March 2012 Archives

Is cloud computing more beneficial to business than traditional outsourcing?

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I wrote an article today about some research commissioned by Google. I revealed a few things including the importance of cloud computing in driving company strategy.

The survey talks about the increasing role of CFOs in the IT decision making process as cloud computing is viewed as a means for companies to succeed rather than just cut costs.

Interestingly 64% of senior finance executives said cloud computing is more beneficial than traditional IT outsourcing. The cloud combines cost cutting with things like being able to take up the latest and greatest technology without having to pay for it up front. But doesn't traditional outsourcing offer that?

I would like your thoughts.

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Unemployed IT professionals should blame education system not offshoring

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I attended a roundtable event today at Intellect, the IT industry group. It was all about the use of technology to improve education as a whole as well as improving the teaching of what is broadly known as computing and encompasses ICT, Computer science, IT and Digital Literacy.

The part about using technology is an interesting subject, particularly when you have a five year old clamoring for the internet and a 2.5 year old only being kept off the computer by a stronger sibling. But having such a distinguished panel of academics and people from the IT supplies community was a great opportunity to get some views on the debate about how IT offshoring is contributing to a shortage of IT skills in the UK.

One of the panelists described the gap in the IT skills required in the UK and those available. She said there are 100,000 IT posts that need filling but the skills are not there.

So I asked all six panelists to answer the simple question: If there are 100,000 UK IT jobs that need filling why are there about 40,000 unemployed IT professionals in the UK? They all agreed that there is a mismatch between the skills being taught and those needed buy the industry. Not a single one of the six pointed to the offshoring of IT jobs to cut costs as a reason for the high unemployment in the IT profession.

"People are not being taught the most up to date technology skills," said one panellist. She has a point. So is the education system to blame? Many disagree and believe offshoring IT jobs is not only reducing the number of IT jobs in the UK but also adding to future skills shortages as the best graduates steer clear of IT through fear of all the jobs going offshore.

Back in 2010 I wrote a blog titled: Is offshoring making Computer Science graduates the largest unemployed group? This was about figures from the Higher Education Statistics Agency (HESA).  They showed that in 2009 recent Computer Science graduates had the highest rate of unemployment six months after graduating, with 17% out of work.

Add to this the fact that many that were in work might not have been working in a job related to their degree and you have a problem. One exacerbated by the offshoring of IT jobs, according to many.

I have recently returned to the subject and asked for people's views on what the government should do to create more IT professionals that have the skills required by businesses?
I asked: Do you think IT outsourcing has contributed to a shortage of UK IT professionals? Out of 67 respondents 58 answered yes. Many of the respondents suggest the government should put a stop to the practice of offshore suppliers bringing workers to the UK on Intra Company Transfers.

Here is the questionnaire if you want to fill in the questionnaire.

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Is the UK government offshoring more IT to close UK skills gap?

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I recently ran a survey which asked people to give their views on some of the causes of a UK IT skills gap as well as some of the possible solutions.

One of the things that stood up was the opinion that the offshoring of IT roles to lower cost destinations such as India is damaging the UK's ability to nurture its onshore IT resource.
See some of the comments here. 

IT professionals are calling for the government to stop offshoring IT jobs. But this is clearly not going to happen. Today there is news that the government is outsourcing the IT development for the universal credit welfare programme to India despite promises to keep large data projects in the UK.

About 500 workers in Bangalore and Mumbai are being hired by the outsourcing firms Accenture and IBM to help design and maintain a delivery system for universal credit, according to the Guardian.

What should the government do to create more IT professionals that have the skills required by businesses?

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I ran a survey a couple of weeks ago asking people for their views on the alleged shortage of business ready IT professionals in the UK.

It focussed on whether outsourcing, more particularly offshoring, is damaging the UK skills base. This followed comments made by John Harris, chairman of IT user group The Corporate IT Forum and chief architect and vice president of global IT strategy at GlaxoSmithKline.

It also asked people for their views on what the government should do to address the problem.

Banning offshoring and closing the Intra Company Transfer (ICT) immigration loophole are examples of comments received.

Here is the questionnaire if you can spare a minute to fill it out and below that are the results so far and some of the comments left.

The results and comments so far:

(49 respondents.)

Do you think IT outsourcing has contributed to a shortage of UK IT professionals?    
45 - yes
3 - No
1 - don't know

Do you think apprentice schemes are the answer to the skills gap?

25 - Yes
22 - No
Don't know - 2 
What do you think the government should do to create more IT professionals that have the skills required by businesses?

"Change what is taught in schools."

"Stop the majority of inter-Company transfers so that there are jobs for graduates."

"Crackdown on offshoring and onshoring."

"Encourage firms to develop their own talent."

"Allow training whilst unemployed. Don't make people lose out if they need to retrain."

"Reduce ICTs, provide tax breaks for taking on UK grads, pay towards tuition fees for students studying computer science."

"Limit the number of ICT visas."

"Nothing. The IT industry should produce its own professionals, like other professions."

"Stop importing inexperienced graduate trainees from India under the ICT scam and start giving UK graduates and experienced staff a chance instead."

"Encourage companies to on-shore their IT."

"Train people here, employ unemployed UK IT workers."

"The skills exist - IT people with 10+ tears are sitting at home right now!"

"Ban all offshoring of government contracts, add a tax to all transactions where companies send money offshore to reduce the financial benefit of offshoring work."

"Reverse offshoring."

"Don't let so many of the grounding skills be moved offshore. It is putting people off entering the IT industry."

"Limit immigration."

"No shortage exist. I know many people displaced from IT workers coming from India!"

"Be strong on reciprocal market access for UK firms abroad."

"Clarify rules on independent consultants."

"Ban ICTs."

"Further limits on ICTs."

"Apply resident labour market test to ICT workers working on client contracts in UK."

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See Fujitsu director being beaten-up in a local council meeting

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I have recently been following the ongoing saga that is the troubled £70m IT services deal between Fujitsu and The Highland Council.

I wrote this story today about the meeting. Fujitsu Scotland director Brodie Sheperd was thrown to the wolves at the Highland Council's resources committee to apologise for Fujitsu's failings in the IT services contract and reassure councillors that services firm would get things sorted out.

But better than that, below is the actual meeting via a recorded webcast.

The committee gets to item 10 on the agenda which is in regard to the IT services contract at about the 20 minute mark. It is worth watching especially to hear how disgruntled councillors are and to see a very apologetic Mr Shepherd beaten up by councillors.

If the video doesn't work here is a link to it.

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Highland council Fujitsu IT services deal still problematic

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A £70m IT services contract, signed by the Highland Council in Scotland with Fujitsu, is causing friction as the sitting council and the opposition unite in protest at the contract's failure to meet targets.

But a termination, although legal at this point, is unlikely, as it would leave the situation worse, said one councillor.

Fujitsu has succeeded in delivering ICT to schools in the region, but it has not fully implemented the council's internal systems. The problems have been dragging on for over a year.

Last year, the Highland Council told Computer Weekly it had taken legal advice on a deal with Fujitsu which had missed service delivery regrets.

The two parties met and Fujitsu was given a second chance.

But the contract is again in doubt and a council meeting will be held tomorrow to discuss the contract.

Councillor Carolyn Wilson, head of the resources committee at the Highland Council, said the contract has now passed the point where the council can withdraw from the deal.

"Since the discussions with Fujitsu last year, things have got better in some areas but in other areas it has still not delivered. It focused on the high-profile parts of the contract, such as delivering new ICT equipment to schools, but the nuts and bolts - such as internal systems - have not yet been delivered."

Wilson said there is cross-party agreement that Fujitsu must do more, but she added that pulling out of the contract would leave the council in a worse situation. "Fujitsu probably realises this, but you think it would do more to protect its reputation."

A Fujitsu spokesman said the schools part of the contract is due to be completed today (20 March 2012) while the corporate part, which includes internal systems, is expected to be completed next month.

But Wilson said there are lots of projects running late. "There are still hundreds of computers to go in at schools, for example."

Fujitsu and the Highland Council are due to meet later today.

Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, said the council needs to weigh up the costs associated with exiting the contract against the costs of remaining in.

He says there is an opportunity to get around the table and renegotiate, based on any losses that have been incurred due to delays. He said it is possible for Fujitsu to offer sweeteners.

"But it all comes down to how strong is the council's case against Fujitsu? If it thinks it has a good case, it has the opportunity to renegotiate."
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HP loses the moral high ground at Rolls Royce but not necessarily the business

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There was an interesting contract announced today between Capgemini and Rolls Royce.
Capgemini has been awarded the job of managing Rolls Royce's new multi-vendor sourcing strategy.

It is 12 years since Rolls Royce signed a deal with EDS, now HP, to provide all its outsourcing needs. So the deal was up for change and Rolls Royce has decided to go multi-sourced with Capgemini at the helm.

HP has lost quite a few big deals that were won by EDS since it acquired the systems integrator in August 2008 for billions of dollars.

But the Rolls Royce deal with Capgemini does not mean that HP has lost everything. It is more of a case of losing the moral high ground but not necessarily the business, says Robert Morgan, director at sourcing broker Burnt-Oak Partners.

But he says it could be the beginning of a gradual reduction in the amount of revenue HP gets from Rolls Royce. He expects perhaps a 30% reduction in HPs revenue with Rolls Royce quite quickly.

He says Capgemini will be tasked with monitoring the performance levels of the suppliers in the multi-vendor environment so HP will lose business where it does not perform.

I find this Capgemini role quite interesting and because HP was the single supplier before there are a lot of contracts that it could lose. This will be interesting to watch.

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Doubts cast over government's figures on business with SMEs

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A major talking point in the IT supplies sector is the issue of the UK government giving more business to SMEs.

This week a businessman involved in advising the government about how to get new suppliers involved in government procurement has resigned as co-chair of the New Suppliers to Government panel. This was over his scepticism around Cabinet Office figures claiming the amount of government business going to SMEs has doubled.

Mark Taylor, CEO at open source company Sirius, quit this week

He said: "I do have concerns about the direction of policy and am genuinely sceptical about the figures [which claim SME business has doubled from 6.7% to 13.7%].

"I think I have a right to be, as there are a number of SMEs I've to spoken to that are finding it more difficult to do business with government and that maps with my direct experience."

An oligarchy of large system integrators is said to be one of the reasons the government cannot get a good deal. So the current government set out to end this dominance by a few suppliers, which includes the likes of HP and Fujitsu, and open up business to a wider variety of suppliers. This would include significant supplies coming from SMEs.

The Public Administration Select Committee (PASC) even published a report titled:  "Government and IT - a recipe for rip-offs: time for a new approach."

The top 20 suppliers to government, including all types of products and services, included many IT suppliers. HP, BT, Capgemini, Fujitsu, Capita, IBM, Atos, CSC, Logica, Steria, Oracle, Microsoft and Accenture were all involved. Technology SMEs find it particularly difficult to win government business as buyers revert to the safe option of buying from the big incumbent suppliers.

But public sector bodies are missing out on good deals as a result. According to Computer Weekly a major systems integrator asked for more money to write a report on the options available for a government IT requirement than an SME supplier quoted to provide the actual service that was needed.

The government set itself a target to procure more its total products and services, not just IT, from SMES. And according to the government's chief procurement officer John Collington, speaking at The Crown and suppliers: A new way of working, procurement conference in London in November , it is having some success. He said that in the past, there were not enough SMEs winning business through the usual procurement channels but that things are changing. According to the government's figures in November 44% of government contracts signed in September 2011 were with SMEs. This compared to 5% in January 2011.

The Government's Cloudstore, where public sector organisations can buy cloud services, is another attempt to break away from a few large suppliers having a stranglehold on IT supplier to the public sector.

It also set up a new framework agreement for buying consultancy services worth up to £2bn over the next four years. The Consultancy One deal is designed to cut the levels of spending on consultants across Whitehall and make it easier for small businesses to win consulting contracts.

But is the government exaggerating its success?

Are you an IT SME trying to sell goods and services to the government? If so leave a comment telling us about you experience and whether things are getting better.

Could new breed of Indian IT suppliers sneak under the radar again

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I met Ashok Soota today. He was at the top of the Indian IT industry way before it famous.

While Soota was the president of Wipro in the 80s and to late 90s, some of the senior executives of the big Indian players today were out in the field.

I spoke to him a couple of years ago when he was chairing an Indian Service provider, known as MindTree, which has grown really quickly. See more here.

When I first met him he had some really interesting insights about how the Indian firms got so big so quickly without the Western IT firms being able to stop it.

He described what happened:

- "Before 1994 Western IT companies were not really noticing us because we were mainframe maintenance.

- Then client/server came they thought we could not do it. But we were.

- Y2K came along (millennium bug) and they thought we would go away afterwards. But Y2K gave Indian companies entry into big global customers.

- Then they did not think internet work could be done offshore, because of the need for a quick turnaround. But distance can be an advantage because you can work around the clock.

- Obviously the internet played a role. The internet reduced transaction costs. Before this big players had dedicated pipelines. Now it became possible for a mid-sized company to communicate with a mid-sized company.

-  It was 2004 by the time the big Western suppliers became anxious."

The reason I chose the headline I did was because Soota told me all about his latest venture.

His new company Happiest Minds (strange name I know) has just officially launched in the UK.

Happiest Minds, which was set up in August last year, is targeting some of the hot areas of business IT. Its technology focus will be on: cloud computing; mobile computing; big data/analytics; and social media. Its business is split into three units: IT services; software product engineering; and infrastructure support and security.

By focusing on the technology areas which are clearly hot at the moment, without a legacy business to worry about, the company will be interesting to watch. Its growth will be a clear indication how businesses are approaching the four technology areas that are interesting businesses at present.

Hopefully we will get some case studies from the company.
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Government shared services increased costs and reduce flexibility, says NAO

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Shared services are certainly not a new thing but the public sector cuts have certainly given them a new lease of life.

Sharing back office processing is surely going to lead to savings. Not so for central government says the National Audit Office (NAO).

The five Whitehall shared services centres examined by the NAO have cost £500m more to build than originally forecast. They were expected to have saved £159 million by the end of 2010-11, but only one centre reported break-even costs, while the two centres tracking benefits report a measured net cost of £255m.

The NOA said: "The initiative for government departments to share back-office functions has suffered from an approach which made participation voluntary and tailored services to meet the differing needs of individual departments. The result was over complexity, reduced flexibility and a failure to cut costs."

Read more here.

Local government and services such as the NHS and police have reported more success of shared services.

These groups are more like families and as a result can benefit from shared services.
The NHS Shared Business Service, for example,  uses an Oracle platform and a single set of processes to run the back offices of NHS trusts. Over 100 NHS trusts now use the service.
It has been a success. It promises trusts up to 30% cost savings and has even paid millions of pounds back to the NHS.

Ruth Ormsby, who headed up the NHS SBS and now works in Accenture's public sector business, told me a couple of years ago that there is a shared services opportunity across government but that 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."

A shared service set up by Cleveland Police and Steria, aimed at providing back office services such as finance, HR, payroll, commissioning and fleet management to police authorities has also made savings of over £50m. These will increase as more police authorities join the service.

Professor John Seddon, managing director of Vanguard Consulting, believes shared services are a waste of time. Read a blog post by him here. Given the NAO report he has a point.

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Is being put out of a job through companies employing cheap migrant workers all for the greater good of UK PLC?

Karl Flinders | 1 Comment
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The Migration Advisory Committee's (MACs) latest report on the immigration cap has revealed a steep rise in the use of Intra Company Transfers by UK businesses, bringing workers into the UK from non-EU locations.

In respect to ICTs the latest report says " is possible that the UK economy is benefitting in aggregate terms while at the same time some displacement of British workers is occurring."

See the latest report in full here.

ICTs allow multi-national businesses that have a UK operation to bring workers to the UK. This route is used by IT suppliers to bring lower cost staff to the UK. About 80% on non-EU workers in the UK are on ICTs and a large proportion of these are IT professionals from India. Despite this ICTs were not included in the cap.

I wrote a blog post last week which asked: Have Tory immigration policies helped UK IT professionals?

And the answer is no.

In 2009, the last full year analysis before the immigration cap, there were 22,000 ICTs, according figures from the MAC. For the 12 months up to September 2011, the first 12 months following the immigration cap, the MAC has reported an increase to 29,700 workers in the UK on ICTs.

Although ICTs weren't included in the immigration cap the government did introduce a minimum pay threshold for ICT workers of £40,000 to try and make it less attractive from a cost perspective for suppliers to bring staff in from offshore.

There is a way for suppliers to be less impacted by the raised minimum pay threshold. Expenses can be included within the pay and tax does not have to be paid on it.

One reader said of the latest publication: "A very disappointing report, I thought the MAC had some backbone as the previous year they recommended that allowances should be excluded from the definition of pay to ensure resident workers were not undercut and because of the loss of tax revenue. They don't actually mention why in this report their position has changed 180 degrees in 12 months."

See this video explaining how the use of ICTs to bring IT workers to the UK.                                


Read this blog post, which contains a series of blogs, to see how the ICT loophole impacted one IT worker.

See this post for all the figures on the number of overseas workers in the UK between 1997 and 2008 and what they are doing.

Please give me your views on how outsourcing is impacting UK IT skills

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About this Archive

This page is an archive of entries from March 2012 listed from newest to oldest.

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