December 2012 Archives

How will the world of IT be in 100 years from now?

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The Guardian published an article about a letter that was written on 1912 on the 12th of December. The last time we had a 12/12/12 in fact.

It is an interesting article. The man that wrote it talked about how flying machines and motor cars were in their infancy. He also talked about women fighting for their right to vote.

He imagined what the future held. Read the full article here. An independent India will have surprised him, never mind men on the moon.

The industrial revolution drove much of the change since1912 but what will the digital revolution mean in 100 years' time?

Will the UK and for that matter Europe and the US still be at the top table?

Let me know your predictions for a world in 2112. If you leave a comment it might take a while to appear due to holidays but please do so.

IT outsourcing predictions for Europe in 2013. Part five Burnt-Oak Partners

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Here is another round of predictions about the European IT outsourcing market next year. Today is the turn of Robert Morgan, director at sourcing consultancy Burnt-Oak Partners.

Yesterday I featured Matthias Mierisch, on Wednesday  Sam Kingston from T-Systems  gave his views,  on Tuesday I revealed the views of outsourcing lawyer Mark Lewis of Berwin Leighton Paisner   \which followed the predictions of KPMG's Lee Ayling.

Expect 2013 to see further blurring of the outsourcing sector

By Robert Morganrobert morgan.JPG

"The forthcoming year will see a further blurring of the realities and objectives for outsourcing and what precisely the definition of Outsourcing really means. Outsourcing as a term has become ubiquitous and symbolises the commoditisation of the original industry to a point where new models, measures and benefits need to be developed to give the industry focus and to redevelop new value propositions. The American giants of yesteryear are a shadow of their former-selves, all lack real CEO leadership and have cost bases that shout "physician heal thyself". HP and CSC are on the critical list for heart and lung transplants and wheezing asthmatic IBM is not far behind. Accenture has leprosy and the rest ... well they are the rest. Indian suppliers like HCL, lead the pack with devolved authority and solid processes and technical excellence.

Predictions for 2013 are by definition "outsourcing related" and not specific as everyone's view of outsourcing is different. Cloud is cloud, security is security, big data is ... well they are all marketing spin and industry rather than outsourcing specific.

However here we go, and in no particular order: -

European growth in old fashioned outsourcing

The economic crisis of 2008 is still echoing and Spain, Portugal and Ireland will lead the way, despite the internal protests, with culture shattering outsourcing deals benefitting mostly National or Regional players. This is because the global players have failed to invest, or consistently invest, ahead of time in key EU countries and regions. Choosing to do "token investment" only when a largely self-funding deal occurs. This does nothing to recruit and retain top talent and it is the client who suffers long-term. The Nordics is a great example where we do great business and have seen yo-yo investment and commitment by the likes of HP, Siemens and Fujitsu. Italy and France will of course tinker with outsourcing as usual and pull back from anything too large or too culture changing.   

Service Providers on life-support

HP and CSC's problems are well documented. However HP's cannibalistic tendencies regarding their numerous CEO's will rear up again and see Meg claiming unemployment benefit before the year is out. CSC has been selling its assets and may survive but not as we know it today. IBM is bereft of new ideas and will lose renewing client in profusion. Regional players like CGI Logica and Atos will benefit especially when the EU starts its new run of legislation (see below). Will there be any logo deaths in 2013? It is possible, but the break-up into saleable smaller entities seems logical and necessary

EU regulators take on the US. Three ground-breaking pieces of legislation are expected to enacted or at least trialled before the populace

Taxes on outsourced datacentre activities. The carbon footprint of large datacentres is a big concern and many companies gain the carbon count advantage by outsourcing these activities. "Tax them in-house or out of house" is the maxim, so high energy using datacentres will be hit will new EU taxes

Public Cloud is subject to the Patriot Act and as such all data can be inspected by the US authorities without permission, notification or an audit trail through any US registered company. The French government will pioneer legislation to "credit" French service providers to develop a zero American company exposure, meantime Brussels will hide their anti-American feelings behind carefully worded regulation to "control public cloud sovereignty", cross EU border mobility and portability and potentially enhancement to the Data Protection legislation. Isn't the fear of "terrorism" great for passing anti-competitive acts?

Such legislation will rip apart ridiculous Google and other contractual clauses on the provider having "perpetual ownership of all private data" under its control

A forth piece of legislation might occur to de facto restrict the movement of workloads (outsourced) to within the EU starting with central and local government. Aren't recessions great for passing anti-competitive acts - see America you are not the only one, but thanks for the lessons!

New models UK PLC leads the way

Burnt Oak pioneered new and alternative commercial and operational model three years ago to largely deaf industry ears. Only HM Government listened and developed variants which now underpin some of the most innovative and revolutionary outsourcing deals being done in the world today. Based on mutualisation where a special purpose vehicle is formed to undertake a carefully designed and sponsored business model. The client retains a shareholding until the objectives are being achieved then it sells it shareholding to the service provider largely for the benefit of the transferring staff. For example the floatation of the Post Office will see 8% of the Market Cap going to the postmen's pension fund. Other models give staff shareholding powers - the John Lewis model. This is outsourcing of the future. Eventually, but probably not totally in 2013, the tier one and tier two suppliers will understand that to survive they need to at least put such models in their portfolio of deal constructs

The death of loyalty and growth of commodity

Everything "on demand" is growing and indeed being heavily advocated by the big service providers. The facts are that these self-same companies have the highest cost of sales, highest paid sales staff and corporate overheads, seems strange. What these suppliers need is client continuity, contractual commitment and predictability. This is the antithesis of the sales and marketing messages they spew into the market. Volume will not make up for the profits of old fashion change orientated outsourcing. Clients will, especially if Burnt Oak has anything to do with it, run on-going checks on the commercial viability of suppliers - no one is "too big to fail" in this world anymore. This is not outsourcing anymore, this is IT consumerism on steroids."

IT outsourcing predictions for Europe in 2013. Part four Arvato

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Here is another round of predictions about the European IT outsourcing market next year. Yesterday I featured Sam Kingston from T-Systems,  on Tuesday I revealed the views of outsourcing lawyer Mark Lewis of Berwin Leighton Paisner   which followed the predictions of KPMG's Lee Ayling.

Today are the opinions of Matthias Mierisch CEO at BPO  provider Arvato in the UK.

The world is changing

By Matthias MierischMatthias Mierisch Chairman and CEO arvato UK  Ireland.jpg
"Rapid technological change and a turbulent global economy mean that in 2013 the world may well be a very different place for outsourcing providers and their clients.

Among the many emerging trends and themes on the horizon for next year, there are three which are worthy of closer examination.    

The intangible feel good factor

In many outsourcing relationships success is very often evaluated against carefully constructed KPIs. But the need for outsourcing partnerships to be able to flexibly deal with change sometimes means looking to assess the strength of a partnership on the factors which aren't on the KPI list.
Independent research commissioned by arvato in our inaugural Open Outsourcing report in autumn 2012[1] found that 71 per cent of end users expect their BPO provider to 'adapt to changing industry and relationship dynamics'. Yet just 25 per cent said that a specific partnership structure had been developed to suit their business over and above the contractual agreement.

The willingness to deliver and step beyond contractual agreements to try fresh approaches, or amend priorities to deliver real value - even if that's more difficult than just meeting KPIs - will be essential to making outsourcing relationships work better in 2013, when the only other trend we can be sure of is change.

A flexible approach to offshoring

As the business world tries to pinpoint which global markets are set to grow in 2013, their mix of global outsourcing locations must remain flexible to meet demand.

While cost will inevitably remain the primary motivation to offshore, smart companies are scouring the market for the best options in terms of both quality and value for money.

The availability of a well-educated, English-speaking workforce which also shares some cultural affinity with the UK, balanced against cost and flexibility, are other key considerations.   

As political stability, education and technological infrastructure continue to progress in ever more corners of the globe, increasing numbers of new destinations will begin to tick the right boxes.

Ultimately it comes down to the type of service companies are looking to offshore. Not all destinations are equally strong across front and back office services. Some, like China, are perhaps strongest in ITO, whereas India was the default offshoring destination for UK businesses, with the Philippines catching up on both voice and BPO.

It is up to their BPO partners to consult on how to structure the right mix of locations to provide the agility to better deal with, and capitalise on, changes in market conditions.

360 degree data

According to IDC's 2012 Digital Universe report, the amount of data created globally doubles every two years. The potential power to leverage data to generate greater insights into the way people like to buy, use and pay for goods and services are limitless.

What's now exciting is the emergence of new ways of developing a complete '360 degree' view of customers or citizens using the vast array of data collected by BPO providers on behalf of their clients.

By joining up different sources and analysing data from each to create this picture, outsourcing vendors can now better empower clients to tailor their services.

For example, a BPO provider can use the data it collects on payment and delivery preferences from a particular person on an e-commerce website to easily customise their settings for future purchases; in local government if a citizen has contacted their council online then it's likely that they may wish to pay for their council services online too.

Expect to see increasing numbers of BPO providers enhancing their skills, capacity and infrastructure needed to both handle and analyse data in 2013, and watch them work with their customers to improve service delivery using their conclusions. "

IT outsourcing predictions for Europe in 2013. Part Three T-Systems

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Here is another round of predictions about the European IT outsourcing market next year. Yesterday I featured outsourcing lawyer Mark Lewis of Berwin Leighton Paisner and the previous day it was the predictions of KPMG's Lee Ayling.

Today it is the turn of T-System's UK head Sam Kingston to give some of his views on some of the trends that will hit the IT outsourcing sector this year.Thumbnail image for Sam Kingston T-Systems.JPG

"1.Software as a Service (SaaS) will see renewed enthusiasm in the guise of application portal implementations

Whilst the past decade was very much the era of the outsourcer, we are currently seeing a new age ushered in, where the chief service being sought is delivery of line of business applications as purchasable commodities. These 'apps', with no need for complicated systems architecture, will be sourced from internally created, or hosted store fronts. The iPad generation has accelerated the change in corporate application dynamics, and acceptance of their employment will increase as the larger vendors and service integrators jockey for position as leading providers.

2. As a direct result of the acceptance of SaaS as a desirable utopia, corporations will move the needed upgrade or migration of key line of business applications up their priority list.
Always the bane of any EUC upgrade planning, due to time and expenditure required, application migration is often postponed for as long as is possible without causing detrimental effects on the business. Finally, with the advent of application portals, SaaS, and the pressure to move forward with new technology such as tablets and smartphones, corporations are now able to construct a viable business case to justify those application changes that were previously considered too expensive. Operators within the application migration space need to be prepared for this, and more importantly be able to take corporations from a classic model to the application portal.
3.Security initiatives will pave the way for increased interest in public cloud storage

The taboo discussions about moving data to the public cloud will finally become open debate as intermediary security specialists step in to provide encryption and token secured data capabilities. Vendors like CipherCloud will see a boom in demand for their product, as corporations evaluate their long term storage expenditure. Previously shying away from public cloud data storage due to valid perceived risks, the offerings from these new vendors will renew boardroom discussions about where organisations are willing to store their corporate data. With at-rest 256-bit encryption, encrypted transit, and third party token hosting, the option to store data in the cloud quickly becomes a cost effective proposition that should not be discounted by any pragmatic organisation.

4.Collaboration is King in 2013

Office 365, Google Docs, and all manner of on-line collaborative toolkits are now available on the market. With travel expenditure reduced, and more interactive meetings taking place over the internet, it is crucial for providers of collaborative software to rise to the top. The release of the next version of the Microsoft Office suite, internally known as Wave 15, sees the entire extended family of Office products, including Project, Visio and Lync, stepping up to version 2013. With Exchange 2013 and SharePoint 2013 also being released, the emphasis next year is all on collaborative working and social interaction within the business. With the lines between corporate and personal devices blurring, so too are the ways in which employees work and communicate with each other. Widespread use of Facebook, Twitter, and other social networking sites are driving the development of new methods employees will use for working and interacting. Companies need to be ready to embrace the changes in cultural acceptance of social interaction tools such as these in order to stay ahead of the competition in 2013.
5.Consumerisation will evolve from a buzz word into an activity

If 2012 was the year of consumerisation discussions, 2013 has to be the year of action. Companies offering routes to consumerisation who want to be taken seriously, need to offer a real and viable way for corporations to move to a consumerised strategy. This may begin with BYO initiatives, incorporate application migration and portals, in order to lead to true consumerisation. The ability to access line of business applications from any endpoint device, from any location, at any time. This transition is not an easy journey, and will take time, but those corporations willing to visualise the end goal and start to make changes to head towards this objective will find themselves leading the market as they're workforce becomes more fluid and agile in a strained economy where stagnant procedures and outdated methods lead to failure.

6.Tablet devices will become more readily accepted into business with easier integration paths

Like it or hate it, Microsoft's release of Windows 8, along with their new surface devices, will help to smooth the way for acceptance of tablet devices as a business focused tool. This will not just be limited to Microsoft devices, iOS and Android based alternatives will see deeper market penetration, as the stigma attached to the inclusion of these devices is eroded. The cloud security discussions will also help in this space, as secure data storage can be extended down from the clouds to these next generation endpoints.
7.Companies will look to BYO as an enabler to squeeze further cost savings from infrastructure budgets

The client based virtualisation solutions offered by companies like VMware, Citrix and MokaFive will present corporations with real opportunities to save on capital outlay and operational expense when it comes to on boarding of contract staff (freelancers). The provision of a corporate image, within a secured container, onto a contractors own hardware will mean day one productivity, and removal of the traditional practice of purchase and provision of corporate hardware to these temporary employees. With economic growth still wavering, and companies looking to remove costs wherever possible, the CIO will be squeezed to undertaken initiatives like this in order to fund other critical investments.
8.Avalanche of Windows XP migration projects

With one year to go until Windows XP is officially retired for good, companies who have not moved off this ageing platform will start to feel uneasy as vendors wind down any remaining support for products sitting on this desktop OS. This D-day of the modern IT era has always felt far enough away, to some,  to be brushed aside. When supporting vendors start to announce end dates for their XP based products, the realisation that the date is fast approaching will hit these companies, and a wave of migration projects will be kicked off in a bid to at least move the underlying OS forwards  onto the next supported platform. Windows 8 is still too fresh, and its benefits beyond the tablet are still being debated. Windows Vista is a non-starter, so this leaves the rational choice for the next step to be Windows 7."

Cognizant is the most satisfying IT services firm for European businesses

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KPMG's report on the performances of IT services suppliers across Europe has put Cognizant at the top of the list.

I wrote about the UK report earlier in the year. Computacenter was seen as the best by UK customers.

KPMG wouldn't give me the full results, I just found out Computacenter topped the list. I have however been sent the results of the same survey about Europe and offshore services provider Cognizant comes out on top.

Funny thing is Cognizant might be top with 79% average rating by customers, but this actually falls short of satisfaction which is set at 80%.
Sorry it is a but difficult to see, but here it is:

Thumbnail image for Thumbnail image for kpmgsatifaction.JPG

Gangnam Style has principles that software development can follow

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I was sent this blog post by William Dvorak and Michael Raybman who are founders
of Deterministic Labs, which helps companies big and small  outsource software development effectively.

It relates successful software development outsourcing with the South Korean pop sensation PSY and his hit Gangnam Style.
Thumbnail image for gangnam.JPG
Outsource Gangnam style

By William Dvorak and Michael Raybman

"Gangnam Style, a successful offshore project that took the American market by storm, reveals valuable lessons in outsourcing and technical project management. It successfully bridged cultural barriers, on a budget well below that of high-rolling Hollywood productions. With the universal language of music, unmistakable moves, and not a single trip to LA, it found success.

Where Gangnam was successful in its implementation, many software project managers are still in search of the perfect remote method. Technology now meets the needs of a distributed workforce: Korean musicians have sound studios and Polish engineers have Git. The problem, however, is that software builders do not take full advantage of these tools.

Feel the beat, language doesn't matter

Conversational language is not as important as the language of your industry, be that music or code.

Business managers from the US mistakenly assume they can manage a global technical team simply by explaining the business requirements to them. However, knowledge of the business goals does not always translate to effective technical specification, a problem exacerbated by language and cultural barriers.

This problem is best mitigated by a technical expert based in the US, who can bridge the gap between the management team and each developer. Such a person is able to communicate with developers partly in English, partly in Code. He can both internalize the value proposition from the Company and execute a Git pull request with ease. Unlike a traditional project manager, he needs to be deeply familiar with the technologies being used, with an emphasis on remote development tools like Vagrant.

Even a child can repeat the moves of Gangnam Style

Simplicity is key in getting others to follow, on the dance floor or in a software goal.

Formulaic micro-tasks allow for fast onboarding and immediate contribution.  Each task should be modular, requiring a limited skill set. These tasks can then be distributed to different geographies most capable of the skill.  For example, the Ukraine is famed for its sharp algorithm developers, and Indonesia is home to many creative designers.

Specifications for similar tasks should be written from a single template. Upon completion, the instructions can be iteratively improved or reused by old and new developers. Similar to code refactoring, templates allow for abstracting details of individual tasks when making general improvements to workflow.

Hey... Sexy Product

Well managed outsourced teams produce market-leading products. Using proper technical language and strategic subdivision of work, your product will shine, on time and on budget."

IT outsourcing predictions for Europe in 2013. Part Two Berwin Leighton Paisner

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Here is another round of predictions about the European IT outsourcing market next year. Yesterday I featured the predictions of KPMG's Lee Ayling . Today it is the turn of outsourcing lawyer mark Lewis of Berwin Leighton Paisner.
mark lewis.jpg

"1. In 2013, business conditions will follow the Chancellor's Autumn Statement, but it will be a busy year for IT and other outsourcers.  My caveat is that fortune will favour the bold and creative. 

2 .We'll see more big companies finally adopting public cloud at enterprise level, and we'll see some of the banks and other financial institutions using public cloud for parts of their businesses.

3. The EU will publish standards and regulations for public cloud that will cause havoc with the US tech sector and the US government will step in.  All cloud providers operating in Europe will have to radically overhaul their contracts, especially in the areas of data protection, sovereignty, mobility and portability.

4. While public cloud will become more important, IT outsourcing will become even harder for complacent or unimaginative suppliers. We'll see even more industrialised, shorter-term, multi-sourced IT outsourcing deals. Only those suppliers who can offer really smart solutions will flourish. For the rest margins will sink even lower.

5. We'll see growth beyond IT infrastructure outsourcing into applications development management, but it will follow the same industrialised route as for IT infrastructure outsourcing.

6. In BPO, only those providers with credible platforms that offer true platform BPO will succeed. Large-scale FTE plays in routine BPO like F&A will flounder and ultimately go the same way as ITO.

7. Only offshore IT and BPO providers that achieve the nirvana of non-linear growth will put on significant revenue and margin growth in 2013.

8. We'll see an upsurge in serious cyber-attacks from hostile states or state-sponsored cyber terrorists on UK government, infrastructure and business. Unfortunately, one or two will succeed and cause serious damage.

9. The UK public sector will open up for massive outsourcing opportunities, both at central and local levels, though they will not be called outsourcing and many will look like privatisation, with the government retaining equity stakes in new outsourcing vehicles.

10. There will again be change at the top in HP (probably the safest prediction of all)."

Tell me what you think by leaving a comment.

Inside outsourcing interview: Banks moving to open source software and need control

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Today I interviewed Jonathan Charley, who is a partner in financial services at IT and business consultancy Bearingpoint. He was a CIO at Lloyds Bank previously.

I asked him what trends he was seeing in the banking sector. I found what he is seeing around the use of open source software very interesting. He said the company's CIO advisory is supporting banks on their use of open source software.

There is a problem. "Increasingly people are using open source software but they don't necessarily know how much they are using, whether they have paid for a license and whether they are using it effectively."

Charley says Bearingpoint is engaging with customers on the subject and identifying risks. "Many customers have duplicate versions and some are not paying enough and others are paying too much." He said there are also security risks because malware can find itself on the corporate network if open source is not properly managed.

Bank IT departments are turning to open source in areas where they are limited by proprietary systems and  bring your own device (BYOD) programmes are bringing open source through the back door as workers chose their own applications for work.

Charley also said banks are opening up their APIs to the developer communities to enable them to build open source software products for them. I spoke to the Society for Worldwide Interbank Financial Telecommunication (Swift) last year about an experiment it was doing around creating an app store for banks.

Other areas the company is seeing a lot of IT activity is associated with meeting the plethora of regulatory requirements facing banks. With over 140,000 pages of regulation published in the last two years this is not a surprise.

Charley says meeting regulations is a good opportunity for banks to really understand their data and how it all joins up. "It is a good opportunity to rationalize data from source to report," he said. "IT has a critical role to play."

He said part of the drive to better understand data will be a move to utilize big data.
"Big data is a buzz word but banks are looking into its application to the business. He says for example big data strategies can help banks better understand customers to meet regulatory requirements and can also support measures to identify fraud.

Banks are also looking much more closely at how they use the cloud. He says this is to drive down costs and improve productivity. He gave an example of the Commonwealth Bank of Australia moving its online banking to the Amazon cloud. See this article on his blog.
Charley also talked about the finance sector's continued appetite for outsourcing to cut costs See this blog he wrote a year ago about why outsourcing so often disappoints the financial services Industry.

How data analytics can unlock value in BPO

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BPO used to be about cutting costs. But today, through the use of technology, much more can be gained by outsourcing a process. The ability to collect and analyses the massive volumes of data collected in BPO can have huge business advantages.

Technologies such as cloud computing, business analytics software, social media platforms and process automation software are being used within BPO to enable businesses to lower costs and be more effective.

This guest blog explains some of the business benefits of BPO today.

How data analytics can unlock value in BPOaccenture.jpg

By Michael Corcoran, Growth and Strategy Lead for BPO at Accenture

"Today, business process outsourcing (BPO) is moving up the value chain, becoming more focused on delivering strategic business impact, not just operating cost reductions. One key way BPO is delivering this value, as noted in a recent post by Karl Flinders, is in analytics. It's all about mining and analysing the huge volumes of transactional data that is being processed for insights that can be leveraged to deliver differentiated outcomes.

Leading BPO providers have come to realise that in running large scale transactions, there is a wealth of insight about client businesses that can be uncovered.  And the foremost among them have developed the expertise to improve and add value to their clients' business. As such, expertise in big data and predictive analytics is quickly becoming a significant differentiator in outsourced service offerings and is critical to gaining competitive advantage.

Analysis of transactional data provides clients with actionable insight into their business operations - enabling them to improve working capital management, claim full discounts from their providers for paid-within-terms invoice processing or increase customer acquisition, satisfaction and retention, for example.

Recent Accenture research found that 42 percent of high-performing BPO relationships - those found to get the most business value -- considered analytics provided by the service provider to be one of eight important components of the BPO relationship, compared to just 28 percent of typically performing BPO relationships. In the high-performing relationships we studied, providers applied their domain and industry expertise to deploy rigorous analytics processes to measure the right key process indicators; they created tools and techniques to measure and report on KPIs; and implemented algorithms, models and sophisticated statistics to identify weaknesses and opportunities. As a result, they were able to redesign processes to deliver measurable business outcomes.

In the effective BPO arrangements we've examined, providers have helped clients move from descriptive analytics, like standard and ad hoc reports and alerts that describe what has already happened in their business -- to predictive analytics, providing statistical analysis, predictive modelling, forecasting and optimization to understand what could happen in the future and anticipate likely scenarios so they can plan more effectively.

It's clear that analytics can empower clients, helping them to become more insightful decision-makers by providing key business performance information and identifying opportunities to address business issues and improve outcomes. In fact, Accenture's research found that 48 percent of high performers identify ways to use data and information from the services to capture additional benefits, versus only 25 percent of typical performers. Because insights gleaned from analytics can deliver real outcomes, Accenture has seen leading clients re-align their business models to take advantage of this new source of value creation.

This is driving a whole new generation of the market, where innovative providers are leveraging large volumes of data, combining analytical tools and technologies with industry/functional knowledge to create business insights. The pure labour-arbitrage, 'busy hands' BPO model will steadily lose competitiveness over the long term to those who can deliver significant and sustainable business outcomes."

Modern IT era has an XP D-day in 2013

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I have been asking people for their thoughts and predictions for the IT services sector next year.

Sam Kingston, a former CIO and now UK head at service provider T-Systems, made an interesting point about Windows XP. Support for XP will end in April 2014.

This is what Sam said: "With one year to go until Windows XP is officially retired for good, companies who have not moved off this ageing platform will start to feel uneasy as vendors wind down any remaining support for products sitting on this desktop OS. This D-day of the modern IT era has always felt far enough away, to some, to be brushed aside. When supporting vendors start to announce end dates for their XP based products, the realisation that the date is fast approaching will hit these companies, and a wave of migration projects will be kicked off in a bid to at least move the underlying OS forwards onto the next supported platform. Windows 8 is still too fresh, and its benefits beyond the tablet are still being debated. Windows Vista is a non-starter, so this leaves the rational choice for the next step to be Windows 7."

If you are still on XP, tell me what your plans are by leaving a message.

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IT outsourcing predictions for Europe in 2013. Part One KPMG

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I am currently writing an article about trends in IT outsourcing across Europe next year. I have put out a request to people in the industry for their views. But as always I would like some comments generated in this blog, which I can then use in the article.

The article is about Europe as a whole and although it will include the UK it is not the main focus.

Here are the predictions of Lee Ayling, a partner at KPMG who works in the firm's sourcing consultancy unit.Thumbnail image for Ayling final.jpg

"1. Southern Europe will be outsourcing more. France, Spain, Italy etc. This will see the growth of local delivery centres to support European languages and locales such as Egypt and Latin America.
2. We will see further supplier consolidation - perhaps even a big boy may sell their services business.
3. Multi sourcing remains the norm with most IT deals having Service Integration layers now
4. Some strategic management functions are being brought back in house in 2nd generation outsource deals - often the driver is to manage costs and governance.
5. Don't expect double digit cost saving on outsource deals any more - focus on access to better capabilities.
6. The Indian service providers are still buying assets (data centres and people) to build out local delivery capacity - less so US players."

Now tell me what you think by leaving a comment. I will try and use the comments in a story later this week on

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Inside Outsourcing interview: Will rural sourcing be real alternative to offshoring IT?

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I met up with Rob Machin, the UK head at nearshore IT services firm Endava. Amongst other things he told me there is a trend that is seeing application development centres being set up in Middle America.

In Middle America, which is underdeveloped in many places, the cost of labour is low and it is a real alternative to Indian offshoring, which is really unpopular in the US, so much so that President Obama is making signs that he will reduce the exporting of US jobs.

Machin also says this will happen in the UK. We already have call centres in lower cost regions of the UK but he thinks app development will also move to similar areas. He gave an example of a company y that has been set up in County Durham. He said a developer that worked in London moved back to his native Durham to work near his family. Although he had to take a huge cut in salary the lower cost of living and lifestyle benefits convinced him.

Endava is a company that supplies software services. About 85% of its delivery comes from Romania and Moldova and it uses agile methods to develop software. I won't go into more detail about Endava as you can read it in this blog post I wrote back in August 2011.

Another interesting trend Machin told me about was that businesses are increasingly demanding that suppliers sign productivity and quality agreements and that procurement departments and are no longer just interested in unit costs like they were in the past. This is all related to the use of agile development techniques. Fewer developers are needed to work in these agile teams and there are tools that enable businesses to measure productivity and quality.

Businesses are always surprised when they learn how many fewer people are used when developers use agile methodologies, says Machin. "When we give them the proposals they often do not believe we will be able to do the project with so few workers."

Machin also told me something interesting about the big Indian IT suppliers. He said that they don't even bod for application development work if it requires fewer than 100 developers. Labour arbitrage is still there main advantage.

So if agile methodologies are taken up by more and more businesses what will the big India offshore do?

Is Cornwall council's slimmed down outsource just a foot in the door for more?

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As I wrote last night Cornwall Council has decided to go forward with a plan to outsource IT services to BT. This also sees BT take over telehealth.

There has been a lot of controversy over the plan at the council. It led to a confidence vote over the council's leadership after members felt the cabinet was pushing on wit the deal without the consent of the full council. The then leader Alec Robertson lost the vote and was eventually replaced by his former deputy who opposed the plan.

Here is a detailed article about the agreement that was announced today. It is written by Mark Ballard, who has followed it closely for Computer Weekly.

It sees a slimmed down version has been announce with no large scale privatization of services but just the outsourcing of IT and Telehealth as mentioned. But for how long will further deals be resisted.

I had a conversation with one of the councilors at the council today and he told me he thought it was just the start of outsourcing at the council.

It seems that because the leader lost the confidence vote it was tougher to get the full deal through. In contrast a similarly controversial plan in Barnet saw the leader survive a confidence vote and the council push on with the plan.

Cornwall Council waters down outsourcing but IT still goes to BT

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Cornwall council's controversial plan to outsource services, which was put on hold, will go ahead but with a compromise.

I have written about the plan that has already caused the former council leader Alec Robertson to lose a confidence vote.

According to a Cornwall news website the council will push on the council has decided to go through with a scaled down version of a full joint venture with BT. But this will still include IT services as well as document management, payroll, and tele-health services will now be handed to BT to run. Councillors rejected plans for a bigger joint venture with BT as well as the option to run services in-house.

What do you think about private companies running council services?

Barnet council approves multi-million pound back office outsourcing but challenges remain

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Barnet's cabinet has unsurprisingly approved a £320m deal with Capita that will see the service provider take over back office functions. The ten year contract is part of the One Barnet programme to outsource service across the council.

The deal will see council workers transfer to Capita and others made redundant.

But there is still time for challenges and the leader of Barnet Councils Labour contingent, councilor Alison Moore told me this morning that next week there will be a challenge in a scrutiny committee.

But what do you think about councils outsourcing services?

The poll below has had 227 respondents so far. 70.04% said council services should be outsourced and 29.07% said council services should not be outsourced. Two people said they didn't know.

I asked the same question in a Google survey earlier in the year and it received well over 200 responses. The strange thing is the result was the opposite to this poll. Over 80% said they do not think council services should be outsourced.

What I am wondering is how long will it be before the suppliers start moving the roles offshore to cut costs. There must be roles that could be done offshore. But perhaps this is a step too far.

Are IT services firms and clients ready for EU data regulation upheaval?

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In this guest blog post Andrew Walker, director at sourcing consultancy ISG, looks at the impact of the new EU data regulation on businesses and IT service providers.

New, stricter data regulations could spell IT upheaval

By Andrew WalkerAndrew Walker.jpg

"The use of consumer data is a pertinent issue for both outsourcing providers and clients, gaining attention recently as online giants, such as Google and Facebook, change their privacy policies and various cases of personal data being leaked by  (or stolen from) firms hit the headlines.  Add to this the growing popularity of social networks and Twitter and there is now an increasing pressure to strengthen data regulations - legislation which undoubtedly has a far reaching impact.

The new EU Data Regulation was first published in January this year, and once approved by the EU Parliament, is set to come into force in two years' time. This not only leaves corporations with little time to get their security systems and structures in order, but also, and perhaps most worryingly, very few companies and service providers seem to be aware of the workload and cost involved in readying themselves for these changes.

Whilst the current regulations that deal with EU citizen's personal data are seen as inadequate and in need of standardisation across EU member countries, the new regulations are broad and if breached carry severe penalties. For instance, the new regulations clarify the importance of consent. Explicit consent from EU citizens for organisations to use their data will be mandatory, rather than the implied consent used, for example, in the UK today.

An underlying principal of the new regulations is continual assessment with an ongoing obligation for monitoring and auditing data - for example, in the case of projects, before a project involving data is initiated there must be a privacy assessment identifying for how long personal data will be processed and stored.

In terms of enforcement, one of the most important features of these regulations is that they will apply to personal data for all EU citizens no matter where it resides. This means this is now a global issue and affects IT service providers that store or process this data all over the world.

As for punishment, if these regulations are breached businesses can face fines on a scale of up to 2% of annual global turnover. What's more, it is likely that enforcement will be strict, as the architects of the rules intend to make the regulators self-funding.

As a consequence of these regulations coming into force, organisations will need to implement new and additional processes and changes to systems, such as audits, privacy assessments, new policies, updates to client consents, new procedures and additional monitoring. Of course, these all carry a substantial initial cost, as well as strengthened and consolidated data protection organisations staffed with skilled, experienced people.  

Furthermore, organisations of over 250 employees will also need to establish mandatory Data Protection Officers, which carry additional overheads for these larger firms.

So, in the face of the approaching, new and stringent data regulations, what needs to be done next?

First and foremost, firms must review their current products and services to determine the impact of the new draft regulation. For businesses that rely on IT outsourcing, or where significant elements of the IT services are outsourced, this is especially important.

Firms will then need to assess the overall impact of the regulations on their operations and the degree to which they need to be adjusted.  Pre-emptively, those in charge of personal data should determine whether there are measures that can be taken before the regulations come into play to reduce the financial and operational impact of the regulations.

Finally, and perhaps most crucially, businesses must assign responsibility, either to someone in the organisation or to an external adviser, to monitor progress of the regulations and establish a decision process regarding plans and changes to products, services and outsourcing arrangements. This will help to avoid costly rework and minimise the cost and impact of implementation.

Realising the sweeping effects of this new legislation, and taking steps to get systems in order, is now imperative for businesses. For those who fail to grasp the seriousness of this new regulation, imagining a fine equal to 2% of their annual global turnover landing on their desk should be enough to make them reconsider."

70% of Barnet council back office jobs to be cut after Capita deal

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The controversial outsourcing contract at Barnet Council, known as Barnet One, rumbles on with news that 70% of back office jobs will be cut.

The council said a major part of the expected £70m savings are coming from job cuts.
Barnet One will see the council spend £1bn on a plethora of outsourcing services.

The back office outsourcing part of the deal, which Capita looks set to take on, is worth a whopping £320m over 10 year and includes HR and payroll as well as IT.

The council's cabinet is tonight expected to endorse the deal. Read more on Computer Weekly here.

There have been a few controversial outsourcing plans in local government, such as one at Cornwall council, which lead to the downfall of the council's leader.

I recently ran a poll on this website asking readers whether they think local government services should be outsourced. At the time of writing this 205 people have given their answer. 71.71% said local government services should be outsourced, 27.32 said they shouldn't and 0.98% said they don't know.

Here is the poll if you want to give your views.

Who needs ERP software when people are so cheap?

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Banks in Asia find it cheaper to use people rather then ERP software.

I was at Ovum's banking conference yesterday and I was chatting to analyst Rik Turner.
He has just got back from a business trip in Hong Kong where he met up with lots of banks in the region.

My other hat at Computer weekly, other than covering IT outsourcing, is financial services IT. But I always ask about outsourcing because it is so big in the banking sector.

Rik said many of the banks in Asia don't have ERP systems because it is easier for people to do the work that the software would do around things like accounts, payroll and HR because labour is so cheap.

People cheaper than software. Software robots could be the next big thing in the Western world as they undercut cheap offshore workers to carry out business processes.

See this article I did about it: Machines are rising and they are offshore IT killers.

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App developers will always be too expensive for businesses to have in-house

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The average UK app developer takes home £70,000 per year, according to recruitment company ReThink. This following a 27% increase in pay over the last year driven by demand for smartphone and tablet apps.
ReThink talks about the arrival of the app economy, which came about as a result of businesses interacting with customers via apps on devices such as smartphones and tablets, as being the engine behind the app industry's explosion.

At growth rates like this wages will be unsustainable for many companies who will turn to contractors or suppliers for resources in the short term. App developers will be a luxury to tap into for projects.

According to ReThink the app economy is serious business. "Whilst there are plenty of stories of independent developers becoming millionaires in a very short space of time, there are also a growing number of app development consultancies who are becoming big and significant employers. These consultancies are increasingly prepared to pay very high salaries for app developers with the right kind of skills."

But who will win?

Will it be the contractors or the service providers?

Either way a whole new IT industry has arrived and it is almost uniquely outsourced.

Is the Patriot Act really something to worry about when outsourcing?

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I was at a meeting yesterday with executives from a few really big finance firms in Europe

They were talking about a service they use that provides board members with the documents they need to prepare for board meetings. Here is the story.

The supplier Diligent, is a US firm, but because of the Patriots Act its customers don't want data stored in the US. As a result it keeps the information on servers in Canada.

The Patriot Act basically means that information stored on servers in the US can be accessed by the government if it requires. Obviously confidential data is confidential and businesses will not want their data to come under the prying eyes of the US government.
A couple of years ago one of my contacts believed the Patriot Act would have a huge impact on the outsourcing sector in the US. I haven't seen much but a couple of meeting I have had recently have mentioned it.

But is it really that much of a worry? I mean any sovereign state could introduce a similar law if it wanted, so nowhere would be safe. And US datacentres are pretty secure and less risky than those in unstable countries. So the risks of the US government spying on you have to be balanced with other factors such as political stability and the threat of theft or attack.

In today's IT world a huge amount of information is either stored or backed up offshore. "In fact, the actual impact of the Patriot Act in [the] cloud context is negligible," according to this article.

I was hoping to get feedback on this blog so please comment.

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Inside Outsourcing interview: Huddle targets US public sector

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I met up with Alastair Mitchell, the CEO and a co-founder of cloud based collaboration software provider Huddle.

I recently interviewed him and ran a article about the company and its strategy and he told me that the company is now pushing the US public sector. Huddle has had a lot of success in the UK public sector. Since the launch of the government's G-cloud it has been one of the most sold products.

Whenever I write about a cloud service I always think how this impacts the IT services sector.
Being a cloud based alternative for software such as SharePoint I asked him about the attitudes of the big integrators towards products like Huddle.

It is big business for system integrators putting in Enterprise-wide systems such as Sharepoint. Not only is there a share of license revenues, but there is also integration work and ongoing maintenance. And don't forget many suppliers will host it for their clients.
But then along comes and alternative that is in the cloud and large companies and public sector organisations are using it. What do the system integrators do?

Mitchell says there is a bit of a block in the sales pipeline which he believes has something to do with a conflict of interest among suppliers.

He says they should step in and become real integrators and use their skills to introduce cloud services into their customer bases rather than resisting it. One service provider Mitchell says is working well with Huddle is Atos. He said Huddle and Atos work closely at the BBC.

What do you think?

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