March 2013 Archives

Government fell short of Francis Maude's bold SME claim

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Speaking at the Better Deal for Small Businesses event in March last year Francis Maude boasted that the government was on track to double the amount of SMEs doing business with it, from 6.8% in 2011 to 13.7% by the end of 2012.

But According to the most recent government figures, central government spent 10% of its total budget with SMEs in 2011/12. This is a significant improvement on the 6.5% spent with SMEs n 2009/10 and 6.8% in 2010/11.

But what happened between March, when Maude made the claim, and December? A difference of 3.7% is pretty significant.

One supplier told me UK SMEs, especially in the IT sector, are not benefiting from the Government's current procurement policies. I wrote last week about the single registration system that the government is designing to help SMEs get involved, perhaps this will improve things.

If you are an SME supplier tell me about your experiences of this?

Could NHS reorganisation have created the NHS IT services model of the future?

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I had an interesting conversation with Nathan Allmont, who is Infrastructure Manager at Dudley IT Services. The story of the company is really interesting and shows an alternative way of delivering IT to NHS organisations. Could internal IT departments within NHS organisations start selling to commercial businesses.

This could bring new money into the NHS and would be more attractive than closing down frontline NHS services.

I didn't think it possible to have an industry more complicated by acronyms than the IT sector, but the NHS is worse. The NHS is made up of SHAs, PCTs, NCBs, CCGs, DMICs and CSUs for example. But after having a chat with Nathan I managed to understand the story of Dudley IT services.

Dudley IT services was the IT department of the Dudley Primary Care Trust (PCT). Using its £8 million it provided IT services to Dudley & Walsall Mental Health Partnership Trust, West Midlands Healthcare Commissioning Services, Black Country Partnership Foundation Trust, Community Services within The Dudley Group of Hospitals Foundation Trust. The services are provided from our data centre.

But as part of the re-organisation of the NHS in April last year, which saw PCTs scaled down Dudley IT Services was left out in the cold.

John Thornbury, former IT director at Worcestershire Health, joined The Dudley Group of Hospitals Foundation Trust last year and started discussions with Dudley NHS Head of IT, about buying the Dudley IT Services from the PCT with the view of using the skills and data centre for more cost effective IT service to the local health economy.

The company is now part of The Dudley Group of Hospitals Foundation Trust and continues to supply IT services to the organisations as it did before. But it is now expanding its services and winning contracts with NHS organisations all over the country to offer services from its datacenter. It is even talking to potential commercial customers about services.

Every penny it makes stays within the NHS. It is either reinvested in the Dudley IT Services operation or goes directly back to the NHS. Given the fact that the government is closing down and scaling back hospital wings this model should be investigated further.

And Dudley IT Services is offering some high-end services. With the support of IT service provider CSA Waverley is currently installing an enterprise data warehouse from HP/Microsoft, also known as a parallel data warehouse, for the Data Management Integration Centre (DMIC) department of the Commissioning Support Unit (CSU) which now provides the corporate functions that the PCTs previously did. The implementation was the biggest of its kind in the UK when it was installed. It supports all the number crunching required by NHS organisations to work out how much everything costs. The new system has reduced a 48 hour data processing task to two hours.

Can the John Lewis of IT services make hay in the UK?

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I interviewed the UK head of Canadian IT services firm CGI yesterday. Tim Gregory, who was CIO of Lloyds of London in the 1990s, was talking to me about the progress being made integrating its acquisition, Logica, as well as business opportunities going forward.

Here is the article I wrote.  It talks about the complementary nature of the two businesses and how CGI will win hearts and minds following the integration of the back office operations.
I won't just repeat what I wrote in the article but it is an interesting merger.

Logica had more staff than CGI when the acquisition took place, which immediately adds an interesting talking point. This combined with the fact that Logica had a strong internal culture would suggest integration might be challenging.

But I have to say I have not heard any stories about trouble in the integration process. When HP and EDS came together I seemed to get an email every day from an unhappy member of staff.

One of the interesting things he said about the company is that the biggest group of shareholders are the staff. So Logica staff will soon be able to join the company's share scheme.

Referring to the share scheme  he described CGI as "the John Lewis of the IT services market." He believes if the staff own the company it is in safe hands.

It seems like a genuine challenger to the big system integrators.

What do you think about CGI's opportunity in the UK?

Inside outsourcing interview: Former EDSer on Unisys' personalised IT support and its deal with Apple.

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In the three years since I have been doing the Inside Outsourcing blog I have not written a single article about Unisys, I did a search to check and Unisys has had been referenced a couple of times but that is it. It surprises me because it is a name synonymous with IT outsourcing.
 
Well I am now kicking off with my first blog post about Unisys, which has about 22,500 staff and makes sales worth over $3bn, after meeting Kevin Rayner. He is head of client services for Unisys in the catchy named UKMEA region (who said the UK isn't properly in Europe? It is Europe).

Kevin is yet another former EDS man. In fact he was with the once great IT services giant for a massive 18 years. And if you like me got billed correctly for your student loan you can partly blame him because he worked on the student loan IT when it was launched. He was also involved in the deal with the Inland revenue that EDS had previously, now known as Aspire and run by Capgemini. Most the IT outsourcing industry seem to have their roots with EDS.

The headline is in regard to Unisys being awarded Authorised Service Provider status by Apple. So it can provide its corporate clients with authorised services on Apple kit. This I thought was interesting because it shows the increasing importance of Apple within big business and the consumerisation of IT.

Unisys is big in the public sector, with deals with the Met Police and Kent County Council to name two. It also has a significant UK financial services business with a big mortgage processing operation (40% of UK mortgages processed on its platform) and a deal with Barclays. Lloyds and HSBC to clear cheques.

Kevin also told me about a news drive by Unysis to improve how it provides support services to the end users within its customer base. It supports lots. For example at customer Unilever it supports 60,000 IT users. It supports 210,000 devices in Europe.

Personas, as the approach is known attempts to work out the technical support required by an employee depending on their role. It links the service to the person, which will save time and money in the long run. A one size fits all approach to IT services does not take the user into account but there are different requirements for different roles and different consumption levels.

Is IT benchmarking still relevant?

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Here is my latest guest blog.

Nigel Hughes, partner at ISG, describes why benchmarking is still relevant in IT outsourcing today despite other factors reducing prices.

Selecting a benchmark strategy

By Nigel Hughes

Technology innovation, improved price transparency and increased buyer choice have all contributed to a steady decline in market prices for IT services. Benchmarking has been a key tool in driving value into outsourcing contracts. Is it still relevant today?

To ensure the competitiveness of outsourced IT services over time, companies can either negotiate short-term contracts and frequently re-bid, or negotiate long-term contracts and benchmark prices on a regular basis.

While benchmarks can anticipate efficiencies in forward pricing, many service providers argue that benchmarking clauses in outsourcing contracts have outlived their usefulness and provide limited value. Indeed, compared to five years ago, relatively few contracts today include clauses mandating periodic reviews of pricing and service quality. Yet for many businesses, benchmark clauses that assess pricing in the context of competitive market standards remain essential to having an effective outsourcing strategy and have become increasingly important for the maintenance of a healthy relationship. Many top-performing global businesses employ benchmarks to ensure continuous competitiveness of in-sourced and outsourced operations, leading contracting practices and operational efficiency.

An organization that pursues benchmarks has two basic options to select from. One is to use the benchmark findings as a non-binding guide to facilitate further discussion. ISG has observed that this approach can work in certain scenarios; for example, when the client organization is confident that overall pricing is already competitive, and when alternative change strategies are being explored, such as transforming to a consumption based delivery model.

The other option is to make the results actionable and binding, so that pricing adjustments are required if the analysis reveals gaps.  For organizations such as Boeing, clearly defined, binding and actionable terms are imperative to a successful benchmark initiative.  Boeing - an ISG client - has been benchmarking since 1999. Recognizing that an agreement that was competitive when the contract was signed could quickly fall out of alignment with rapidly changing market standards, Boeing has conducted regular benchmark reviews of IT infrastructure outsourcing, BPO and IT application outsourcing contracts.  

These analyses have consistently resulted in contractual price reductions, cost reductions through process improvements and/or implementation of improved practices. Even after benchmarking regularly for over a decade, Boeing estimates that recent studies have yielded an approximate 5:1 return in direct cost savings, with significant additional indirect benefits, including improved service level agreements and industry leading practices.

A new ISG white paper, guest-authored by Lawrence Kane, a senior IT leader at Boeing, makes the case for binding, non-negotiable benchmark clauses.  From Boeing's perspective, an analysis that doesn't mandate corrective action isn't worth pursuing. Moreover, while some argue that binding benchmark clauses can cause friction and contention between the client and supplier, Kane's experience at Boeing has been the opposite; in his view, clearly defined terms set expectations for all parties and facilitate healthy long-term relationships.

Benchmarking has proven to be an effective management tool for many global organizations and is central to a culture of continuous improvement. In addition to analyzing current operational states, benchmarks play a critical role in quantifying the potential benefits of change and assessing the relative risks and benefits of alternative scenarios. For an in-depth examination of different scenarios where benchmarks can contribute to improved performance, take a look at this ISG white paper. "

Is it time to ditch offshore services for automation for security sake?

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I have recently written about IT and back office automation and its impact on outsourcing and more particularly offshoring. Here is a guest blog post on the subject from Paymon Khamooshi, director at UK-based developer Geeks Ltd?

Should UK firms ditch offshore outsourcing and embrace automation for the sake of security?

By Paymon Khamooshi

"Offshore outsourcing was once heralded as the saviour of IT departments as it freed-up budget by pushing lower cost programming and IT support onto a different balance sheet. The idea was that it would save on expensive UK-based outsourced projects but also enable departments to cope with IT skills shortages. For many years it has worked well and India in particular has benefitted but surely we have reached a point at which technology is now enabling companies to meet programming and support targets that negate the need for offshoring?

When 'Bob' the programmer decided to outsource his job to a Chinese programming firm last month, it raised all sorts of questions about the validity of offshore outsourcing, not least as a secure channel for quality not just cost-effective applications. While for Bob, the Chinese deal meant that he could spend more time on eBay and at lunch, for Verizon, the client, it meant massively increased risk. Verizon has reported that two-factor authentication tokens and passwords were sent to offshore coders to enable them to access corporate systems. While Bob's case is unusual, for offshore outsourcing, the process is not.

The story has raised the question of whether or not offshore outsourcing is actually of long term benefit when quality control and potential security risks are thrown into the mix? The Nat West IT meltdown last summer and Standard Charter's data loss had demonstrated clear reputational risk from using offshore IT outsourcing.

So are businesses wise to employ offshore programming and IT support?

The economy unfortunately dictates the decision making, as many companies will continue to put cost-benefit over risk, crossing fingers and trying to shore-up any potential holes that could be exploited through passwords and code falling into disreputable hands. I would argue that it is never wise decision but I understand that sometimes it has been necessary.

The challenge now of course is how to use rapidly developing technology and programming skills to help these businesses meet cost challenges but also, and more importantly I think, reduce risk. In the light of the Capita strike last October, there is also the issue of keeping local workers happy. No one wants to pursue policies that create turmoil within a business but as Capita realised last Autumn, offshoring can have ramifications throughout an organisation. The cost of this is Immeasurable as it hits morale and productivity.

So how far can technology and automating processes actually go in giving UK businesses a viable alternative to offshore outsourcing?

A number of businesses including UK-based technology companies such as Geeks Ltd, are developing tech-based solutions to speed-up programming time and therefore reduce project costs. For example, Geeks has its own IT automation software product called M#, that cuts .NET development time by up to 75%. We know there are other solutions for other programming languages. Reducing dev time is important especially in a market where skills are in short supply and good programmers cost a premium as it means that the UK can compete with offshoring on cost alone.

What does this mean to UK businesses? Ultimately it should mean a return to in-house projects or joint projects with UK-based development companies. Programming automation in particular would enable IT project managers to exercise greater control over a project, minimising risk and allocating less time and therefore cost to a specific job. We know this because we have already seen it with our customers and it is still early days. There is willingness in business to keep projects in the UK, especially given the high profile problems at NatWest and Standard Charter. We just have to use the technology and automation that is available to give them the ammunition to meet their budgets and targets while minimising risk.

Interestingly, Verizon found that a remote worker's link was the initial access point for 74% of network intrusions. It's surely enough to make any business nervous about employing outsource developers, especially if they are employing freelance programmers by the name of Bob."


Capgemini's Metropolitan Police contract looks set for shake-up

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The Metropolitan Police currently spends around £325m a year on technology, over a third of which goes to Capgemini as part of a deal that is due to end in 2015. The London Assembly is now reviewing the Met's overall IT strategy, which will obviously involve looking at the Capgemini contract.

The Met's technology strategy sets out to make savings of £42m in 2014-15 and £60m in the following year.

So it will be interesting to see what happens to the Cagemini contract after the review, if anything does happen.

Will this mean breaking up the contract, putting the contract out for temnder, looking for bigger cost cuts or nothing?

Robert Morgan , director at sourcing consultancy Burnt-Oak Partners, says there is a lot of room for cutting costs in most IT services contracts and the Capgemini deal with the Met is no exception.

"This is easy to achieve in real terms and any supplier can and should achieve this about breaking into a sweat. No big deal. Redefining services, changing how the service is delivered, automating where appropriate, reducing direct labour inputs, applying new technology to resolve issues, the dropping cost of ownership generally and especially storage, going to private cloud, etc.

This is a relatively easy task especially if your client cooperates. Capgemini should be secure. If not then that says as much about Capgemini as it does the situation."

CFOs are overriding CIOs when buying IT services

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It seems that the CFO is increasingly influential when it comes to buying IT services.

According to research from Forrester, although the CIO has more influence over IT services procurement, this is dwindling as CFOs take more control.

Forrester says the IT services industry is changing because new service providers are changing how they work with customers and bypassing IT departments, instead going direct to business executives.

"The IT services industry is in the middle of a fundamental transformation of who it sells to, what services it sells, and how it delivers those services, because upstart vendors - specialising in new technologies like predictive analytics, big data, and mobile - are going around IT departments and incumbent suppliers by selling to business decision-makers," said the Forrester report.

To be honest I wasn't that surprised about this. Most people I talk to already say that the CFO makes decisions around outsourcing already because most decisions are made in relation to the cost savings a contract will offer.

It seems like CIOs are being hit from all sides. Recently I did a story in August last year about CIOs having to increasingly share control of IT budgets with marketing departments as customer relationship management (CRM) software is becomes critical to customer retention.

Mac Scott, associate director in KPMG's CIO advisory, said the convergence of marketing and IT means marketing professionals will gradually hold more influence on IT budgets. See the article here.

Now it seems that IT service providers see marketing people as the point of contact for many technology services. One senior employee at a big  supplier recently old me that it is the marketing people they are engaging with for technologies such as social media, mobile apps for customers and website work.

Do you think this is surprising? Let me know what you think?

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About this Archive

This page is an archive of entries from March 2013 listed from newest to oldest.

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