" experience. Development took 3½ months (33% of total project duration).

The application was then made available for acceptance testing and any pre-live enhancements. We had arranged a dedicated server in a commercial data centre so several instances of the system could be installed for testing and production. This enabled the Scrum team to implement the system and enhancements for remote testing and signoff before promotion to production. It's a neat solution and again supported collaborative online working during the development process.

We spent 2 months (19% of total project duration) testing the system and making small enhancements. No major functionality was added or omitted during the development process and the work really was completed when expected. The team had been running about 2 weeks early until I decided to upgrade to a more powerful server. This Chicken-inflicted delay put the Scrum team back onto the original planned completion date. Not bad for a 5½ month development programme with no traditional schedule, formal progress reports or meetings.

The fixed price held firm but we decided to allocate additional funding for pre-launch enhancements which amounted to 6% of the original contract sum.

Now the system is running and our online working practices are well established, we can get minor functional changes live in as little as 30 minutes from the point we upload a change request. That includes development, testing in the QA environment, signoff and promotion to production. Not bad when you consider three separate firms are involved, each working remotely.

So the Scrum experience was a very good one, even for a fresh Chicken. The application really was developed for a fixed price, it landed on time and it met the specification. I know this is not simply due to the approach we selected as our Scrum team members are highly skilled, very dedicated and put a great deal of care into their work. The key point here is that a method can either help or hinder a development project and we wanted to use a method which was most likely to help us succeed. We made the right call, Scrum is the future.

Our top Scrum tips:

- Produce fully detailed functional specifications before starting development
- Create minimal administrative documentation: focus on the product
- Use online collaboration tools with a minimum of meetings and phone calls
- Carry out rigorous testing based on the specifications
- Use written change requests which include time and cost impact
- Provide a "low distraction, high freedom" working culture for the whole team"

The Scrum Master role and Project Management were performed by WeSolutions Ltd (www.wesolutions.co.uk) and Scrum development carried out by Website Design Ltd (www.websitedesign.co.uk).

The stats

james martin table.jpg

Is the evidence of shared services success flawed?

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I blogged yesterday about the fact that local government's adoption of shared services is accelerating. I outlined a few groups of councils that are embarking on shared services journeys.

These included:

-Surrey County Council looking to share a comms network with nearby authorites;

-Four London boroughs that are looking for a systems integrator to support their plan to share a single instance of Oracle's latest ERP software

-Glasgow, Inverclyde, East Renfrewshire, Renfrewshire, East Dunbartonshire, West Dunbartonshire, and North Lanarkshire joining up services in to save around £30m a year.

A comment was left on the blog by Howard Clark (this might not be real name), which is very interesting and balances the debate. After all the reason I blog about shared services is to get a debate going about them.

So here is the response if you have not already seen it.

By Howard Clark

"A few corrections if I may.

My understanding is that West Dumbartonshire is pulling out of the Clyde Valley shared services scheme. They know that there is no evidence to support shared services, just estimates, projections and surveys generated from within the shared services industry.

Professor John Seddon, an expert in service organizations with extensive experience in public sector systems says that there are two arguments for sharing services.

The 'less of a common resource' argument and the 'efficiency through industrialisation' argument. The former argument is 'obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.

The second argument is 'efficiency through industrialisation'. This argument assumes that efficiencies follow from specialisation and standardisation - resulting in the creation of 'front' and 'back' offices. The typical method is to simplify, standardise and then centralise, using an IT 'solution' as the means.?

The problem with the industrial design is simple - it doesn't absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can't get what they want. Worse still once shared, costs can be locked-in by contracts, SLA agreements and other un-evidence and poor management practice.

The evidence of this flawed theory can be found everywhere. In HMRC or South West One shared services which predicted savings of $176m over 7 years and actually recorded a pre-tax loss over its three financial years. Duplicate payments sitting at $772,000 and a struggle to manage $12.9m in outstanding debts.??

This year Western Australia followed Queensland in ending its shared services. It was claimed that it would save $58m a year and instead cost $444 million dollars (no savings). It is estimated that it will cost taxpayers between $1 - $2 billion dollars to rectify."

Also see: Can shared services do more than just cut overheads?

 

Local government is adopting shared services at lightening speed

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Back in December a colleague of mine wrote an article about research from the Chartered Institute of Public Finance and Accountancy. The research suggested nearly all local councils will use shared services.

It seems to be moving in that direction of recent tenders are looked at. There is loads going on in local government.

How deep can these sharted services go? How long will it be before all IT enable services are shared ion local government? Which other public sector organisations can share IT with local authorioties?

- This week a tender has been placed on the Official Journal of the European Union by four London boroughs that are looking for a systems integrator to support their plan to share a single instance of Oracle's latest ERP software.

The contract, which will be worth up to £88.5m over four years, includes the London boroughs of Barking and Dagenham, Brent, Lambeth and Lewisham, which are existing Oracle users. It is hoped other councils - including Croydon and Havering - will join the shared services deal at a later date.

- Early this month Surrey County Council put out a tender for a managed network service that will be shared between public sector organisations within the council as well as neighbouring Berkshire.

The contract titled Unified Communications over Regional Networks (Unicorn) was been put out for tender on the Official Journal of the European Union.

 It is asking for bidders that provide integrated network systems and services as well as telecoms suppliers.

The supplier will be tasked with providing services, including managed wide and local area networking and IP voice services, to public sector organisations, provide the ongoing management of contracts within the overall project, as well as technical, commercial, migration, training and support. The service provider will be expected to work alongside staff from the public sector who will provide specialist business and procedural expertise.  

- Also this month came news of seven Scottish councils joining up services in a move that is expected to save around £30m a year. The participating councils include Glasgow, Inverclyde, East Renfrewshire, Renfrewshire, East Dunbartonshire, West Dunbartonshire, and North Lanarkshire.

Staff numbers under the new shared services model are expected to decrease by around 25% over time, which could see more than 100 IT roles go. IT is the most expensive function across the councils with a total cost of £58m per year. 
 

US IT workers sue former employer alleging that Indian workers push them out

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Interesting story yesterday about some of the industrial relations problems that can occur when businesses outsource work to an offshore supplier.

In California 18 IT workers are suing former employer Molina Healthcare Inc, its CIO and an IT supplier, alleging that the company broke state law when it replaced them with Indian workers from outsourced service provider Cognizant.

The US H1-B visa, which allows US employers to temporarily employ foreign workers in specialty occupations, was used in this case.

The workers that were eventually laid off say for several years the US workers were marginalised as the IT department became dominated by Indian nationals.

See the full story here.

US IT professionals are not alone in their suffering. UK IT professionals in their droves have lost their jobs as part of an IT contract that sees their roles sent overseas.

I am constantly writing about the problems IT professionals face as a result of businesses bringing offshore workers to the UK using the controversial Intra Company Transfer scheme to provide businesses with low cost IT staff.

Well the US equivalent, known as the H1-B visa, is equally problematic.

The New York Times has a story about it which has serious echoes of the UK. I post the article because it is very clear in describing the problem. The similarities to the UK are frightening.

Click here to read it.

See this video about the UK problem.

Also see this link for some of the articles about the issue in this blog. Scroll down there are lots.

Why large IT projects are 20 times more likely to fail than other projects

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When the coalition government gained power it got stuck into government IT projects without hesitation. When you are looking to cut costs and avoid waste I suppose IT projects in the public sector are a good place to start. Projects have been cut left right and centre.

The private sector is just as bad.

But why is it so bad when it comes to IT?

I wrote a news story about research from the Said Business School at Oxford University about the fact that IT projects are the most likely of all to fail.

The research expects more businesses to go out of business as a result of a failed IT project. It says that this happens because project managers focus on the average performance of previous IT projects rather than variable performance.

See the article I wrote here.

See the full article written by the Said Business School academics here. If your planning a big IT project it is worth a read.

To research said that large IT projects are 20 times more likely to fail than other major business projects.

It seems that IT project failures are actually on the up because projects are getting bigger and more complex.

Are you an Orange customer unable to access email?

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I wrote a story earlier on the Computer Weekly website. Basically some customers of Orange have been unable to access their email accounts for weeks. Read the story here.

According to one affected customer Orange has been really poor at communicating the problem to customers. It seems quite serious if a problem can put email accounts out of action for weeks. A customer I spoke to says she uses the account to run a few small businesses and as a result of the problems is losing customers.

A call centre support worker said over the phone that lots of people were affected but Orange said in a statement that it is only a few.

So in an attempt to put the record straight I am calling on Orange customers to tell their stories. I will report later on the findings.

If you are one of the Orange customers affected by email unavailability please complete this short questionnaire.

UK IT warned that postgraduate research costs to soar. Can IT suppliers help out?

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An inevitable rise in tution fees for post-graduate courses could damage the UK's standing in the global IT industry. But could the IT suppliers put their hands in their pockets and help universities find a way of lessening the blow?

I was at a round table hosted by Logica this week. One of the experts speaking was Anthony Finkelstein, dean of engineering sciences at University College London (UCL).

He said there will be a worrying knock-in effect of the increases in undergraduate tuition fees which have sparked a major storm since the government introduced rules that meant universities could charge anything up to £9000. See full story here.

But perhaps more worrying for the UK IT sector is that Finkelstein says fees in Masters degrees are set to rise substantially as a result.

He says postgraduate degrees that cost between £3,000 and £5,000 per year might rise to £10,000. "The full consequences of the undergraduate fees decision and the HE White Paper are yet to become clear. The broad direction of travel for institutions such as UCL is however, more or less apparent. It is appropriate that now some attention should focus on postgraduate taught provision, which forms a large part of our portfolio and that of other research-intensive universities," Finkelstein recently blogged.

He said that although the full impact of the undergraduate fee rise is as yet unclear current fees will increase. "Obviously, the situation in which a full-year postgraduate course, with a lengthy dissertation requiring close supervision, would be priced below that of an undergraduate programme, of shorter duration and lesser intensity, is unsustainable. Thus it will be necessary for universities to raise the fees for most postgraduate taught masters (note: some professionally oriented courses already have high fees) to somewhere above the £9000 payable by incoming undergraduates."

He said the university might have to lessen the blow to avoid potential students staying away. "At UCL we may choose to taper the fee increases in order to test the market and to subsidise some specific courses. Our capacity for continuing subsidies will however, necessarily be restricted, undergraduate students will expect the experience they are paying for and financially such subsidies are a zero sum game."

See Finkelstein's full blog post, which he published on July 14, here.

I was wondering if the IT industry could step in with some funding initiatives to help keep UK universities and research at the top of the global sector.

Logica calls for better business and academia communication with central IP register

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IT services firm Logica is campaigning government to set up a central register of the intellectual property (IP) of universities to help good ideas make it into commercial environments.

UK businesses are missing out on world-leading research from UK universities, simply because the communication between academia and commerce is inadequate.

At a round table discussing UK innovation Logica UK CEO Craig Boundy said the company would write to government to suggest the creation of a resource that could be shared between businesses and universities.

"We need an effective knowledge sharing platform. It is currently far too difficult for organisations to access university research," added Boundy. "We are calling on government to establish a register that allows universities to share IP."

Businesses could take the IP and support its commercialisation in partnership with universities.

What do you think?

Atos Healthcare staff under investigation for obscene criticism of sickness benefit claimants

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Back in November I blogged about a group that had been created by disability rights campaigners that believesbenefits for sick and disabled people have been wrongly cut because of the system that DWP supplier Atos Healthcare uses when assessing them.

Atos is investigating one administrative worker and one nurse for making comments on Facebook. The workers are under investigation after they allegedly referred to the claimants as "parasitic wankers" and "down and outs" separately on Facebook.

Atos, through its Healthcare arm, uses Logic Integrated Medical Assessment' (LiMA) software to support medical professionals when assessing claimants. It does assessments on behalf of the DWP.

Basically the computer says yes or know and there is a campaign against the use of the system. The group, known as the Black Triangle, wants Atos removed from the contract and Atos Healthcare staff have

 In a written statement Atos said: "Atos Healthcare is committed to providing a high quality, professional service to the DWP and expects the same of all its employees. Where it is found that these standards are not adhered to, this is taken very seriously and appropriate disciplinary action taken."

If true it doesn't half show the importance of outsourced staff to the reputation of an organisation. It is obviously an awful thing for Atos to deal with but it doesn't reflect too well on its customer the DWP.

Read the article about it here on Computer Weekly. 

Are nearshore suppliers the best low cost option for agile software development?

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Agile software development requires development teams and users communicating all the time.

The flexibility and constant testing makes it a challenge to succeed using agile software development techniques if these groups of people are not in close contact during work time. You can't really do a scrum over thousands of miles.

This gives outsourcing let alone offshoring a disadvantage. 

I had a conversation with the man heading up Cadbury's digital developments today. He told me that when the company embarked on its digital strategy, which involved the creation of lots of websites to increase interactions with consumers. Cadbury did not have the in-house re-sources to complete the project so decided to outsource to a specialist. After looking at a number of suppliers it chose Romania/Moldova based Endava.

This nearshore location had the best combination of experience, cost and proximity to customer, when compared to other digital development suppliers based  onshore, offshore and nearshore.

The fact that the supplier works the same hours as the customer means agile software development techniques can be used. The client can work very closely with the development team, like a virtual team,  and ensure constant targets are reached.

Could this be the biggest advantage of sending work to nearshore locations?

There is a lot more interest in nearshore locations such as countries in central and Eastern Europe. It seems it is a case of big businesses not wanting to have too many eggs in one basket, namely India.

Hear are five reasons to outsource to Eastern Europe

1. High skilled labour
The former Soviet Union had a strong educational emphasis on engineering and the sciences. As a consequence, many of the countries in this region today have a highly skilled workforce in areas such as computer science, but at much lower labour costs than the UK.

2. Cultural similarities
Some companies believe that Eastern Europe has a distinct advantage over places such as India when it comes to outsourcing because employees tend to take a more collaborative and less process-driven approach to projects.

 3. Time zones
Eastern Europe covers a vast region, but most of the countries within it are just a few hours away from the UK in terms of time difference, making it easier to communicate within working hours.

4. Data protection
Eastern European countries within the EU could be a good choice for work which requires adherence to the Data Protection Act.

5. Growing labour market
While skills shortages remain a problem in the UK, growth in IT outsourcing in Eastern Europe continues to increase. In 2009, Romania was found to be the country with the highest growth of IT specialists, increasing by about 12% compared with 2008. Ukraine followed with over 9% growth.

DWP wins outsourcing contracts at MoD, bad news for Capita, Logica, NorthgateArinso and Liberata?

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I had an interesting conversation last week with Robert Morgan who is a director at sourcing broker Burnt-Oak Partners.

I called him to get his views on a meeting next week of an All Party Group that will be looking at how the government can become a better customer of outsourcing.

The conversation got interesting when he told me that the Ministry of Defence had recently outsourced HR and Payroll to the Department of Work and Pensions. Could this be a sign that the government is tired of the big suppliers?

If the DWP wins enough HR and Payroll contracts within government the suppliers might find it hard to compete.

Below is a copy of a blog post from Robert, which originally appeared in the Burnt-Oak blog.

 

The Trick for Government Shared Services

By Robert Morgan


"In anticipation of the meeting of the All Party Outsourcing and Shared Services Group on the 22nd of August we would like to say that Government has finally started to make in-roads to using the principle of outsourcing (consolidation, standardisation and scale) to secure deep departmental savings through Shared Services.

There is however a significant difference in how they have gone about this, and ample evidence that this will continue. Take the case of the Department for Work and Pensions (DWP) who have recently won HR services and payroll business from two parts of the MoD. Logically this makes huge sense - utilising DWP's core strengths to undertake similar work for other sections of government. Currently DWP's IT and business services are being underpinned by commercial outsourcing contracts with suppliers like Fujitsu, HP and CapGemini. But will they really need them if government business continues coming DWP's way?

The trick for Joe Harley, Director General and CIO for DWP and also the lead player in determining and driving IT policy for government in outsourcing and shared services, is can he secure enough volume and expertise to ensure the right blend of professional and dependable services, scale for service provider economics and staff retention levels to rival the private sector. We believe he can.

What would success bring?

By virtue of the huge volumes of back office services involved, Government has in its hands the ability to rival and beat the world's largest service providers such as IBM, CSC and HP, for many simple but critical back office functions. This could be particular bad news for Capita, Logica, NorthgateArinso and Liberata who thrive on such additive business without necessarily attempting to reform or re-platform the applications, merely run them into the ground.

At a recent briefing Jane Platt, CEO of National Savings Investments (NSI), stated that they were "open for shared services business" having recently won two significant deals, firstly with Courts Funding Office, and secondly with Equitable Life Payment Scheme. Even East London Boroughs are clubbing together to reinvent themselves by providing common or shared services through a single centralised powerhouse.

So, with or without a utilising the financial and service strength of professional outsourcers, government HAS firmly entered the shared services market. More importantly they have the ability to dominate the market and build a significant asset that could be privatised at a later stage.

In today's market this is a unique example of building up the "family silver" for another generation of politicians to squander away."

If banks can put down their weapons and share their toys any industry can

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I blogged earlier about SWIFT as an example of a shared service that goes way beyond offering organisations a way of reducing overheads by cutting the need for people and IT assets.

The message that the UK government needs to cut costs has not missed anyone by now. Even the far reaches of the universe have probably had word of it by now. To this end share services are as relevant as ever.

The basic premise is that shared IT services will cut costs through the process of putting servers from a group of organisations into the same building and then use fewer people to support it.

But Swift, which was originally a payments service shared by a community of banks is using its strengths to experiment way beyond transacting payments securely and reliable. I wrote earlier about how SWIFT was testing out an App Store for banks.

Today I had a conversation with Swift's head of innovation Kosta Peric, about another development in incubation. This one is all about identity management. More specifically the fact that Swift is developing a service where banks will be able to offer customers a way of securing their digital identities while making online activity easier.

Read the story I wrote here, but basically consumers might just have one digital identity that all the companies they have a relationship with, including government, can use as proof in a transaction. It will ensure that the consumer's ID does not fall into the wrong hands.

It is an interesting one. It shows that banks, who are about the most competitive beasts around, are willing to put down their weapons and share their toys when it is pointless competing and for the greater good.

Are government IT leaders prepared for fight with System Integrators over SME contracts?

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It's long been a complaint of SMEs that government spend on systems integrators (SIs) eats up the vast majority of the public sector IT budget (80%-90%), leaving very little for innovative small businesses.  

Having spoken to several SMEs part of the gripe isn't just that they're only left crumbs from the public sector table.  SIs will often subcontract specialist work to small businesses and take the lion share of the profits themselves.

I've also heard cases where SIs have  said it would not be in their interest to work with small companies,  as they don't want a quick and innovative solution but something which creates long drawn-out contracts, enabling them to keep  milking the public sector cash cow.

I had an interesting chat with Chris Chant, responsible for setting the strategy for the use of cloud computing, who believes moves toward the cloud will help break up the 'oligopoly'.

"We've got to recognise that some of the organisations we outsource to are as big as the civil service, so why would we expect agility with something that big," he said. But with a lengthy legal contract lock in still in place, the cloud panacea still seems a long way off for the moment.

And of course, it's important not to underestimate the power of these contractors, many of which have account managers with one-to-one relationships with people in government that SMEs simply don't have.

"These providers are used to getting a certain amount of money from the government and they can't afford for their shareholders to lose out by reducing their income in the area of public sector contracts. So of course they will push back against change," says Mark Taylor, appointed by the Cabinet Office to lead its New Suppliers to Government working group.

If the government is to change the entrenched culture of awarding contracts to a few large suppliers, it will need to recognise it will have a fight on its hands. The question is, will it be able to back up it good intentions with the necessary action?

Hundreds of outsourced IT staff in government could soon walk out on strike

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Hundreds of IT staff across five government departments could go on strike during September and October as workers at Fujitsu are balloted for industrial action.

Is this another reason why the public sector should keep work in-house?

HMRC, the Office of National Statistics and the DVLA are some of the government departments that could be hit if a ballot of 750 PCS union members at Fujitsu vote to strike over a pay dispute.

If strikes result in Fujitsu missing service agreements it could face financial penalties.

But what about the customer? It is suffering as a result of a service provider's inability to sort out a pay deal with staff.

The PCS union says because Fujitsu has met or exceeded performance targets senior managers are enjoying bonuses in excess of £14,000 in some cases it is only offering staff rises of between just 1.5% and 2.5%, well below the rate of inflation.

What advice would you give the government about IT outsourcing?

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Later this month  parliament will see the first meeting of a newly formed All Party Group looking into outsourcing and shared services.

With the spending cuts the government really has to be able to better understand outsourcing and shared services. We know in many cases public sector organisations can save a lot of money. But we also know that outsourcing and shared services are not suitable for everything.

So on the 22nd of this month the Outsourcing and Shared Services group will hold its first meeting. See the details here and a link where you can send information to the group in advance of the meeting.

 

I am hoping to attend the event so please feel free to give you advice below and I will try to pass the information to group members.

 

How the Government could increase the number of front-line police and cut costs in one go

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The recent riots in London and other parts of the UK have raised awareness of the problems that a lack of police can cause. The police were unable to contain the rioters with a lack of numbers on the first two days partly blamed.

This, combined with the planned cuts of thousands of front-line police to help the government reach a target of 20% police spending cuts, is being hotly debated in parliament.

But why should front-line police be the ones to lose their jobs? Shared IT enabled back office services could allow police forces to cut jobs and costs without actually impacting front-line services. In fact because there are loads of trained police officers working in the back office it might actually be possible to put some on the front line again.

So is the government missing the point by suggesting the police cost reductions will be met through cutting 16,000 front-line police jobs?

Steria, for example, has a shared service that targets police authorities.

In June last year Cleveland Police Authority became the first customer of Steria's shared services offering that is targeted at UK police forces.

The authority is spending £175m over the next decade on shared services and expects £50m in savings in that time. Do the same across forty-odd forces in England and Wales and the potential cost savings are huge. Not to mention the opportunity to redeploy trained officers that have been stuck in the back office.

The Steria service enables the sharing of services such as finance, HR, payroll, commissioning and fleet management in Steria's dedicated datacentres. When other forces are signed up they will use the same infrastructure.

The deal has already been extended with targeted savings increased. As with other police authorities, Cleveland Police has uniformed police doing back office jobs. The savings combined with moving uniformed staff back to the front line will help Cleveland fill gaps in its policing.

John Torrie, CEO at Steria told me that there are job vacancies at Cleveland for uniformed police officers but the authority cannot afford to fill them. He said bringing in civilians to the back office will mean uniformed officers can be redeployed.

Steria is not alone. Capgemini has shared services aimed at the police.

Is economic misfortune of some an opportunity for overseas IT suppliers?

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Could the double dip recession provide the straw that breaks the camel's back in terms of IT offshoring?

The Indian IT services sector thinks so. This article in the Economic Times of India displays a bit of confidence in the face of economic turmoil in the US, despite a large part of Indian IT revenues coming from the US.

The basic argument is that during tough economic periods businesses need to get more for less out of IT and need a bit of flexibility in terms of costs.

Outsourcers, particularly those offshore, can offer a lower cost of service and flexible payments.

But the current economic climate brings with it a catch. Governments are getting involved and are not going to take kindly to companies sacking staff onshore and sending staff offshore.
The US is a good example.

But as usual big businesses are one step ahead of the game and are once again very interested in setting up captive IT centres as a result.

This means that rather than becoming unpopular with a national government by offshoring jobs they can just create new ones overseas. Later on they might make redundancies in more expensive locations such as the UK and US but they will not actually be offshoring work.

Similarly I heard a while back that Lloyds Banking Group, which has publicly stated that it will not offshore any more permanent operational roles, is planning on having all the new integration work related to its acquisition of TSB and HBOS completed in India. But the union representing workers at Lloyds Banking Group says, in Lloyds Banking Group terminology, permanent operational roles do not include IT jobs.

And again it will not be offshoring jobs but just creating new ones offshore.

The whether it is right to offshore IT or not debate is in the news at the moment. Birmingham City Council has been criticised for deciding to send UK IT jobs to India and Department of Work and Pensions IT staff are currently working to rule in protest to supplier HP sending 200 DWP IT jobs to Bangalore.

So I recently asked the question: Should UK public sector work be done offshore to cut costs?

So far I have had 43 responses.

6 said yes.

2 said perhaps in the future

19 said no

16 said never

 

Here is the questionnaire if you want to contribute to the debate.

 

UK government should not offshore IT jobs, says majority

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I blogged yesterday and asked for people's views on public sector organisations offshoring IT work.

Birmingham City Council is facing a backlash after its decision to offshore work and the Department of Work and Pensions having to deal with industrial action as a result of its supplier, HP, offshoring 200 jobs to India.

I put a questionnaire on the blog, which you can see below. Please take time to fill it in.

When I put the information together I will write an analysis piece about it.

So far I have had 34 respondents.

16 said the public sector should not offshore IT work to cut costs.

Some of the reasons given were:

"There needs to be TCO for the UK....we need people to pay taxes in the UK."
"Dealing with DWP in the UK can be a stressful process for some people, before you even consider adding a 'language barrier' which will affect communication.  They has already been backlash in Birmingham, and countless articles written which have reversed a lot of UK companies decisions to use 'offshore call centres' for customer service, and one of the most outstanding customer complaints is relating to this problem.  When have the voting public ever been consulted about this?"
"It is difficult to understand the Indian accents."
"It makes no economic sense, how will costs be cut by increasing unemployment."
"Low work quality, poor communications."

11 said public sector IT jobs should never be offshored to cut costs.
Some of the reasons given were
:

"Security, privacy, and spending taxpayers money within the UK economy."

"It's a false economy."

"Jobs should be kept in the UK to give more job opportunities to UK citizens.  There is also the data security aspect, I can see breaches of sensitive data being a whole lot easier if the data is being worked on outside of the UK."

5 said jobs should be offshored to cut costs.

Some of the reasons given were:

"Lower costs and higher efficiency."
"If the public benefits then why not?" (must get the organisational change right.)

2 said perhaps in the future.

 

Do you think public sector IT work should be carried out in India?

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The government is getting an early taste for the hurdles it faces offshoring jobs to India, or any other low cost location for that matter.

In July Birmingham City Council announced plans to offshore some IT jobs to India as part of its deal with Capita. There was a huge public backlash and the council announced it would re-evaluate its decision.

Today the DWP and its supplier HP are in the news after the Public and Commercial Services union announce industrial action in protest to 200 jobs being sent to Bangalore from Newcastle, Sheffield and Lytham. Workers voted to refuse to co-operate with the process of exporting their work. This is also a significant deal because it will see the personal details of millions of UK citizens being sent for processing in India.

But will the industrial action make any difference? And will Birmingham City Council's re-evaluation lead to a change of heart?

I am interested in getting the views of IT professionals. If you can spare the time please fill in this quick questionnaire.

Uncertainty still hangs over offshoring at Birmingham City Council

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I recently spoke to a member of the Unite union who said Birmingham City Council's plan to outsource 100 of its staff are still hanging in the balance.

The council originally intended to offshore the work to India, but had to re-evaluate plans after a backlash against proposals.

However, the Unite union member said there are mixed feelings among councillors, with some saying the controversial plans will steam ahead, while others claim they are to be abandoned.

Another source told Inside Outsourcing that the council was very likely to go ahead with plans anyway, but was keeping quiet for the time being for reasons of political expediency.

While the significant cost savings attached to outsourcing will remain an attractive option to cash-strapped councils, public opinion surrounding the issue is something the government itself is fully aware of.

In recent guidelines it published about offshoring it said: "If the service currently employs staff in the UK whose jobs would be lost under the new arrangements, you would expect to have to take instruction from ministers before proceeding."

I will post another another update as soon as we hear more information.

Are utility companies set to be the next big IT outsourcers?

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Smart metering and pressure to cut overheads are encouraging utility firms to outsource more.

A source recently told me that there are loads of outsourcing deals in the pipeline that involve utility companies.

The Smart Metering Implementation Programme (SMIP), which will provide homes and businesses with smart meters to help them reduce energy use, is increasing outsourcing.

Scottish and Southern Energy has for example outsourced some of its planned smart metering processes and IT to Logica. There is likely to be more as utility companies shy away from making the upfront investments required to adhere to the SMIP rules.

Ovum recently said factors including the need for new infrastructure investments, ongoing industry consolidation, and increasing interest in smart energy initiative are driving utility firms to outsource.

Meanwhile Robert Morgan at sourcing broker Burnt-Oak Partners says that the regulated status of utility firms means that they are under pressure to show they are lowering their own costs. This is because they are increasing prices and the regulators want to know what they are doing to control their own costs.

Tory Rail Minister insensitive with Indian job opportunity claim

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Sacked call centre workers in Newcastle who have been replaced by workers in Mumbai have been reminded by a Tory politician that it is within their rights to take a job in India as part of a TUPE transfer.

Workers at an East Coast passenger call centre lost their jobs when work was offshored to Mumbai. Rail Minister Theresa Villiers wrote to Berwick MP Sir Alan Beith, who complained, to remind him that under TUPE regulations the workers will be given the opportunity to relocate to the Mumbai centre. 

She said: "These staff will be given the opportunity to transfer to the new service providers under TUPE where those services are to continue." 

I was recently involved in a TUPE transfer and I thought under the regulations the staff would get their extra travel costs paid for two years as well. If the workers took up this option it would really throw a spanner in the works. 

It would be interesting if some of the staff affected went for the new jobs and flew home every weekend.

A Department for Transport spokesman said: "National Express Services Ltd staff employed at Baron House will be given the opportunity to transfer to the new service provider under TUPE. Exactly how this works will be a matter for the new service provider."

Read more about TUPE here  

All I can say about the comments is that at least when a government changes unpopular MPs are kicked out rather than being offered TUPE transfers.

Here is Villiers' website.

Vampire IT service workers that tell you as it is.

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What can an IT services firm operated from Transylvania offer a UK corporate?

It is not easy selling IT services that are more expensive than competitors' offerings.

But that is what companies in Eastern and Central European service providers are trying to do when bidding for development work from UK companies. Places like India are lower cost so Eastern European firms must differentiate.

The appetite for outsourcing and offshoring amongst UK businesses shows no sign of diminishing. But there does seem to be more and more consideration of nearshore locations for IT services.

Earlier this month a colleague of mine wrote an article about why businesses are selecting nearshore locations in Eastern Europe for some of their IT services.

The story, which you can read here, received a lot of feedback so I can only presume that a lot of businesses are considering outsourcing to Eastern Europe.

Recently I met a couple of executives from a company known as Endava. The company provides its IT services from a combination of Moldova and Romania. A total of 95% of its customers are UK businesses.

Endava is the result of a UK IT services firm, known as Concise, moving into Moldova and then acquiring a company across the border in Romania. It has IT support centres in Transylvania.

The company, which has about 700 staff in total and over 500 in Romania and Moldova, offers application development (two thirds of its business) and testing services as well as managed services and IT service desks. It has been in Moldova for 11 years and Romania for six years.

Endava facts:

Its service desk staff can speak 14 languages including English.

The company has set up Endava University to train middle management in Romania and Moldova. The qualification is the equivalent of an MBA.

Endava has a challenge culture and its development staff will tell customers if they think they are wrong.

Five of the world's top banks are customers.

See Endava's service desk in action.

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About this Archive

This page is an archive of entries from August 2011 listed from newest to oldest.

July 2011 is the previous archive.

September 2011 is the next archive.

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