June 2013 Archives

IT professionals not sure how to get cloud skills

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UK IT professionals are not sure how to get cloud computing skills according to CWJobs.co.uk. Only 45% of IT professionals on CWJobs.co.uk's database have cloud skills.

The IT outsourcing sector is transforming into a cloud services sector and skills in cloud computing will be essential for the suppliers and their customers who will want some in-house skills to manage cloud projects.

CWJobs.co.uk director Richard Nott discusses it in this guest blog

The cloud computing skills gap

By Richard Nott, CWJobs.co.uk

IT pros are cloudy about skills

"The IT industry's growth shows no sign of slowing down. Cloud is one sector in particular which is demonstrating significant growth and seemingly accelerating at a rapid pace. New research from IT specialist recruitment site, CWJobs.co.uk, has shown that over two thirds (71%) of professionals are unsure of how to get skilled up in this important discipline, despite clearly seeing the opportunities a career in cloud could bring.

Cloud shows no signs of slowing
Cloud has been a hot topic in the IT sector for a while now and whilst it's not a new technology, it is still continuing to evolve and adapt, as more businesses are seeing its potential to improve their offering within their external and internal business environments. Google, Dell and HP are amongst many other companies who have already adopted the use of cloud and research from Forrester has implied that by 2020 cloud computing will be worth a huge £157 billion worldwide , showing the extensive growth potential of this market.

New, and growing, businesses have already seen this promise, as cloud offers many possibilities for delivering growth and efficiency. Companies such as Amazon, Netflix, and Spotify have already taken advantage of this business model, seeing the cost effective benefits which it can bring, particularly during a time of on-going economic uncertainty.

Cloud computing is a useful solution, delivering services, software, and infrastructure on demand, potentially reducing IT costs by storing assets such as these without using masses of disk space. This means tools are readily available and able to offer affordable operating expense.

Benefits to business are apparent
Arguably, one of the most significant uses of cloud is its ability to help individuals and businesses share resources with individuals in multiple locations. With so many companies based around the globe and continuing to diversify to new locations, this helps different branches of the same organisation streamline their operations, allowing a document produced in Japan to be available to read in New York, instantly and easily.

Whilst cloud can assist businesses in consolidating their operations, the rise of its prominence means it is also having huge benefits for those working in the IT industry. Over half (57%) of professionals surveyed by CWJobs believe that cloud has had a positive impact on the jobs market; potentially creating new positions that can boost the IT recruitment market.

Skills gaps in cloud mean lost careers opportunities
Professionals can see the growth and resulting benefits of a career in this speciality. Despite less than half of professionals surveyed currently having experience in cloud (45%), two thirds plan to gain skills that could assist in a career working with this growing field (61%). Almost three quarters of them however, do not know how they can gain these skills (71%).

Cloud computing is expanding rapidly and as such needs the support of skilled IT professionals in order to drive growth forward and sustain its important role in business operations.

The industry needs to adapt
Professional's lack of skills is an issue that Britain's technology sector needs to address, particularly as career opportunities in cloud are likely to be on the increase, with 71% of industry insiders stating that they think there will be more jobs that require cloud-computing skills in the future. Cloud is integrating into every level of technology in all areas of the business environment, both externally and internally. 

In response, over half of professionals are seeking to gain new skills (51%) and experience in cloud, to enhance their employability and capitalise on the growth of cloud. This was supported by 52% of professionals who think having skills in cloud will make them more attractive to an employer.

Those looking to break into cloud computing should look at their existing skills set and think about how they can develop it to help with a career in this discipline. Skills in cloud can stem from existing knowledge in analysis, security and management, and it seems cracking cloud is about expanding pre-existing skills and experience to get traction in the sector.

Cloud will continue to boost the industry
Cloud is having a positive impact on the IT job market and the majority of professionals think there will be more jobs requiring cloud-computing skills in the future.

The value of developments in cloud can be lost, unless the industry works to promote opportunities for training and further development, necessary to ensure Britain has a workforce equipped with the skills to fulfil vacancies. With clouds' continued development in mind, this makes promoting IT careers within sectors showing growth even more important, to ensure Britain's position as a leader in the technology industry, and to support businesses as they look to modernise and streamline their operations in a tough economic climate."

Tech Mahindra lays Satyam name to rest and breaks top five of Indian owned IT suppliers

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After nearly four and a half years of change the IT services brand that was Satyam will disappear from our minds as Tech Mahindra integrates its operations.

The company acquired Satyam  after it almost collapsed after a billion dollar fraud carried out by its former chairman Ramalinga Raju in January 2009.

It went by the name of Mahindra Satyam for a while but has now completed the integration of the operations, boasting a total turnover of $2.7bn last year, putting at number five in the list of Top Indian owned IT services firms in terms of revenues.

I had a chat with Vikram Nair, who heads up Europe for the company. He said the company is now a single brand with a single operation which will be able to combine its software skills from the Satyam legacy with its networking expertise from Tech Mahindra. A compelling offering when you consider the importance of networking and communications in today's IT departments.

Vikram also believes Europe makes up a higher proportion of its sales out of the other top five Indian owned players of TCS, Infosys, Wipro and HCL.

I asked Vikram why the Satyam name was dropped.   He said it had a bad name after the fraud and potential new customers might be put off even if they did a simple Google search for Satyam and were bombarded with negativity.

Read this to see all the gory details and the rescue in this Satyam Timeline: From tragedy to fairytale.

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Staff from IT suppliers are often perfect for in house relationship management roles, says Co-op head of sourcing strategy

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There were some interesting presentations at the latest CW 500 Club meeting last night. The subject being discussed was cloud computing. The title was Cloud Computing Versus Outsourcing, is it worth outsourcing anymore?

Good topic of discussion. Obviously it was quickly decided that cloud computing is in fact outsourcing, just a different way of doing things.

I will be doing a write-up of the event for Computer weekly so won't go into any depth here, apart from highlighting a couple of interesting comments from the one of the speakers.

Steve Briggs from the Cooperative Group talked about the challenge of outsourcing for such a diverse organization.

While the Co-op is a heavy user of outsourced IT services it is not yet a cloud user in the sense of its main IT systems. The company spends over £200m with 531 suppliers, 12 of which are strategic. The co-ops divers business of retailing, banking and funeral servicing is today all under a single CIO. So it is good to get the views of a company running a traditional outsourcing strategy before cloud services are introduced.

The other two speakers from the Tate and Sega are already heavy cloud users so I will write about them separately.

Interesting points about outsourcing made by Briggs included:

1 - Good account managers at supplies spend their time managing relationships and are good at it. He said he has hired former IT supplier staff for relationship management roles.

"Do not dictate to suppliers. They are good at the role they are doing and the client is not."
"Be open minded suppliers have some good capabilities."

I wrote a feature this week about how outsourcing is changing in the light of cloud computing and how this is making relationship management a key role at businesses.

2 - He said that there are many suppliers out there and that businesses might miss out if you do not have a good insight of the market.

"Our challenge is how do we spot small suppliers and fit them into our supplier model."

Is IT failing to contribute to business goals?

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In this guest blog from Hornbill Service Management, Pat Bolger, writes about research the company conducted with the Service Desk Institute to see what CIOs and service desk professionals think about IT's perception in terms of its strategic business value.

This is an important question for anyone buying IT services to address.

Demonstrating Business Value - Has IT Been Framed?

By Pat Bolger, Hornbill

"IT departments know the value they can give the business: not just providing services that keep operations ticking over and improving efficiency, but also helping their organisation make huge leaps in achieving its goals through new services and capabilities. However, there is a question over whether the rest of the business always agrees: indeed, whether IT is seen as more than just a necessary utility. To investigate this further, Hornbill and the Service Desk Institute (SDI) commissioned research to examine exactly how IT's contribution is viewed. While the SDI surveyed its members to get the views of workers 'on the ground,' a separate independent survey approached CIOs to see how the business views the IT department.

Demonstrating understanding

The research showed a clear difference in views: a whopping 98% of respondents from service desk teams believed IT can play an even greater role in supporting business goals. On the flipside, a mere 27% of CIOs said that senior executives viewed IT as contributing to strategic business goals. If IT teams wish to improve this, they need to show that they understand the wider business strategy. CIOs are more positive than service teams here: 67% say IT does understand business strategy, while only 57% of IT service teams said they understand. Even taking the more positive CIO figure, this leaves a significant chunk claiming not to know their employer's overall mission and strategy.

This is exacerbated if, instead of looking at the overall business strategy, we instead dig into individual business units: after all, these are the departments and groups that IT should be directly helping. 53% of CIOs, and 66% of service desk teams stated that teams didn't have enough time to spend with business units to understand how they could meet their goals. This has direct consequences: 57% of SDI members said they didn't understand the goals set for different business units; which means that proving IT's ability to help is something of an uphill struggle.

Measuring success

Another obstacle in this struggle is the way in which IT's performance is actually measured. According to CIOs, half of organisations either have no formal reporting mechanism for IT performance (17%), or have a mechanism focused entirely on metrics such as downtime (33%): leaving little space to show how IT's actions are aiding strategic goals. In comparison, 21% of organisations base their reporting metrics on user satisfaction, while only 29% explicitly link performance to strategic business objectives; such as improved sales and reduced customer churn. This split in reporting is part of a larger issue with communication: 68% of CIOs say that senior executives and business units themselves are not effective at communicating business strategy and individual 'line of business' goals to IT.

Achieving goals

The key to any successful relationship is communication and understanding. Without this organisations will never realise what IT can contribute to their overall strategy, while IT itself will struggle to demonstrate value and prove that it can do so much more than just keeping the lights on. However, any improvement in communication won't come out of the blue; service teams should already be acting to demonstrate they can do more than simple "utility" work.

Taking more time to understand the needs of individual business units will be crucial for service teams and IT departments who want to make the case for greater involvement in overall business strategy. CIOs should be sure they are pushing for improved communication, and for this to be recognised across the organisation: for example, by using collaboration tools to encourage discussion between IT and other departments, and making reports and measurement more accurately reflect IT's contribution to business strategy."

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The state of IT sourcing mid 2013 - a reflection of Forrester conference - Part two: digitisation

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At the recent Forrester summit in London I attended most the presentations in the supplier and vendor management stream. Following the event I blogged earlier this month about the issue of getting innovation from outsourcing contracts.

But perhaps the biggest shock to outsourcing is the onset of digitisation driven by cloud computing. I have been writing a feature about the state of outsourcing today and digitisation stands out as a major challenge for sourcing departments.

According to a Forrester survey of global sourcing executives, 65% said they are excited about the changes that digital technologies will bring, but 62% said the business lacks the skills to make the change and 68% said they don't have the right policies and business practices.

Forrester analyst Liz Herbert said supplier management teams need a new approach if they are to harness the skills of a plethora of often little-known suppliers. She said businesses have to change the rules of engagement with suppliers by rebalancing risk and value.

Digitisation also takes power away from IT departments because the business or somebody within the business might take a liking for an app and start using it for work purposes. This is driving a trend that is seeing staff self-provisioning IT without the IT department knowing. Different departments might find certain apps useful even if they are not one approved company-wide.

Herbert said that business often sees the IT department as "the department of slow and no."
IT and sourcing departments need to better understand the products and services staff want to use, because used correctly they can really benefit the business.

Imagine if you are a business and you sign a long term enterprise contract with a software supplier only for a similar piece of software to become available for free the following week via the cloud. And anyway there will be no stopping it with things like bring your own device programmes becoming more popular.

Forrester says sourcing departments need to change to be a department that encourages caution but does not prevent the adoption of new apps. The rules around accrediting suppliers need to be less rigid and staff need to receive new technology education.

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Will one supplier oligopoly replace another in Government IT?

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The government is determined to end its reliance on the big system integrators selling them huge enterprise systems and hefty support contracts on top. Part of this involves digitisation.

Moving to a digital by default model the government aims to save loads of money.

In its digital strategy published late last year, the Government Digital Service said £1.8bn would be saved per year through government services going digital.

A large part of this will be the introduction of lots of new suppliers through initiatives such as the Government's CloudStore. This would end the so called IT services oligopoly, with a few very large suppliers dominating government contracts.

One of this oligopoly, Capgemini, is taking steps to ensure that it doesn't miss out, through the creation of a UK Digital Government Unit to Support.

The supplier says this will help "government and public sector organisations pursue the 'digital by default' agenda with maximum speed and efficiency and minimum risk."

It is offering the infamous "one stop shop" for departments running digital transformation projects.

Digitising and opening up to more suppliers will be challenging for government departments. Procurement and supplier management will be difficult. Companies like Capgemini will offer management skills as well as technical skills.

But is there a danger that the big suppliers will end up dominating and isn't it vital that the suppliers of particular services (towers) are kept clear of service integration?

Or is it a good thing that the suppliers are changing to support the government?

Tell me what you think?

Smart metering IT services contract to be awarded next month

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I blogged last week about talk in the market that Logica (CGI) is looking odds-on to win a contract in the GB Smart Meter Implementation Programme.

The Department of Energy and Climate Change (DECC) said this is not the case: "[CGI] is bidding for the Data Services Provider contract but final tenders were only received for this on Monday."

The department also updated me on the progress being made on the contracts. There are three related competitions to appoint suppliers. The Data and Communications Company (DCC), Data Services Provider and a Communications Service Provider or Providers.

There is a tender for a single licence for the DCC. Regulated by Ofgem it will be responsible to ensure an effective service is provided to energy suppliers, network operators and other authorised parties. This is likely to be awarded next month.

Then the communications system will be provided by a single Data Services Provider and up to three Communication Service Providers. These are being procured on behalf of what will be the DCC to ensure it can be done quicker. The Data Service Provider will develop and operate a data application that will link gas and electricity meters with the business systems of utility companies. The Communications Service Provider or Providers will establish a wide area network connecting the data application with gas and electricity meters in domestic and some non-domestic premises.

IT services providers are blinded by opportunity and attempting to ride the digital elephant

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Businesses are investing in digital services and the IT services firms are clamoring to get a piece of the action. But CIOs face challenges selecting suppliers or digital services or if perhaps even face a decision whether to outsource at all.

I recently met with Tridip Saha who head of sales in Europe for tier two Indian supplier Mindtree. We talked about this subject and he said he would send me a blog post he had written on the subject.Thumbnail image for Thumbnail image for Tridip Saha.jpg

He said to me that the views expressed in this blog post are his and do not necessarily reflect the views of Mindtree.

Here it is.

Five Blind Men and the Digital Elephant

By Tridip Saha

"Booz launches Booz Digital",
"Capgemini Digital Services plans to become UK market leader with fourfold growth by 2014"

These two announcements in quick succession, around six months ago, caught my attention. Why on earth would a strategy consultancy like Booz try to get into the digital services space and what is driving Capgemini to launch a separate division for digital services market?

The answer probably lies in the size and growth of the pie and the perceived need for a different kind of expertise and unique selling point to win in this space. In the UK alone, there is a league table of over 100 digital service providers which lists pure play agencies which cater to the demands, almost exclusively, around providing services in the digital world. Add to this all the IT service providers, and you don't know whether to pity or envy the buyer who is spoilt for choices.

The way service providers view this world, and their corresponding pitch, does not make it any easier for the buyers either. The different propositions from the providers can be compared to the tale of the five blind men describing an elephant. The expertise required to ride this elephant covers Strategy, Industry knowledge, User experience and Technology but each type of provider appears to view this elephant differently. Here's a quick look at how I believe they see it (and in turn, are perceived by the buyers).

Type of Service provider  and main proposition

Large consulting-led IT service providers   
It is all about the strategy to transform your business. We will also do the IT!

Digital agencies   
It is all about User experience/Customer journey. Don't bother about technology!

Platform providers    
It is all about having the right underlying technology platform. No need for writing custom code ever again!

Domain centric IT service providers   
We have the golden solution created exactly for your industry. Just tell us how much of it you want and it will be delivered in months!

Most of the other IT providers   
One of the above depending on whom you talk to!

The pervasiveness of digital services and the sheer volume of demand in this area means that whether a provider is tugging on the tail of the elephant or hanging on to the tusk, they are all generating good revenues from this service currently. However, the winners will be the ones who can demonstrate the depth of expertise in all the elements. So, how is your organisation preparing to ride this elephant?"

Logica to bag smart meter project deal?

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I have been tipped off that Logica, or CGI as it is now known following its acquisition by the Canadian firm, is going to be awarded the contract to run a core part of the smart-metering project.

The Department of Energy and Climate Change (DECC) has put out notices to IT suppliers to get involved. This includes operating what is known as the Data Services Provider. This will be independent of the utility firms and make it easier for consumers to change suppliers.

I asked CGI but it would not comment apart from confirming it is bidding for the deal. "The Data Service Provider will develop and operate a data application that will link gas and electricity meters with the business systems of service users,' said DECC.

DECC said: "[CGI] is bidding for the Data Services Provider contract but final tenders were only received for this on Monday and evaluation of final proposals only begun this Tuesday and, as such, no one knows what the outcome of this competition will be, within DECC or anywhere else.

A decision in principle will not be reached until late July and an announcement is not likely until early September."

Apparently the role of the Data Services Provider has been scaled back

I have written quite a lot about the GB smart meter implementation programme. It is a big project that will harness the IT services market and there are a lot of points of failure. The project has already suffered its first delay.

The project has been put back a year to give suppliers more time to create the communications network that will underpin it. According to Department of Energy and Climate Change (DECC) the target for the introduction of smart meters in homes by the summer of 2014, has been put back to the autumn of 2015. The project, originally planned to be complete in 2019, will now go live in 2020.

Here are more articles that I have written:

Smart metering - the next big waste of money or venerable project?

Smart energy meter project IT raises Public Accounts Committee concerns

Cabinet Office and Capita about to launch company to sell government IP internationally

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The UK government has lots of its own intellectual property. A great deal of this is related to IT projects.

It has lots of training tools that it sells to UK businesses. These include IP around things like project and ITSM best practice and Prince II training for example.

The government's IT project failures are written about extensively so often the impression people get is that it can't run IT projects. But there are a lot of good skills and experiences in government. The Cabinet Office sells this IP to UK businesses.

I met Capita this week and a representative told me about an upcoming project that is seeing the business services provider and the Cabinet Office jointly set up a company to help it start selling this IP to some new markets. The fast growing economies of Brazil and India are examples as well as the US.

Capita is to use its commercial expertise to create and run the project.

The company will be announced soon so I should have more on this soon. Read this FT article that was published about this in April.

IT critical to rail industry as government instigates cuts

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The rail regulator has told Network Rail to save £2bn over the next five years and improve service levels. It has also said that safety levels must not be impacted.

At the same time network rail has consolidated the number of IT service providers it deals with. Presumably there is work on its way and by committing to fewer suppliers Network rail might be able to make extra savings, by committing more to suppliers for better prices.

One of the short-listed IT services firms named by Network rail is Cognizant. Here in this guest blog Rohit Gupta, head of Cognizant's manufacturing, energy and transportation practice in the UK, talks about IT as a key lever for efficiencies.

How the UK's rail industry will fare better with IT

By Rohit Gupta

"It is expected that over the next 30 years, passenger demand for rail travel will more than double and freight demand will go up by 140 per cent. While the government has invested £9.4 billion in railway improvements across England and Wales to meet these requirements--one of the largest sums of money to be spent in rail infrastructure for the last 150 years--some have argued this will barely scratch the surface. However, improving rail services across the country is not solely down to government initiatives. The rail industry needs to be looking at its internal operations and business processes and, wherever necessary, make changes to increase productivity and safety measures.
The asset-heavy rail industry is facing multiple challenges. It is being constantly pushed to increase efficiency and punctuality, while reducing operational costs. At the same time, it has to meet the rapidly increasing demand from passengers and freight services, providing them increased safety.  In order to address this challenging mandate, the industry would need to not just continuously enhance the efficiency of existing processes, but also create the concept, architect and implement new--and increasingly different--capabilities. In other words, it would need to run better and run differently.
Technology is a key lever through which the rail industry can bring in massive efficiencies, both in terms of optimising its technology spends and, more importantly, through adopting newer technologies. Information Technology is critical for this industry to operate smoothly and seamlessly, but it can also be a key enabler of transformation and innovation. For example, potential maintenance issues can be resolved at an early stage by adopting intelligent asset management techniques that utilise cutting-edge mechanisms to collect and analyse data related to assets such as tracks and bridges. Similarly, the rail industry can also apply social channels to gather more feedback from its customers, thereby providing them with a greater sense of involvement.
In fact, the emerging SMAC (Social, Mobile, Analytics and Cloud) technologies are increasingly playing a key role in shaping the future of rail. The influence of SMAC technologies in driving efficiencies in rail network will have a significant impact across the UK rail ecosystem--including Network Rail, Train and Freight operators, Rolling Stock companies and Rail Delivery Group. Use of handheld devices and smartphone applications in providing real time cargo visibility will be immensely appealing to the freight transportation industry. Building a greener and smarter ecosystem of consumers, customers, network and train operators using an underlying information network enabled by SMAC technologies will be the essence of future-proofing one of the oldest rail networks in the world."

Inside outsourcing interview: MindTree - UK's Silicon roundabout now offshoring app development

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I first interviewed MindTree back in May 2010.  It is a tier two Indian IT supplier following behind the likes of TCS, Wipro, Infosys and HCL.

It was formed in August 1999 as the result of a collaboration between executives of Indian service provider Wipro, US consultancy Cambridge Technology Partners and Lucent. This diverse group of people combined the low costs of India with the high end consultancy of Cambridge Technology Partners and the technology expertise of Lucent. The person behind the company was Ashok Soota, a well-known executive in Indian IT.

For the last few years I have been in regular contact with the UK head Tridip Saha. I met up with him last week to see how MindTree is doing in the UK. MindTree is involved with the project in India that is attempting to give one billion people ID card. It was the company that created the software that is collecting all the information.

Despite the economic slowdown in the UK Mindtree has grown its revenues by 30%. This compares to its overall growth of 8%.

When I spoke to MindTree in May 2010 it had 80 staff based in the UK, with 720 in India that are dedicated to UK customers. Today it has 200 based in the UK and another 2000 in India that are dedicated to the UK. MindTree has 11000 workers globally.

So where is the growth coming?

One of the most interesting areas of growth being experienced by MindTree is in the IT start-up space. There is a lot of investment in the UK start-up scene at the moment with the development of communities of start-ups like those in London's East End.

These companies begin with ideas for apps that address a business need. Once they have the product outlined and perhaps put it in production, becoming a startup and then early phase business they are faced with the need to invest in people to work on the code. MindTree is seeing a significant amount of work coming from these companies. Tridip told me: "These Silicon Roundabout companies do not always have the resources. They are coming up with the ideas and some are offshoring the coding and development."

Tridip also said that MindTree's main business, application development for corporates, is growing strongly and he told me about a trend amongst European businesses to consolidate applications.

He said some of MindTree's pan European businesses customers are centralizing there core applications and delivering them to operations via the internet. This is almost like the ASP model but not multi-tenanted.

"Businesses are still only putting their non-critical apps in the cloud."

Then he told me about the finance sector where the company is experience an overlap between developing software to help customers meet regulations and better analyse data. He said MindTree is involved in building systems that collect data from all over the complex infrastructures of banks and putting it in one place. This helps banks meet regulations through faster access to relevant data, and the data can also help banks better understand customers.

The state of IT sourcing mid 2013 - a reflection of Forrester conference - Part one: innovation through outsourcing

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I was at the Forrester conference this week following the track focused on outsourcing. I have written an article following the event that looked at the importance of supplier management in today's world of multiple suppliers.
This, which you can read here, basically covers the presentations I attended. The article looks at how supplier management is becoming more complex as new technologies, delivery models and suppliers come to market with technology to address business challenges.

But I thought I should blog some of my observations. So here is the first. I really want to get some feedback about each of the points I mention, so feel free to leave your comments.

There was an interesting point made about innovation. Businesses lament the difficulties they face getting IT service providers to innovate. Even when it is part of the initial agreement businesses struggle to get service providers to genuinely innovation. Having said that innovation is a very difficult for any business to do? I mean it isn't that easy to identify innovation.

I was talking about innovation in outsourcing with Forrester analyst Lutz Peichert at the event. He said Forrester is seeing more companies investing time and money in getting innovation from service providers. It is in the service providers' interests to innovate these days both for their own business, to make them more effective at delivering services and also to help them win business.

His advice to businesses for getting innovation from suppliers is this: "Understand the capabilities of the supplier and put the people at the supplier in contact with the right people in the business." This makes sense because there is no point a procurement executive talking about innovation to an IT expert. It should be the person that could benefit from innovation that should be involved in that debate.

Let me know how you get suppliers to innovate. Or if you are a supplier let me know what you want from your customers to help you innovate.

Here is an article Forrester analyst Wolfgang Benkel wrote for Computer weekly last year about. Innovation in Outsourcing Relationships.

Network Rail's supplier consolidation makes sense amid £2bn cost cutting

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I recently blogged about Network Rail consolidating its IT service provider roster. TCS, Cognizant, Accenture and CSC all sent press alerts out about being awarded a framework contract.

Network rail's CIO Susan Cooklin had talked about her plans to reduce the number of suppliers late last year.

The rail regulator has told Network Rail to save £2bn over the next five years and improve service levels. It has also said that safety levels must not be impacted.

So IT is a good place to make some of the savings. IT outsourcing contracts usually have a lot of potential for cost cutting and by creating a framework with fewer suppliers Network rail can build relationships with the suppliers that will result in a trade-off between price and commitment. By ensuring these suppliers are in with a shot at lucrative contracts Network rail will be able to get good terms.

Jean Louis Bravard, director at sourcing consultancy Burnt-Oak Partners said but there is no question that reducing the number of suppliers helps manage total costs, accelerates the timing of cost reduction programmes. 

He added that working with large suppliers can help customers with financial engineering. 

"The other aspect is that you need to pay attention to what the measure is.  If it is the amount reported as 'expenses' in any given year a very large supplier is able to negotiate how value is delivered versus how it is invoiced.  This way and for the same cost over say a 7 year period a supplier could deliver savings in year 1 to 3 but receive the value in later years.  The financial engineering has its own accounting and funding constraints but it is a key area of negotiation and can honestly only be entertained with the larger players."

Read more about getting more out of your IT service providers,

Daimler bringing IT in-house but offshore reflects high cost of software support

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Daimler is the latest corporate to announce plans to bring IT that is currently outsourced back in-house. The firm's announcement follows similar plans from fellow manufacturers General Motors (GM) and Procter & Gamble.

Daimler is planning savings of €150m a year. A chunk of the savings will come from taking SAP support in-house by setting up a low cost captive in Bangalore.

Forrester analyst Lutz Peichert told me there are a lot of big companies looking at the possibility of bringing IT back in-house because there is general dissatisfaction with suppliers. He also said offshore is now a standard part of the supplier landscape for large corporates so more in-house captives could be on the cards. Back in February I wrote about how there could be more and more big businesses are setting up offshore and nearshore captive centres as regulations, fears over IP security, and hidden offshore costs increase.

Software from the likes of SAP is critical but is expensive and cists can spiral out of control. Daimler's decision to set up a low cost captive to support its SAP reflects this.

I was at the Forrester forum this week and attended many of the outsourcing presentations aimed at supplier and vendor management professionals. There was an interesting presentation from Duncan Jones about strategic software sourcing.

He described the four software giants SAP, Oracle, IBM and Microsoft as the "technoligarchs". He said businesses need their software because it is good but these suppliers want bigger revenues than customers can actually afford to pay.
He said by managing them strategically businesses can make massive savings.
It appears you have to threaten or punish these suppliers to keep your maintenance costs down.

At the Forrester event there was a presentation from Rimini Street. The company offers businesses maintenance on Oracle and SAP with the promise of doing it for half the price charged by the software suppliers. The CEO said about 30% of the companies that approach end up switching to its support. But the interesting thing is the other 70% then go to the likes of Oracle and SAP, show them what Rimini Street has offered, and end up getting a better deal. So it seems you need a good bargaining tool when it comes to negotiating with these powerful suppliers.

He said businesses cannot use standard procurement tactics when dealing with these suppliers. "Traditional approaches are very transactional and reactive and not the best way of doing things."

A key part of procurement tactics will involve deciding which suppliers you want to commit to and reward then appropriately, said Jones.

For example he said businesses should tier suppliers with the benefits and commitment for both parties rising with the ranking. "The higher up you are as a supplier the more benefits you get but the higher the obligations."

"For example they cannot be a strategic partner if they audit you and charge you for some spurious interpretations of vague licensing agreements," said Jones. "If they want to be a partner it means fair treatment."

He also said procurement teams should identify the suppliers it wants to do more work with in the future.

Why is a government department proposing reclassifying 440,000 UK IT professionals as creative professionals?

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An inside outsourcing reader sent me an interesting email this week. He brought to my attention something that e-kills UK had published regarding a proposal from the Department of Culture Media and (Sport DCMS) to classify IT professions as creative.

This will have an impact on the IT industry because it will be much smaller and less important to the UK economy. As a result it might not receive the high level of government attention it deserves.

There are some bizarre proposals. For example 239,000 programmers and software development professionals would be reclassified as creative professionals rather than IT professionals. That's 21% of the total UK IT profession.  A total of 95,000 IT business analysts, architects and systems designers will also become creative professionals. And 53,000 IT & Telecoms directors will become creative professionals while their staff will remain IT workers.

It job relassification.JPGIf you want to give your views before the consultation closes on 14 June click here and add your comments.

I would like to hear your thoughts so feel free to leave a comment.

Moving IT offshore from rate card to managed service

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I had an interesting conversation with the CIO at Ceva Logistics yesterday. Peter Dew was telling me all about the companies move to the offshore IT delivery model. More specifically how it has outsourced to Indian services firm HCL.

The journey shows how good strong offshore relationships can be built even if the prime reason for going offshore was for low cost labour.

When Dew joined Ceva in 2008 it did not have an existing outsourcing supplier so had to start from scratch. Because it had never gone to the market for an outsourcing supplier it did not have the experience and processes in place to select one.

Dew said companies that have existing IT service providers in place would put together what they want and run a RFP. With Ceva Dew decided to take a different approach.

He knew the primary goal was to lower the wage bill. Ceva had 1500 It staff in high cost regions (US and Europe). So he selected a group of Indian suppliers and outlined 17 job roles. He went to the suppliers to see how much they would charge for each role. Within 10 weeks of deciding to offshore IT he had people in India up and running.

So he basically got a rate card from the supplier and outsourced work to them. Ceva managed these offshore workers in a pure time and materials model.

The interesting part is how this has evolved into a strong relationship over the years. As the relationship has developed Ceva has passed more responsibility to HCL, meanwhile Ceva carries out benchmarking to ensure it continues to get the best deal it can.

Today Ceva has managed switched, from time and materials, to full managed services for Infrastructure and application management and development with HCL. It has 600 HCL staff in India working for it and is also embarking on a BPO outsourcing contract with HCL, which will see billing, invoicing and customer services offshored to HCL and another 500 staff added in India.

So time and materials is a good place to start for an offshoring journey if that is what a business has chosen to do.

Indian IT services firms are themselves moving away from a dependency on time and materials models with services that offer linear charging models, so they will be willing to go on this type of journey with a customer.

Inside outsourcing interview: ITC Infotech is "small enough to care but big enough to dare."

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I met up with Hardeep Garewal, who is the head of Europe at tier-two Indian IT services firm ITC Infotech. It is always interesting to speak to some of the lesser known Indian suppliers.

ITC Infotech have interesting plans about making their mark in Europe.

The company has an interesting history. It was previously the internal IT department at Indian conglomerate ITC Ltd. With revenues of $7bn it is focused on fast moving consumer goods, hotels, paperboards, paper & packaging and agri-business.

ITC Ltd still owns ITC Infotech and is a major customer but spun it out in 2000 to serve other clients. This is similar to TCS, which is part of Tata and Wipro Technologies which is part of the Wipro conglomerate. It also rings of EDS, which was once the internal IT department of General Motors.

It has some really big customers. It is only currently a $300m a year company, with 6000 employees, but has been able to win big customers because they feel safe with it because of its huge parent company.

Garewal told me that ITC Infotech has been getting its European foundations laid and putting its strategy together and is now ready to grow.

The company knows it can't compete on end to end enterprise outsourcing contracts but specializes in certain areas where it can compete. With CIOs disaggregating IT outsourcing contracts and looking at the individual pieces to see where they can improve, there is an opportunity for specialists.

"We have found large organisations are increasingly disaggregating their large Services contracts, and choosing us for the special experience and expertise we bring in this space,' said Garewal.

So where does it specialize?

1- Infrastructure services. End user computing- Windows 7 migrations. ITC Infotech is busy migrating some big customers from XP to Windows 7. It is also developing co-existence between Windows 7 and 8.1 should customers want to upgrade to Microsoft's latest system

2 - CRM and customer experience. It has a strong focus on CRM and has developed expertise in creating loyalty programmes for customers including airlines and retailers. It is also using its expertise to expand into areas such as providing customer insights through trade and consumer Analytics. It is co-developing software with Oracle.

3. Product Lifecycle Management. It currently provides services to large fashion outlets where its develops software that manages products from the initial design sketches right through to the customer.

4. Testing.  ITC Infotech's Testing Centre of Excellence has developed expertise in the latest tools and methodologies, using TMMi to sharpen our testing effectiveness.

Another interesting point is that the CIO at parent ITC also helps the ITC Infotech business by meeting up with potential customers. So the CIO of a huge conglomerate shares his experiences with customers and potential customers. I imagine he is also very useful when it comes to helping ITC Infotech develop strategy.

ITC Ltd is the company behind e-Choupal. This initiative enables rural farmers in India to link to markets to sell via the internet. In the past middlemen would sell the products and make most the profits.

Network Rail reduces IT services partner list

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I have been inundated with emails from IT services suppliers today about them being included in a framework by Network Rail.

TCS, Cognizant and Accenture have all sent press alerts out about being awarded a framework contract.

Obviously this does not mean they have won any business yet but it does mean Network rail is planning to put some contracts out to tender.

This is part of Network Rail's plan to reduce the number of suppliers it works with. It also includes CSC. They are preferred suppliers and will still have to negotiate to win contracts.

Read this CIO interview with Susan Cooklin, at Network Rail.

TCS, the billion pound company in the UK that actually understates its cloud story.

Karl Flinders | 1 Comment
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IDC analyst Douglas Hayward sent me an interesting article he wrote, with other IDC analysts, about TCS. This followed an analyst day at TCS.

It is interesting to see how big TCS is in the UK. We know it is India's biggest IT services firm with over 250,000 staff globally and billions in revenues. But in the UK it is now a billion pound company. It had sales worth a total of £1.18bn in the UK in 2012.

Hayward points out that TCS, unlike many rivals, grew faster in the UK during 2012 with 25% growth in dollar terms during. He said it is now the eighth largest IT services supplier in the UK and has 9,500 UK employees.

And believe it or not it is an IT supplier that understates its cloud offering, according to IDC.

Here are some excerpts from the paper.

On cloud computing IDC believes TCS actually has actually understated its story. While this makes a refreshing change from every Tom, Dick and Harry having a cloud story, it is interesting to read IDC's thoughts.

"While executives confirmed that they do not chase standalone cloud services contracts, they will certainly provide cloud services as part of "end-to-end" outsourcing deals (particularly where the customer wants outsourced infrastructure), and cloud is therefore playing an interesting and innovative part in some key deals. For example, the NEST contract, in which TCS runs the newly established default national pension scheme for U.K. workers, has the IT infrastructure provided through a secure private cloud hosted by partner Cable & Wireless. That's impressive -- yet it's not something that's generally known."

IDC also asks: where will TCS go next to continue its growth?

It needs to ramp up its consultancy business.

"TCS has an established business consulting practice, spanning both traditional areas such as process transformation and change management and newer areas such as the Digital Enterprise Group (see above). Still, executives concede that TCS has to scale the group up in future, and it also needs to get it more integrated -- meaning driving closer collaboration both across the consulting practices and between the consulting organization and the mainstream and IT services and BPO businesses. It also has to inject more "consulting DNA" into the mainstream TCS organisation, supplementing the traditional technology excellence with a focus on driving IT and technology transformation among clients -- at least for those employees willing and able to combine these two realms.

It must adapt its services to meet public sector demand.

"Winning major contracts such as NEST and DBS based in part on innovative technology solutions rather than labor arbitrage has helped TCS establish a reliable brand that can compete for major deals at the central government department level against traditional incumbents. And to the winners go the spoils: having onshore delivery centers for BPO and IT service delivery will help TCS win more deals, giving it reference customers and gaining points in the procurement process, not to mention making migration of customers coming from new contract wins smoother. Further growth in central government would benefit from TCS strengthening the packaging of its industry-specific offerings and from strengthening its cloud positioning to meet the U.K. government's G-Cloud objectives. To speed up those initiatives, especially in an environment that cannot afford the cost and risk of 'big bang' custom development any longer, TCS should consider partnering with local solution providers or specialty software vendors. It has traditionally built its offerings in-house from scratch or repurposed them from other verticals, such as taking the BaNCS offering and adapting it for the UK life and pensions industry (for both commercial customers and for the NEST project). While this works well enough, it may need to be supplemented in future with more partnering-led approaches if TCS is to accelerate its drive into the public sector, so some business models and organisational changes should be considered. In local government, the Digital Enterprise Group is making what we consider an initially somewhat timid approach to the 'smart cities' market with the Intelligent City (iCity) framework. TCS has strong legacy of state and local government customers in India which provides a solid foundation for digital service delivery, but to break into the crowded "smart cities" arena in Europe requires a strong point of view, offerings, and customer successes in specific areas that are in high demand, such as transportation, environment, public safety and health, besides generic eservices platforms, such as the one being deployed for Cardiff Council."

Read our CW Special Report on TCS

See my recent interview with TCS's UK head: Inside Outsourcing interview: TCS public sector win shows that offshoring is not about labour arbitrage, but service innovation.

Will O2 contact centre staff really be better off with Capita and need TUPE be end of world?

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Capita has taken over the management of O2's customer services operation for the next ten years. The deal will include increased digitization of services.

O2 says it is responding to changing demand. For example it says it is taking 1 million less calls per month from O2 customers today than it did 2 years ago. I am an O2 customer myself and I have rarely used the phone. I find the web chat good, although there is sometimes something lost in a conversation.

O2 told me that jobs transferred to Capita will be guaranteed for two years. It also said that there will probably be more opportunity at Capita in two years' time than there is in O2's contact centre. Capita has a broad range of customers and might offer staff opportunities to develop other skills as well.

It might sound just like O2 is softening the blow for affected staff. But it does work out better for some when they transfer to an outsourcing provider from an in-house role. But only a small minority I think.

It reminded me of an interview I did with Bob Scott at Capgemini. 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 group marketing dircetor at Capgemini and has held many senior global roles.

In 1992 part of a mathematical modeling team at British Coal that was outsourced to hoskyns, which was later acquired by Capgemini. British Coal needed the skills but could not justify having it in-house because the mining industry was declining.

Read this blog post to see how Bob Scott's career developed after he was outsourced.
This is obviously not common but it gives some hope for those being transferred.

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