January 2013 Archives

Inside Outsourcing interview: Infosys trailblazer on iGate and the arrival of outcome based service

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I met up with the CEO of IT services firm iGatePhaneesh Murthy, today.

Just to explain the headline. In 1992 apparently Infosys was thinking about shutting down because its revenue had plateaued at $2m. Murthy was asked if he fancied moving to the US, with $40,000 in hand, to get business going there. Although it had customers in the US id didn't really have a presence in terms of sakes and consultancy. He changed this and 10 years late in 2002 its revenues were $750m.

It was good to catch-up with Murthy to find out how things were going at the company that acquired Indian IT services firm Patni for $1.22bn a year ago. pmuthey.JPG

This was an interesting story because at the time of the acquisition iGate was much smaller than Patni. For example it had 6000 staff compared to the 18,000 at Patni. iGate had revenues of about $280m compared to Patni's $700m.

iGate had also looked closely at Satyam when it was up for sale following the billion dollar fraud of a former Satyam chairman.

The plan was to build scale through the Patni acquisition and transfer iGate's established outcome based services to the combined company, which meant transforming Patni from being a firm that made its money from time and materials. The acquisition immediately gave iGate a huge Indian workforce for its programming.

Murthy was in town because iGate, which currently only does about 15% of its business in Europe, is pushing into Europe. About 80% of its business is in the US.

So it is worthwhile outlining the companies proposition. Before it acquired Patni, iGate was largely focused on the mortgage sector in the US. It would do end to end processing for mortgage providers, from sale to funding. Its differentiator was the fact it did not charge for time and materials but for each transaction completed.

Murthy says the company will now transfer this outcome based philosophy to the Patni business. He believes the time is right for outcome based contracts for three reasons. The IP and delivery models, which includes the cloud, are maturing; customers are finding it hard to predict revenues and business volumes; and the need for cost reduction is becoming more and more important.

iGate targets businesses that sell products that are not physical. This includes finance firms that sell non physical items. Manufacturers that sell physical goods are not targeted. Murthy says this is because iGate wants to take entire processes off the hands of its customers and provide it more effectively at a lower cost.

He says the value is in iGate's IP so it takes over the running of processes using its own technology.

Customers include GE, Murthy says iGate learns a lot from customers.




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Is Nokia's offshoring a sign of the pressure it is under and a way of hiding redundancies?

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Nokia was once the dominant force in the mobile phone sector. Then came the smartphone giants. The likes of Apple and Samsung have ripped into Nokia's market share and quickly put the Finnish firm under pressure.

Given the loss of its dominance the company looks like it is on a mission to cut costs. Just recently it has signed a couple of IT outsourcing contracts with offshore suppliers.

This month Nokia appointed Indian IT giant Tata Consultancy Services (TCS) to support and develop its global business applications as it consolidates the support of systems under a single supplier. It has also signed an IT outsourcing agreement with HCL Technologies.

The agreements saw hundreds of jobs cut and transferred to the suppliers, who both have operations in Finland.

Not only is it interesting from a Nokia perspective but is also very revealing in that countries in the Nordics are increasing their use if offshore based suppliers. Nokia looks set to work with TCS and HCL in the long term.

This article by a Finland based Wall Street journal writer asks if Nokia outsourcing its redundancies?

The recession has really changed things on the continent. A few years ago many IT professional viewed continental Europe as a safe haven, where they were unlikely to lose their jobs to lower cost staff provided by a supplier. Not anymore it seems.

Read this article about a UK IT professional who moved abroad so he could compete for work.

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Cornwall councillor resigned in protest to outsourcer's use of lie detectors to catch benefits cheats

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A councillor in Cornwall resigned from her post in Cornwall Council's cabinet after she discovered the council's service provider Capita was using lie detectors when doing telephone interviews with some benefit seekers.

Tory councillor Fiona Ferguson was threatened with the sack if she revealed the practice of using the Voice Risk Analysis (VRA) software, also known as the lie detector, when carrying out a review of people claiming single person's council tax discount.

She did not give the council leader a chance to sack her and duly resigned, revealing the whole shameful activity.

This reminds me of the protests of the Facebook group campaigning for better treatment of disabled people, known as Black Triangle. This group was protesting against the use of software by Atos when assessing whether people were entitled to disability employment support allowance.

Read the full article here: Cornwall Council Tory group leader Fiona Ferguson quits Cabinet post over "lie detector" tests

Councils should probably use these lie detectors during negotiations with service providers, because many contracts fail to meet expectations.

Cornwall council is becoming synonymous with negative headlines about public sector outsourcing.

The whole debacle surrounding its strategy to outsource services including IT, saw the overthrow of the council leader and a heated debate.

Here are some of the articles written about this:

Cornwall Council opts for IT outsourcing after rejecting BT privatisation

Cornwall outsourcing backers accused of 'undemocratic' tactics

Cornwall Council puts outsourcing move on hold after landslide vote

Cornwall Council axes leader Alec Robertson in outsourcing controversy


Good to see that some old fashion trading is going on after stock exchange disappointment

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One of my beats at Computer Weekly over the years has been the financial services sector.

As somebody without a technology background I always enjoyed talking to the technologists behind the stock trading venues. Hearing about they systems they build and being amazed by the speeds and volumes of trades going throw them was really educational.

However my big disappointment must have been when I first visited the London Stock Exchange. Not that it wasn't a nice place with lots of interesting people to meet, but simple because my image of a stock exchange was gone forever.

Clearly working for Computer Weekly I knew things had changed and should have been happy with that. But I thought that perhaps hidden away in some corner there would be a group of traders with their sleeves rolled up yelling into their telephones. Perhaps a few screams and high fives thrown in for good measure. But no, the London Stock exchange is a very plush and very quiet office with lots of glass.

But last week I was pleased to have my first experience of a trading room with actual people. I went to see Yann L'Huillier. He is the global CIO of interdealer broker Tradition.

See my interview with Yann here.

After the interview Yann showed me the trading room. There was a couple of hundred people, most with telephones in hand, and there was noise.

Yann told me about the difference between share trading and what Tradition does, which is involved in the Over the Counter (OTC) sector.  This sees Tradition help bank traders do deals with each other.

Most the work is done via voice but work is increasingly being made electronic. Althou L'Huillier said it will never be fully be voice or electronic, but the most appropriate balance.

News from Davos is less stressed with no crisis - BG Srinivas at Infosys reports

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It's that time again. The World Economic Forum is on in Davos. Once again BG Srinivas, head of Infosys in Europe, has agreed to keep us updated in the blog. Here is his post.

Update from Davos

By BG SrinivasThumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for BG.JPG

"While the official theme of this year's World Economic Forum is 'Resilient Dynamism' one phrase that is also on the lips of many people is 'cautiously optimistic.' 

This is the first year in the recent times where there is no immediate crisis overshadowing the events in Davos. We have seen a period of relative stability in the last few months and there are signs that the European governments have made the right kind of interventions to begin to address the long term sovereign debt issues they face.

With our feet firmly on the ground, we remain optimistic about the long term potential of Europe.  Our chairman and co-founder, talked about this in detail to the Financial Times.

In this environment, while 'resilient dynamism' is a macro economic message I think it is equally applicable for the enterprise.

Companies still need to prepare for unforeseen circumstances, retain a tight control on costs and make sure their systems and processes are both robust and agile at the same time.
At the same time, organisations need to ensure they look to transform themselves and innovate to drive growth. Successful companies (and there are some even in Europe) are going to be those that relentlessly drive themselves to find new business models, new markets and provide compelling products and services.

That is easy to say and hard to do.  Within the modest top line growth rates that we see in Europe, there is hidden significant difference in fortunes.  While some companies in Europe struggle to adapt, others are taking advantage of the new economic, social and technology realities they face.

What I do find consistent is that in my conversations with other executives and with political leaders here, there is a desire to focus on the positive messages and examples, from large companies, NGOs and the entrepreneurial community to give us the inspiration for a prosperous future."

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Universities should outsource tracking of students with visas in their name or face having rights revoked

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Many universities have a license to bring overseas students in on visas. One such university was the London Metropolitan.

Last year the university lost its right to recruit students from outside the EU because it failed to properly monitor students. There were cases of students remaining in the UK when they had no right. Student visas have been used by people with no intention of studying.

Because universities want to focus on teaching they need technology and support to help them monitor activity as losing the right to bring overseas students in is very costly.

Here in this guest blog John Butler, VP at education IT supplier Ellucian, discusses the role of technology in simplifying the international student management process.

Universities must harness technology and services to prevent student visa abuse

By John Butler

In mid-December, Home Secretary Theresa May, highlighted work the coalition government has done to reduce the abuse of the student visa system by foreign nationals. She said the number of bogus applicants coming to the UK on a study visa and subsequently disappearing to take up work had been reduced dramatically since this government came to power.  May concluded by claiming the UK "can now look forward to a period of stability on student migration policy." 
 
While May pointed to policy stability, nearly 75,000 foreign nationals still live in the UK on a student visa and it is every diligent college's responsibility to keep track of them.  Universities across the UK use different systems and processes to track overseas students, but a lack of concrete direction and guidance by the UK Border Agency (UKBA) and ways to measure progress makes managing international students during the course of their study challenging. In the wake of London Metropolitan University losing the visa licence which allowed it to enrol international students and the subsequent reprieve, the issue has rarely been out of the media spotlights. In its defence, the LMU argued that the Border Agency changed the requirements for tracking overseas students "at least 14 times in the last three years" and failed to keep the university aware of its concerns in the six months before the issue came to light.

There's no doubt that higher education institutions realise the importance of managing overseas student applications effectively. Many UK academic institutions have made significant investments in technologies and have in place software and services that help to streamline and simplify the process.

Such solutions can help to manage the registration process, including visa requests and also enable universities to communicate with prospective international students in a number of ways, at various stages of the application process. For example, Banner™ International Student Tracking from Ellucian™ allows institutions to notify students by email about the status of their CAS (Confirmation of Acceptance for Studies) application; to identify students who have received a visa but do not show up for registration and create automated reports to alert UKBA for no-show students. Universities are also able to record and monitor attendance information for international students.

Essentially, innovation in technologies means institutions can manage information through one centralised system and easily match its student information records with the UKBA data. In addition, the international student management process can be streamlined to ease the burden on administrative staff across different schools. This not only decreases workload and resource issues but also reduces duplication and erroneous information, creating a more efficient and resourceful management system.

Ellucian has worked with a number of UK higher education institutions to help them implement tools to improve enrolment. Universities that have appropriate systems in place have benefited from an easier, less time consuming process that has delivered a better quality of information and accuracy to track international students."

Other reading:

University black box cuts student visa processing time

UK Border Agency ordered to crack down on bogus student visas

Exeter University automates overseas student processing for UKBA compliance

Banking IT life support costs drain budgets - time to go off-the-shelf?

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When will banks move off their 40 year-old platforms?

Not only is the European economy holding back IT spending in the banking sector but ageing systems mean that a massive proportion of what is spent goes on maintenance and not generating business.

I did an article about research from Celent about the banking sector and expected investments in IT over the next couple of years.

I am sure I have heard it before but I was still staggered by the fact that 77.1% of total bank IT spending is on maintenance. This is $138.2bn.

So forget about new mobile platforms and internet banks being the projects that get funds. Most the money goes on supporting legacy systems.

I constantly hear people in the finance sector talk about the fact that banks will replace legacy systems when it becomes worthwhile from a financial point of view.

Well surely over 75% of IT spend going on maintenance rather than going on technology that increases business, is a good argument for replacing systems. Remember the skills required to support these systems are often in shortage and come at a premium.

And surely this walks straight into the arms of the off-the-shelf banking software suppliers. Standard software from suppliers will be maintained by them and actually requires less maintenance than legacy systems that are highly customised.

Or outsourced systems suppliers could look attractive if they take away maintenance overheads.

According to Gartner, banks spend about 6% of their revenue on IT. This compares with the retail and wholesale sectors that spend 1.1% of revenue on IT, utilities 2.8%, industrial manufacturing 1.8% and a sector-wide average of 3.6%. The only sector that spends a larger proportion of revenue on IT is the software and internet sector, at 7.6%.

But only 18% of banks' total software expenditure is external. Perhaps time for a change?

Also read:

Perhaps time for a change?What does 2013 hold for financial services IT?


Mobile banking innovation stimulates banks' IT spending




How much is charisma at the top worth to Indian service providers?

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I wrote earlier about Vineet Nayar. More specifically the fact that he was stepping aside as CEO at Indian IT services firm HCL. vineet.JPG

He has transformed the company in his own unique style as has been written before. Robert Morgan, director at sourcing consultany Burnt-Oak Partners, left a comment on the blog post which made it hit home just how unique Nayar is in Indian service provider CEO terms.

Here is what Robert said: "HCL - will suffer. No other Indian offshore provider has a CEO with that extra something that bridges important gaps in culture, aspirations and delivery.
Vineet was the cement between the client exec and the delivery organisation, so vital to ensure continuity and any service contract.

Above a true leader, HCL will not look and feel the same, but more importantly not ACT the same."

When I thought about this I realised that Vineet Nayar is the only Indian IT services CEO I can name off the top of my head. I know senior people at various Indian service providers but cannot even name CEOs. Apart from Vineet Nayar.

If you are a business and you can understand what a company's leader stands for you are more likely to consider using them I suppose. BP even insists that the CEOs of all its suppliers reort to its CIO when required.

How important is charisma for leaders of IT services firms?

Read more articles about Vineet Nayar:

HCL's Employees First Customer Second is more than shallow marketing slogan

Inside outsourcing interview: HCL discusses targeting potential customers unhappy with current suppliers and having a DNA like IBM.

Indian CEO warns of business threat from China

How much did the India IT bosses earn last year?

HCL CEO says the fact that his teenage kids don't give a s**t about him, inspired company strategy




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Time for system integrators to do a lot of work for charity and talk about it

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It's time for system integrators to do some pro bono work.

Charities are really struggling in the current economic climate and many of them have more people to help with unemployment on the up and benefits being stripped down

Lower income for charities means serious constraints on IT investments. A recent survey of charities with an annual income greater than £1m found that 41% spent less than 1% of their income on IT, 46% spent 1-2% of their income on IT and just 13% spent over 2%. The average spend among commercial organisations is greater than 4% of income.

When donations are down it is arguably the time when charities need new IT the most, to become more operationally efficient and be able to contact more people that need help.

But with over two-thirds (67%) of UK charities not having paid IT staff it is difficult to harness the right IT at the best of times. Perhaps the system integrators, many of which have had their names dragged in the dirt for expensive public sector cock-ups, should offer a bit of support.

It will be good for their PR.

I know some SI's do work for charity but we should have more of this.

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Restrict IT offshoring and prevent immanent skills shortage

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Yet another survey about an IT skills shortage hit my inbox today.

It is an article about how the UK will have 33,300 less IT workers than it needs by 2050.
These surveys always surprise me because I am in contact with quite a few unemployed IT workers. There is talk of there being about 40,000 unemployed IT professionals in the UK. Furthermore IT students coming out of university with IT qualifications are the largest group of unemployed graduates.

The survey blamed: a skills shortage, with people having the wrong sort of skills; an ageing workforce; and a restrictive migration policy, for the shortfall.

On the skills from it seems a shame that the government can't introduce good schemes to help unemployed IT professionals retrain to fill the gaps. I mean these people have an aptitude for IT so it will only be a case of topping up.

Also the report said another problem is that work related emigration has risen 16% since 2007 while work related immigration has fallen 24%. But if you ask a lot of unemployed workers why they lost their jobs they will often say it was because their jobs were taken over as part of an offshoring contract. This means offshore workers come to the UK to do their job for less, but only for a short period before they are replaced by another, which stops it being recorded as work related immigration.

Also I have spoken to many UK IT professionals that have emigrated and they have done so because they cannot compete on price with offshore workers in the UK.

So workers lose their jobs as a result of the role being offshored. From this point the UK worker ceases to learn new skills on the job, hence adding to the skills shortage. Secondly a worker loses job to offshore worker and emigrates because it is impossible to compete on price, hence adding to the skills shortage.

The third point is that recent graduates cannot get their feet on the IT career ladder because entry level jobs are offshored. John Harris, chair of The Corporate IT Forum and chief architect and head of IT strategy at pharmaceutical firm GlaxoSmithKline (GSK) for example told Computer weekly in a recent interview that years of outsourcing commodity IT skills has much to blame for the lack of grass-roots IT talent today. "It is important to feed the pipeline at the bottom end," he says.

So why doesn't the government do something about this. I have nothing against offshoring personally but there has to be a balance. Perhaps flying in low cost labour for short periods isn't fair. It is up to the government to control this. What is cheap now could be costly in the future.

Give me your views in this poll.


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When Bob offshored his job was he doing anything that different?

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I blogged yesterday about the US software development head within a big US organization who had been sending his own work to a Chinese services provide to be done for a fraction of his salary. See the blog here.

He used a fifth of his own salary to pay low cost developers in China to do his work. The individual, known as Bob (sorry hyperlink only vaguely related but comedy gold), wasn't found out for years and when he was it was nothing to do with software quality but the result of fears within IT of a cyber-attack because of the VPN link the developer had set up between him and the Chinese developers.

Somebody in the office said with tongue firmly in cheek, to me that they should make this guy COO. If the software quality was good and at that price he is obviously on to something.
Then I had a comment in the previous blog which described the similarities between what the developer did and what is going on within corporates throughout the UK, with companies offshoring work.

This is what the reader, known as Matt, said about the story.

"To be honest, I don't see a huge moral difference between "Bob" and the common practices of many large consultancies, who will parade their top UK-based experts in front of the client when they're bidding for a contract, but when they win the contract they'll staff the project with inexperienced offshore trainees wherever possible and pocket the huge difference between the daily rate they charge their clients and the rate they pay the offshore worker. I wonder if Bob's employer has outsourced any work recently?"

How will HCL cope without its voice?

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HCL's extravagant leader Vineet Nayar  is stepping away from the role of CEO. The man that famously puts employees before customers is moving to become joint managing director until July and vice-chairman after that.

Nayar has been seen as the driving force behind the company's explosive growth. His no holds barred style has seen him become a minor celebrity.

He famously dances and swears his way through company presentations and even said sh** on BBC radio 4. But jokes aside he is recognised globally for his methods. Notably his Employees First Customers Second strategy.

How will HCL get on without him behind the wheel? He transformed HCL from an also ran amongst India's IT sector to India's fourth largest IT service provider. He took the headcount from 30,000 to 90,000 and the company sells over $4bn in services every year.

Vineet was certainly popular with staff if his Twitter account is any reflection. Read it here, but I warn you that you might vomit.

HCL appointed Anant Gupta as CEO.

What do Google and Apple have in common with HCL and Cognizant?

US software programmer outsources his own job to China

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I was recently asked by the BBC whether IT contractors, known as Ringers, were winning multiple contracts and sub-letting the work to low cost workers.

I have also been blogging about outsourcing to China.

Well a blog post by company Verizon reveals that a software developer in a US organization was doing both.

He was sending his development work to a Chinese service provider and paying them a fraction of his earnings.

He was foiled when Verizon was asked to investigate suspicious VPN activity that looked like a security breach. Funny thing his he was praised in  his annual reviews for his code quality.

The Verizon blog said: "Central to the investigation was the employee himself, the person whose credentials had been used to initiate and maintain a VPN connection from China.
Employee profile -mid-40's software developer versed in C, C++, perl, java, Ruby, php, python, etc. Relatively long tenure with the company, family man, inoffensive and quiet. Someone you wouldn't look at twice in an elevator. For the sake of case study, let's call him 'Bob.'"

"As it turns out, Bob had simply outsourced his own job to a Chinese consulting firm. Bob spent less that one fifth of his six-figure salary for a Chinese firm to do his job for him. Authentication was no problem, he physically FedExed his RSA token to China so that the third-party contractor could log-in under his credentials during the workday. It would appear that he was working an average 9 to 5 work day. Investigators checked his web browsing history, and that told the whole story.

A typical 'work day' for Bob looked like this:

9:00 a.m. - Arrive and surf Reddit for a couple of hours. Watch cat videos
11:30 a.m. - Take lunch
1:00 p.m. - Ebay time.
2:00 - ish p.m Facebook updates - LinkedIn
4:30 p.m. - End of day update e-mail to management."
5:00 p.m. - Go home."

Bob is now COO. Only joking.

Read the full blog post here.

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Tata Consultancy services still gets double digit growth

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India's biggest IT services firm Tata Consultancy Services (TCS) has managed to generate 14% more in sales in its latest quarter compared to the same period last year. Its sales were worth about $2.9bn in the three month period.

Like the next biggest Indian IT services giant, Infosys, it did better than the market expected.

Double digit growth in IT sales is not just a thing of the past then.

TCS also increased the size of its workforce by about 10,000 to 263,637.

But what keeps TCS on its toes?

I was sent an internal email form a source which showed how TCS is obsessive about its competitors. It regularly sends an internal mail to staff explaining what all of its competitors are doing and how well they are doing it. The list of competitors is long and it is very detailed.

I won' t go into detail on what it said in this post but will go through it and pick some interesting things up later.

Well one of its competitors is big on offering cloud based platforms aimed at niche markets.

BG Srinivas has told me on a couple of occasions that these platforms are a focus area.
The recession has driven customers to look for more flexible ways of paying for service and these platforms enable this.

As a result there is interest from customers in Infosys. Srinivas said in the last quarter there has been strong demand for its ProcureEdge procurement platform, its BrandEdge marketing system and its CreditEdge financial services offering, which are delivered via a private cloud.

I had a conversation with Infosys' VP product, platforms and solutions, Gopal Devanahalli today about its latest platform as a service.Here is a bit more detail about its latest platform, known as AssistEdge. This is a customer service platform aimed at improving customer services experiences.

The platform launches next week, but already has a large US and a large UK telco implementing it.

It supports customer services agents by linking together all customer services channels. Infosys is delivering these platforms, which address particular customer pain points, via a private cloud.

Who said Indian IT services firms just make money selling cheap labour?

Here is a Computer Weekly guide to TCS,

Here is a Computer Weekly guide to Infosys.

Has the rapid rise of China created the perfect environment for offshore IT services?

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The Chinese economy might have slowed a bit during the current economic conditions but it has exploded in recent years.

China is the world's powerhouse today and heading towards world domination.

Usually when a nation develops everything becomes expensive. Less developed countries can undercut them and provide lower cost services, but not necessarily lower quality.

India for example is becoming more expensive when it comes to providing IT services. This is because the growing middle class in India want more luxuries and require higher pay to get them. In a democracy it is difficult to stop this happening.

But China is different. It has a command economy, which although is the source of most of the criticism of the Asian giant could actually be its trump card. Human rights in China are not good and I am not suggesting that being a command economy, where the government controls everything, is ideal but that it will prevent the prices going up.

China has millions of well educated people and for example creates 350,000 computer science graduates every year. These workers are on very low salaries even compared to India, where low cost labour is a large part of the attraction to companies offshoring IT work there.

Most large multi-national businesses also want to get a piece of the China opportunity. Getting into China through a service provider could be a way to do this. I spoke to David Chen, president at VanceInfo, a couple of years ago. He said that multinational businesses based in the west, such as banks and retailers, are all trying to get into the Chinese market. He says that because of the challenges breaking into China it would be an advantage for these businesses to contract Chinese service providers to support them.

But China's treatment of citizens is cited as a reason not to buy services there. There is also a big question mark over its Intellectual Property laws.

But the command economy could mean that China becomes the world's strongest economy but at the same time the cost of services it provides to overseas businesses remain the cheapest available.

I have been running a poll in this blog to get people's views on offshoring to China. I simply asked, whether people would offshore to China?

So far I have had 61 people contribute. A total of 49.18% said they would not offshore IT to China 40.98% said they would and 9.84% said they have never considered it.

Please add your view in the poll below.

If Fujitsu system has sent people to prison, will Post office face huge compensation claims?

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Over the last few years Computer Weekly has written about the plight of sub-postmasters that allege that the accounting system that they use has been faulty and caused them to be falsely accused of cooking the books.

Some sub-postmasters have even gone to prison.

But there are a large number of claims that it is the Horizon accounting system, developed by Fujitsu, that is to blame for accounts being wrong. The Post Office has always claimed that the Horizon system is accurate 100% of the time.

See these articles:

Bankruptcy, prosecution and disrupted livelihoods - Postmasters tell their story


85 sub-postmasters seek legal support in claims against Post Office computer system

Post Office launches external review of system at centre of legal disputes

In recent weeks there has been a change in attitude from the Post Office. It is now prepared to look closely at the system and has given a sort of amnesty to anybody that might have information about the system. This has occurred following pressure from the sub-postmasters, lawyers, the press and an organization known as the Justice for Sub-postmasters Alliance (JFSA).

I was wondering what will happen if it is revealed that the system is faulty? People have had to spend time in prison and many that have not gone to prison have had their lives wrecked.

So if Horizon is at fault surely these people will be entitled to compensation. Will the Post Office pay or will it turn to Fujitsu for this as the developer of the system?

The JFSA said although it is unlikely to happen it wants people who worked on the Horizon project at Fujitsu all those years ago to come forward if they have any information.

If you want to contribute do it here.

I wonder how HP workers feel about Meg Whitman's pay packet?

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According to a filing with the US Securities and Exchange Commission last Friday HP CEO Meg Whitman got over £9m pay in 2012 despite HP's heavy losses.

She was only paid a basic salary of $1 but this was more than made up by $1.7m in bonuses and the remainder made up of shares and other income.

Whitman, who became CEO in September 2011, was rewarded a package worth $15.4m for the first year in charge.

Although HP wrote down its EDS and Autonomy acquisitions by over $16bn in 2012 Whitman can hardly be blamed as she was not in charge then. Rather she has had to deal with the aftermath.

But over $9m in rewards seems pretty generous. I blogged earlier about how HP troubles show dangers of demotivated staff to business. Whitman is not one of the workers I was referring to.

If you are a current or former HP worker, what do you feel about Whitman's pay package?

Over 60% of people agree with outsourcing local government service

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With more and more local authorities looking at ways to cut costs there is inevitably a focus on outsourcing services to the private sector. And IT is one of the areas that always seems destined to be farmed out.

Recently councils such as Barnet and Cornwall have hit the headlines as a result of controversial decisions to outsource services, including IT.

I have been running poll on the blog to get people's view on outsourcing local services. I asked whether people thought services in local government should be outsourced to private companies or not. The third option was don't know. I have had 342 people contribute with their views.

61.4% said local government services should be outsourced to private companies. 35.96% said they shouldn't, while 2.63% said they didn't know.

Should local government outsource services to private companies?



Please contribute your views below.

HP troubles show dangers of demotivated staff to business

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Is the ability for IT services firms to provide the high levels of service their clients demand being undermined by a lack of motivation amongst mistreated staff.

I wrote last week about how HP could shut down under-performing units. I suggested the services unit, which has been devalued by $8bn since it was acquired from EDS, could be an under-performer.

I got an interesting comment from a source that knows a thing or two about HP/EDS. The source talked about the importance of having motivated staff if you are going to provide good service levels.

He described how moral amongst staff at HP is low. The point is the customer has no control over the moral of workers at their service provider. Yet they are doing jobs that are business critical.

And HP is not alone, with IBM and CSC others mentioned. Indeed I doubt IBM staff were particularly motivated when a senior HR executive made the ill-advised claim that that it could reduce its workforce from 399,000 today to 100,000 in 2017. Turns out IBM had not said this but no smoke without fire as they say.

Anyway this is what the source said: "I T service companies need to be based on providing excellent levels of service to clients, firm financial footings and a well lead (inspired) and well-motivated workforce. Any one of these missing and it will not work. All I read these days of these service companies is staff cutting, freezing salaries and bonuses, disposing of unprofitable units, playing musical chairs with overpaid and incompetent CEOs.

"HP EDS is one of these companies. IBM, CSC, CGI etc. all seem similar. The accountants have taken control and displaced excellent service with financial juggling. Morale at HP EDS is low as the staff are busy working on CVs looking for other work, doing the minimum necessary to keep their jobs, but certainly not providing innovative and inspirational solutions to business problems."

He also added that he does not believe outsourcing to India, for example, is a solution. "We need to get back to rewarding properly and delivering quality solutions."

General Motors, which previously outsourced almost all IT to HP/EDS is bringing everything in-house. It has already recruited 3000 HP workers who worked on its account.
I bet it can get more out of these same workers.

This is in stark contrast to the views of HCL Technologies CEO Vineet Nayar, who has a corporate strategy known as Employees first Customers Second.  The idea is that by empowering staff customers benefit from higher service levels. By that rationale demotivated staff will means lesser services.

Tell me what do you think about the importance of IT service provider staff motivation.

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Forget giving up booze here are KPMG's New Year's resolutions in IT outsourcing

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Innovator describes challenges in finance sector IT in 2013

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I have had some good feedback from the series of 2013 predictions I have been running.

Experts from across the IT and outsourcing sector have given me their thoughts. As we are still in January I am going to continue to post people views.

In the financial services sector CIOs face flat budget, along list of regulation related must do's, the need to drive innovation to deliver tangible new value to internal and external customers and they must continue delivering operational excellence , says Kosta Peric, head of innovation at the Society for Worldwide Interbank Financial Telecommunication (Swift).

What does 2013 hold for financial services IT?

By Kosta Peric

"If you're a CIO/CTO in financial services, you probably have something like the following in your objectives -

•    flat budget
•    long list of regulation related "must do's"
•    drive innovation to deliver tangible new value to internal and external customers
•    continue delivering operational excellence 

In other words, 2013 budgets reflect on one hand a continuing focus on fiscal caution, and on the other hand the necessity to invest for the future.

I've gathered from my talks with CIOs in various financial companies - and indeed my own (SWIFT) - the ratio of maintenance vs investment has changed. What used to be a 90/10 budget (90% for maintenance and operations, 10% for new projects) has now shifted towards 80/20 or even 70/30. That means serious money for innovation.

The first area of innovation will be related to regulation. How to cope with the inevitable and increasing requirements, while keeping the budget equation balanced? I think cloud computing will probably emerge as a best adapted tool. Regulation lends itself to be, by nature, a shared effort - everyone must comply to the same rule. Therefore, why implement this over and over in every financial institution - why not use a shared resource? A good example of this is the recently launched, and quite successful, Sanctions Screening service from SWIFT. This service checks payments against public sanctions lists for the banks who subscribe to it. This costly to implement process (due to ever changing sanctions lists and the tricky text matching algorithms) is thus available as a cloud-based service, over existing connections - easy to use and much cheaper to implement than if built in-house or outsourced. I think there is a major opportunity for more services such as this one, and a large number of potential suppliers are out there.

The other areas of innovation will be driven by technology change in mobile computing, social media and "big data" analytics.

Most financial institutions are playing catch-up right now with respect to mobile computing - I expect frantic investment in 2013 to go into easy to use, mobile based front end to replace the more traditional web based home banking systems. It's a "no-brainer", and this game-plan will essentially be about choosing the right partner (outsourcing or ad-hoc) to deliver - delivering this in-house is seldom an option.

The challenge for 2013 will be about formulating the gameplan for a truly innovative customer experience. This is not only about technology, it is really about a mindset change. Going from 'captured consumers' into 'empowered consumers'. The clever use of social media and big data analytics (analyzing massive amounts of customer related data to gather new insights) will be key in differentiating the offerings and gaining traction with the "digitally native" generation (people under 30 today).  I've seen some pioneering examples of this at Fidor bank who rely heavily on social media for new customer acquisition, and Movenbank who use big data analytics to compute financial health scores.

Finally, it is going to be important in 2013 to map the future. Where does the empowered consumer road ultimately lead? Innotribe, the innovation arm of SWIFT, thinks the future is about the Digital Asset Grid a new internet where consumers own their digital assets (valuable data such as a person's eBay reputation), and where digital assets can be shared safely and securely. The banks may have a major role to play. It will be important to incubate this - and other - ideas related to the digital banking of the future."

Can Huwawei cut it in mainstream IT services?

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I was talking to a contact of mine some weeks back and he was telling me about moves by Chinese IT giant Huawei to get into more mainstream IT services rather than its telecoms home ground.

In fact he told me he knows of a few deals in the offing for the vendor.800px-Flag_of_the_People's_Republic_of_China_svg.bmp

He said despite the US and UK governments, particularly the US, being suspicious of the company because it is Chinese he does not think it will stop corporates from looking at Huwawei for IT services.

The company's acting CEO,  Guo Ping, admitted recently  it had not been an easy year for Huawei, which was surrounded by controversy after a report by the House Permanent Select Committee on Intelligence in the US claimed using its equipment posed a threat to national security.

The company had revenues of over $35bn last year and has network services contracts with mobile service providers Three and O2.

China has ambitious outsourcing plans. Read this blog: China plans 30% annual outsourcing growth but will IT compete with India?

I recently ran a poll asking people whether they would outsource IT to a Chinese supplier. So far 49 people have answered the question. 25 said no, 20 said yes and 4 said they have never thought about it.

Please fill in the poll below.


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Windows XP upgrades and SAP testing to drive project based outsourcing this year

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Windows XP upgrades and SAP upgrade testing are two areas that will stimulate the outsourcing sector this year.

Nick Mayes, research director at PAC, said in a report  that while there will continue to be a level of demand for big traditional outsourcing deals that clean "'your mess for less" he expects "clients to look for more point solutions to address specific challenges such as upgrading from Windows XP, insurance policy administration platform consolidation and SAP upgrade testing."

This echoes something Sam Kingston said in his IT outsourcing predictions for 2013. He said there would be an 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," he wrote in this blog.

Meanwhile Ovum says that "stability, capability and accessibility" will be the key words for IT buyers in 2013.

Jens Butler, principal analyst, IT Services at Ovum says: "The fact that we live in very uncertain times makes investment decision-making even more difficult. With continuing instability across the global markets and even in locations with historically robust growth such as China and India, the outlook for IT services in 2013 is unpredictable."

"Enterprises will be looking for greater reliability in their IT usage and, as a consequence, seeking stability, capability and accessibility among their external service providers." In line with recent trends, Ovum's Bundling Index points to an increasing desire for longer term commitments and extended-scope outsourcing engagements."

In 2013, the push to fill out portfolios, especially across some of the newer technology arenas such as mobility, analytics, social and cloud, will continue to grow and a multitude of vendors will look to take advantage of this desired technology adoption, even if it means looking to a single supplier to deliver these services."

See other predictions.

At the end of last year I did a round of IT outsourcing predictions for 2013. I  featured Matthias Mierisch of Avarto, Robert Morgan of Burnt-Oak PartnersSam Kingston from T-Systems, outsourcing lawyer Mark Lewis of Berwin Leighton Paisner  and KPMG's Lee Ayling.


TUPE need not be the end of the world for transferred staff

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I blogged earlier today about TUPE. This is the llegislation that protects workers' rights if they are in a company that is acquired or if their role is outsourced to a third party.

Although TUPE protects workers and is seen by many as favouring the workers it is often bad news for workers because it means changing employer. But it need not be bad news.

Two years ago I interviewed Bob Scott of Capgemini, who had a good TUPE experience. Here is the story again.

The outsourced coal miner that got to the top of the IT industry

I want to tell a story about a coal miner who has transformed his career and life after being TUPE transferred to a supplier (Capgemini) from  British Coal.

Outsourcing is controversial because it involves workers being transferred to suppliers. This is not only life changing but often leads to workers leaving either voluntarily or not.

These transfers, which guarantee workers certain rights under TUPE legislation, in many cases cause major friction and often lead to major redundancies and resignations.

As my blog has explained in recent weeks being outsourced and offshored is often a painful experience.

Bob Scott started working for British Coal in the 1980s. He got his mine manager certificate in 1987 and became a fully qualified mine engineer. Now he is the global head of testing at Capgemini and has held many senior global roles.

Bob Scott 1.JPG

But how did he do it?

1982 - Started working at British Coal - initially as part of engineering course

1985 - Qualified as a mining engineer at Nottingham University

1992 - Part of a mathematical modelling team that was outsourced to hoskyns. British Coal needed the skills but could not justify having it in-house because the mining industry was declining.

A total of 75 people were transferred as part of the deal including Scott.

1992 - hoskyns acquired by Capgemini. Scott says the transferred workers did not know much about Capgemini but it was made clear to the workers what it's strategy and vision was.

Scott said: "From this we could see why we were valuable."

But he added: "In April 1992 if you had bet me that I would still be working for Capgemini in 18 years I would have taken the bet."

Oct 1992 - Scott completed a masters at the London School of economics, along with four colleagues. This was supported and funded by Capgemini.

1995 - Became head of the team that was outsourced. By now it had actually grown to 100 people from 75. More people were brought in via TUPE from British Steel and British Gas. Again declining industries taht could not justify the resources internally.

1996 - Scott was given the task of heading up business development for Capgemini in the UK.

1997 - Asked by Capgemnini CEO to take control of the new e commerce and internet business at Capgemini, which was a new business at the time. He relocated to Paris from 1997 to 2001.

2002 - Took over the Capgemini services business in the UK.

2003 - The head of outsourcing asked Scott to develop this business

2004 - Scott was injured playing cricket and was off work for a lengthy period. During this time he contemplated his life and decided he wanted to do something different.

As a result he was asked to lead the bid for work at the Metropolitan Police. In 2005 the Met signed a £350m outsourcing deal.  Scott was the account director.

2007 - He took over the role to develop a market strategy for services related to the police.

2008 - Scott became head of UK public sector business

January 2010 - He was appointed head of Capgemini's global testing business, where he remains today.

So Scott has used the fact that he was transferred to a supplier, as part of an outsourcing contract, to build a varied and successful career. He said he took the decision early to take up business development roles and has not looked back.

He said had he not moved to Capgemini he would probably have ended up using his Mine Manager certificate to work in the mining industry overseas, South Africa for instance.

He told me that quite a few of the people that were transferred to Capgemini back in 1992 are still at Capgemini, some in very senior positions.

"It is not everyone's cup of tea but for those that go out of their way and take something out of it being transferred in an outsourcing deal can be a massive opportunity," said Scott.

he said if transferred workers should try and take opportunities and build networks.

I imagine at the time Scott's transfer to Capgemini was something that caused many sleepless nights. He was entering the unknown.

I thought this story is a good one to tell because it is a TUPE transfer with a happy ending. Well a happy beginning, middle and end.

What you need to know about TUPE and possible changes to it

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The Transfer of Undertakings, Protection of Employment (TUPE) legislation is designed to protect workers employment conditions when their company is acquired or their role is outsourced to a third party.

Any business outsourcing IT must contend with TUPE. The law, which is often said to favour the employees, is currently under review. I am no lawyer but law firm Eversheds has given me a guest blog on the subject.

TUPE today and what about tomorrow?


By Philip Davies and Simon Gamlin, outsourcing specialists at  Eversheds.

"Anyone familiar with IT services contracts, in particular IT outsourcing arrangements, will be familiar with the Transfer of Undertakings (Protection of Employment) Regulations ("TUPE") and will probably have a good understanding of how the law works.  They will also be aware that TUPE liabilities and costs are often fundamental enough to deals as to actually inform whether a deal will go ahead or not.

In April 2006, the 1981 TUPE regulations were repealed and replaced by new, 2006 TUPE regulations.  One of the major changes made to TUPE in 2006 was the introduction of the concept of a "service provision change" (a "SPC") - ie the application of TUPE where services are outsourced, insourced or assigned to a new contractor.  One of the advantages of the SPC rules is that they make it reasonably clear that TUPE will, subject to certain limited exceptions, apply to a SPC. 

The introduction of the SPC rules had a number of perceived benefits:

-It created greater certainty for clients and contractors - this was a step change from the 1981 Regulations, under which IT service providers and customers alike could rarely be 100% sure whether or not employees would transfer;

-It reduced legal fees because legal analysis of whether TUPE applied became simpler; and

-It created a level playing field for tendering contractors by avoiding situations where one contractor might price its bid on the assumption that TUPE did apply whilst another priced its bid in the belief that TUPE did not apply.  It also reduced the scope for "cowboy" contractors to undercut competitors by arguing that TUPE did not apply and then cherry-picking only some of the incumbent staff and offering them new employment on lower pay.

However, following concerns from some businesses that TUPE unnecessarily "gold-plates" the underlying EU Acquired Rights Directive, in November 2011, the Government announced a "call for evidence" on the effectiveness of TUPE, including regarding whether the increased certainty from the definition of a SPC had resulted in benefits or burdens for business.  The Government published its Response to the call for evidence in September 2012. 

Approximately 40% of respondents thought that the inclusion of the SPC rules provided benefits in terms of increased transparency and reduced burdens on businesses.  However, some business representative groups expressed dissatisfaction that, under the SPC rules, more transactions were becoming subject to TUPE.

The Government will now formulate its policy views having regard to the responses to the call for evidence and further engagement with stakeholder groups.  A formal consultation will then follow, including regarding whether the SPC rules should be retained or repealed.

If the SPC rules are repealed, that will not mean that an outsourcing can never give rise to a TUPE transfer.  Rather, things will be back as they were pre-2006, when there was often extensive legal debate about whether a deal satisfied the multifactorial test (often referred to as the Spijkers test) used to determine whether the more traditional form of a TUPE transfer (ie one involving the transfer of an economic entity that has retained its identity) had occurred. 

Businesses that would welcome the SPC rules being repealed should remember that the question of whether an outsourcing satisfied the Spijkers test was one of the most litigated aspects of the 1981 TUPE regulations.  So, whilst the abolition of the SPC rules might benefit lawyers, the jury is still out on whether it will benefits participants in the market."

Also see:

TUPE: The facts

China plans 30% annual outsourcing growth but will IT compete with India?

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An article on the English language version of Chinese website The People's Daily has an article about the China government's plan to increase its outsourcing sector by 30% annually to the end of 2015. This is part of a five year plan.

800px-Flag_of_the_People's_Republic_of_China_svg.bmp

Obviously this is talking about the entire outsourcing industry and not just IT. However research by Infiniti suggests China's IT outsourcing sector will grow about 15% over the same period. 

I have written quite a bit about offshoring IT to China. It has all the hallmarks of the perfect offshore location for IT such as low cost labour and a large supply of skilled IT professionals, some 350,000 computer science graduates every year.

Another advantage for China is the fact that multinational companies want to get into the nation to benefit from its growth. One way of helping a business make a step into China would be to engage with an IT service provider there.

But China is not without its fears for businesses. IP law and the lack of human rights to name a couple.

But even the giant Indian IT services firms realise China is a threat to their dominance. HCL Technologies' CEO, Vineet Nayar warned Indian IT services companies to be prepared to change their ways or lose business to Chinese companies. 

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

China's IT workers cost less than their equivalents in India. Chinese service providers such as Bleum and VanceInfo are currently targeting the UK market for growth.

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

What do you think?


Read other articles about offshoring IT to China:

Is China ready for frontline offshore services?

Is China a serious alternative to India for software development?

Indian CEO warns of business threat from China

Can China catch India without a Y2K?

China needs a Y2K to overtake India

Michael McCourt of the China-Britain Business Council in Shanghai describes the opportunities for UK IT companies in China


Business Intelligence services: indispensable and largely overlooked

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Big data is all the buzz in IT. Businesses are trying to make use of the data they collect about customers, for example. And they are investing in BI software. But they are spending twice as much money on services related to this software than what they are spending on the software itself.

Tom Pringle, principal analyst at Pringle and Company, which has done research about this, wrote this guest blog on the subject.

Business Intelligence Software & Services Market, 2011 - 2016

By Tom PringleTom Pringle Aug2012.jpg

"Our latest analysis of the business intelligence (BI) marketplace reveals a strong and rapidly growing market for IT services as demand for insights derived from the ever-increasing volume of data dramatically increases. Growing at over 15% the global market for these services will nearly double over the next four years, from an estimated $54.9 billion in 2012 to $96.9 billion in 2016. The overall market is in rude health; we estimate that BI software and services combined are worth some $79bn in 2012 and will grow at 16% to reach $143.3bn in 2016.

The report underscores the indispensable, and largely overlooked, role of IT services - from management consultancies to technical, deployment and maintenance providers - in the development of BI capabilities. Its conclusions support the general rule that for every dollar spent on software for business intelligence more than two are spent on external service providers.

So what drives such strong demand for these services? BI projects span a significant range of skills and capabilities, both in and out of the IT department. The quality of insight derived from BI-based analysis is largely dictated by the quality of the data used and that remains one of the, if not the, primary challenge. It is therefore unsurprising that information management, the component of BI concerned with effective management of data, is the largest segment of BI services spend, estimated at over a third of the market in 2012. Any BI project should assess the quality of the data to be used in analysis and remedial work is often necessary. It is not just a one-time cleansing exercise either, the causes of data quality issues go beyond IT systems to the processes involved in the creation, capture and storage of data.

In addition to the specialist, technology-focused skills other services are often necessary. The most common example is performance management, which is concerned with analysis of the financial operations of an organisation. This involves qualified finance professionals working with finance departments to plan and implement new and refreshed financial reporting in tandem with IT to identify and locate required source data (and verify its fitness for purpose).

Analytics, the newest component of BI which is primarily focused on forward-looking and often strategic decisions, demands a blend of skills covering technology, analytical technique and industry-specific knowledge. Projects in this field of BI should be, and often are, considered a major opportunity for multi-discipline business services providers whose capabilities generally encompass these skills, albeit from areas of their business which may not have traditionally been considered relevant to BI.

Beyond physically acquiring and implementing a BI solution there is significant additional work required to enable successful adoption of the technology. People, process and technology is an often referred to maxim in IT services. And in order to effectively realise the value of integrating BI-based insight into everyday decision making adopters will need to invest in educating the workforce in the use of the new technology and update business processes to encourage and enforce that use.

Engaging vendors of IT services to support BI projects is business as usual for many organisations, the best example of which are financial institutions, not least a result of their long track record in BI use (we estimate they represent around a quarter of the BI market globally).

Strong arguments can be made in favour of using IT services providers to develop a range of capabilities; placed in a BI context - the range of skills required by BI and the reach of BI projects across a business' operations - these arguments can become compelling."

Also see: How data analytics can unlock value in BPO





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Infosys denies that sacking underperformers is anything new

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Infosys is reported to be getting rid of staff that are not reaching their targets. According to a report on Indian website The Economic Times, 5000 staff could be cut. 

The Economic Times India writes: "The renewed lack of tolerance for poor performance, which will affect up to 5,000 employees, is indicative of the pressure the software company faces to curtail costs while pivoting towards a more aggressive sales strategy."

Apparently this is an about turn for the company that had a policy to help under performers in the past. But Infosys told me that there is actually no change in policy because people come and go based on performance all the time. Perhaps there are more underperformers because the economy is so poor.

An Infosys spokesman said: "Last week, an article in a major daily newspaper claimed that Infosys is laying off 5,000 people to manage costs. This is wrong in two different aspects.

One, there is no layoff.  Infosys is a performance-driven company. And like any performance-driven company, it actively manages underperformance and encourages chronic under-performers to seek other jobs. This is done regularly and is not a one-time event. We have a robust performance management system that includes structured appraisals and performance feedback.

Two, the number that may be affected is significantly lower than the 5,000 quoted in the article. For a performance- driven company with more than 150,000 employees this is part of the normal ebb and flow of running a business."

Another sign of the pressure that Infosys is under is the company's decision to stop looking for more government business in India. It has enough in the pipeline to keep it going but wants to target other areas for growth.

If Indian companies are being this cautious it really does demonstrate how tough the economy is. HP recently said it will cut underperforming units never mind people.

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The financial services sector IT in 2013

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Financial services companies are probably the biggest consumers of IT outsourcing. Suppliers salivate when discussing their customers in the sector. The customers are less willing to talk about their outsourcing.

This blog is focused on IT outsourcing but because I also cover the financial services IT sector, and there is a lot of cross-over, I am going to integrate some financial services IT stuff into the blog.

In this post I am publishing some predictions for financial services IT in 2013.

Jean Louis Bravard, director at sourcing consultancy Burnt-Oak Partners, previously headed EDS's global financial services business. In the past he was a CIO at JP Morgan.

Here are some of his predictions for 2013 in the financial services sector.

"- Financial Services firms will continue to be in the cross hairs of regulators and no matter what is outsourced the risks will continue to remain with the financial firms.  While this has traditionally been an excuse not to outsource, reality is that increasingly FS firms have no choice but to outsource to cut cost and improve quality.  So outsourcing will be up, probably substantially.

- The most interesting area of outsourcing will be FS firms outsourcing to FS firms.  While this has traditionally been a big activity in asset management (think BONY or State Street)  we believe it will be considered for most processes and probably more applications than today.  The jury is out for pure IT as we do not see FS firms entering the market with unbundled offerings.

- Shared services in whatever form will be in vogue but the regulators will become anxious as they will have a hard time monitoring operational risk accounting and thinking about long tail risk or even liquidity issues... not even mentioning the living will of the "processing engine" firm.  We expect action on sharing market pricing and the processing of commodity operations.

- Cloud services will be everywhere at least in name as the technology will be massively used internally but very sparingly leveraged externally (be it private or public cloud).

- FS firms will probably fail miserably in listening to customer demand for smartphone based services they can rely on.  Especially retail banks will continue to insist on paper, faxes or medieval security solutions to provide a level of service provided by customer interface leaders such as Apple, Google or Amazon.

- At least one large retailer will seriously enter financial services in the UK and see that as a main activity.  This will happen before Google or Amazon enter banking.

- Insurance companies IT will probably not improve as declining business and ageing portfolios cannot fund the necessary modernisation.

- One or more bank ATM networks will fail, lead to massive disruption and management will blame third-party IT or Communications providers for the mess.  We would put some money on at least one bank domestic payment system to fail for several days potentially leading to questions about the fate of the firm and the system.  Legacy is running out of runway!

- The FSA will be even more intrusive than in 2012 and IT firms will feel the tentacles.
Last but not least FS firms will for the first (?) time seriously look at cutting spending on IT OPEX.  Not good for IT jobs at FS or IT firms."

I am interested in hearing from people in the finance sector for their views. Please leave a comment.

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Could HP turn off IT services business life support?

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I recently ran some blog posts giving the predictions for 2013 from of outsourcing industry experts.

One commenter, Robert Morgan, talked about how some of the "suppliers are on life support."

He said this: "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."

Well HP has said it will dispose of units that don't hit targets. According to an article on Bloomberg HP will continue to "evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives." This is what HP said in a filing with the US Securities and Exchange Commission.

I wonder what HP's targets are for the services business. Last year was not good and it had to write down the value of its EDS acquisition by $8bn.

Putting legal advice in the cloud is risky

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Cloud computing is accelerating fast. There is hardly an industry not touched by the technology. With security fears reducing, costs coming down and technology maturing the march of cloud computing will continue.

But storing legal advice could be a step too far. Well that's what some lawyers think.

In this guest blog Richard Little (pictured), partner, and Emily Hudson, associate, in Eversheds' commercial disputes team explain some of the dangers of storing this kind of information in the cloud.

Not Every Cloud Has a Silver Lining

By Richard Little and Emily Hudsoneversheds.jpg

"Whilst a cloud system has many benefits including ease of remote access and the ability to share information, these can create legal risks if a company uses the cloud to store and/or share sensitive information or legal advice.  These risks increase when documents are shared via a cloud between different group companies and across a number of jurisdictions.

Privilege

It is a fundamental principle of English law that legal advice should be able to be obtained confidentially and privately. Therefore, so long as certain conditions are met, legal advice has privileged status and is protected from being disclosed to third parties, including in Court proceedings.  When legal advice is placed into a cloud, care must be taken to maintain its privileged status by keeping it confidential to the individuals within the company who obtained the advice.  It is therefore prudent to ensure that any privileged documents are clearly labelled and stored separately where possible.  Steps can be taken to avoid any unnecessarily wide dissemination of the advice (which could lead to a loss of privilege) by way of separate folders accessible only to certain individuals.  Access to privileged documents should be given expressly on the basis that this does not amount to a waiver of that privilege.  The use of tailored terms of use for the system may be useful here and legal advice should be sought on these issues.

Exposure of documents in litigation

There is an obligation on parties to litigation in England and Wales to provide to other parties any documents, whether favourable or unhelpful, which are relevant to the litigation and which are within that party's possession, custody or control.  Privileged legal advice which sets out your legal position "warts and all" is therefore important to keep from the other side.  There is a risk that the use of a cloud based database may facilitate a position whereby documents may come within a company's control, and thus need to be disclosed in any Court proceedings, where they might not otherwise have been; access to documents in a cloud might be said to establish some form of general consent as between group companies to access documents beyond those stored in the cloud.  This can increase the cost and complexity of litigation and, further, cause difficulties if any of the other group companies wish to resist disclosure of their documents.

International clouds

Different countries' legal systems have a range of differing approaches to legal privilege and access to documents.  Where documents from different countries are placed into a cloud whose server is in another jurisdiction, competing legal regimes may apply.  A cloud user may find that one country's legal system requires them to take a particular course of action in relation to documents that places them in breach of the laws of another country, for example in relation to data protection.

The identification and management of the extent of these issues in the use of a cloud system will assist in managing the legal risk and costs of litigation that a company using them might otherwise face." 


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Cornwall council's CEO abdicates after outsourcing path decided

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Cornwall Council CEO Kevin Lavery is leaving to take the top job in New Zealand's capital Wellington. In March he will become CEO of Wellington City Council.

This comes days after Cornwall Council, guided by Lavery, decided to go forward with a plan to outsource some services. After controversy and opposition, which led to the council leader being overthrown, Cornwall decided on a scaled down outsource. In the end the council outsourced IT and created a telehealth partnership with BT after rejecting a controversial plan to privatise a much broader range of council services.
 
This article gives more details about his move and describes how he does not count outsourcing as an ideology but an option. One which cash strapped UK councils must face.

Here is a poll I did to get people's views on the outsourcing of services in local government. 308 people have responded with 195 saying services should be outsourced, 105 saying they shouldn't and 8 saying they don't know. Please fill it in.



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