November 2013 Archives

Mindtree appoints local to head up UK and Europe as Indian business model changes

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I have blogged quite a few times about Indian IT services firm Mindtree, because I am interested in what some of the smaller, lesser known suppliers are up to and what they have to offer.

I recently met up with Mindtree's CEO, KK Krishnakumar Natarajan (KK), who is also chairman at Nasscom. He updated me on Mindtree. I will be writing a separate interview with KK about Nasscom soon.

A bit of news is the fact that Mindtree has just changed its leadership in Europe. Mark Wilsdon, who previously worked with Cognizant in the UK, was made head of sales for UK & EU following the departure of Tridip Saha (see this blog post he wrote for me.) Wilsdon has also worked at Capgemini and Unisys.

The Indian suppliers need a bit of local expertise when they are dealing with large corporate customers. I was chatting to European head at Tech Mahindra Vikram Nair, the other day. He told me the company, which famously acquired Satyam, uses domain expertise from local in Europe to support its sales strategty.

Anyway back to Mindtree. This is a company that has accepted that it can't chase every deal and is focussing on certain markets.

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.

KK told me about how western businesses want different things from Indian suppliers today. The attraction is no longer just price but domain expertise.

"In the last two and a half years or so the key thing we are seeing in the market is that the first phase of the Indian IT industry, which was about lowering costs for clients, coming to an end. This was key for clients to buy-in but now customers want business expertise from suppliers. This is partly to move to non-linear business models but more about solving specific business issues using technology."

This is the reason Mindtree has created a model where it focusses on a few areas. "Clients are demanding expertise. Not many suppliers can be a generic service providers across sectors and be the best in each."

This could be the key for tier two Indian service providers targeting the UK. I have spoken to a few: L&T Infotech and ITC Infotech as well as Mindtree.

Where should I outsource my agile developments - onshore, nearshore or offshore?

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I was recently at the Agile awards in London where I hosted a panel discussion. One of the panelists was Carl Bruiners. He is an agile software development consultant and currently works at furniture retailer Dunelm. I asked him where is the best place to outsource agile development - onshore, offshore or nearshore?

I am using some of Carl's comments in an anaysis I am currently writing but thought I would share his comments as I know he is answering a question many people want answers to.

This is what he said:

"Working in an Agile framework does challenge the practice of offshoring, though often I have found in various organisations the decision to offshore to low cost regions is often not the choice of the companies IT function, but the choice of the finance department.
To challenge this I would recommend engaging with the executive to explain the cost of ownership / value return, as it is often narrow sighted not to consider the other factors you inherit when offshoring; language difficulties, communication latency, culture, etc...

At GE an individual (offshore) engineer was a third of the cost of an engineer based in Cambridge, UK, but the Cambridge engineer was 4 times more productive and therefore far cheaper per feature delivered.
In practice I have never found there to be a big difference between onshore, nearshore or offshore. Whilst at GE and Lloyds I had teams based in Cambridge / London and ones based in India. At Dunelm I have teams in Leicester and London, yet the communication challenges remain the same as those at GE and Lloyds. If you have separated your delivery capability you need to ensure that you leverage as much as possible on the various communication / collaboration tools available (instant messaging, video conference, Interactive whiteboards) to try to bridge the physical gap between teams.
One critical element to consider when creating remote delivery capability is not to split the team between two locations but to create discreet teams in each geographic location to deliver features. For example when I arrived at GE an Agile team could consist of two developers in Cambridge UK and two developers Hyderabad, India, this created numerous problems; communication latency (even effective stand ups become a challenge), effective pair programming was virtually impossible. The first thing that I did was reshape our backlog into Feature releases and formed discrete Agile teams in India and Cambridge so that each team would deliver a feature in its entirety. This improved our effectiveness as team communication issues were localised and the behaviors of the teams improved as each team felt more inclusive of delivering a great product.
I would also analyse the maturity of your Agile practices. At Dunelm we have two teams in Leicester and two in London. We have implemented test automation (BDD) and Continuous Integration (soon to have Continuous Delivery) to ensure the quality of the product and ensure the feedback loop is quick and transparent to all the teams working on the product. It becomes a far more difficult challenge to maintain multiple teams within the same building without these techniques and virtually impossible to maintain a sustainable remote function if Test Automation and Continuous Integration is not in place.
My top five recommendations would be;
Don't have remote teams unless you really need to
Have teams within the same time zone
Implement Test Automation
Implement Continuous Integration
Create a backlog of work you can deliver as independent features"

Offshore is for large companies and nearshore for small firms

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I had a meeting with Alastair Mitchell, the CEO and co-founder of cloud collaboration platform provider Huddle. We were talking about the skills gap and how businesses are addressing this through the use of overseas suppliers.

He said skills shortages always exist in growing economies and businesses must address this through overseas skills. "There is more and more demand for high quality development resources and it is not just about cost but access to talent," says Mitchell.

There has been a lot of talk recently about start-ups and early stage companies being held back by the lack of skills in the UK and the difficulty getting visa's for overseas workers with the skills they need. There has even been a call from the mayor of London Boris Johnson for a special London Visa to make it easier for the city's start-ups to get the right staff.

But the very different requirement of small growing companies and large established means a choice between nearshore and offshore.

Mitchell said that small growing companies are looking for skills when they go overseas for IT staff compared to large established companies, such as big banks, that do it to cut costs. As a result he say that offshore is good for big business while nearshore is good for small growing businesses.

I recently received a report about how (nearshore) Eastern Europe is (offshore) India's biggest threat for IT outsourcing? Read it here.

I am planning to write more about this and I am looking for people's views so let me know by leaving a message.

People should be given tools to insource healthcare if NHS savings are to be made?

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Electronic medical records not only promise to make doctors more efficient but could also help patients reduce their demands on the NHS.

I wrote an article yesterday about some research from Accenture looking at access to electronic patient records.

It revealed that over three quarters (77%) of English patients think they should have full access to patient records but only 34% of doctors agree. It found that 63% of English patients are not self-tracking personal health information, such as blood pressure, weight and physical activity. This compares to 49% in the other countries surveyed.

Wouldn't it be good if people began to take more care of their own health? Having information at their fingertips is a good start for people to insource their own healthcare.

After all doctors only get 10 minutes with patients and that's just when they visit a doctor which for most people is not very often.

I am not suggesting self-diagnosis using the internet although I have done that myself in the past after two doctors told me there was nothing wrong. After the second doctor told me nothing was wrong I Googled it. I then went to a third doctor armed with what I had learned. Who confirmed it as being the case.

Ed Miliband appoints Maggie Philbin to address UK skills shortage - but what can she do about Intra Company Transfers?

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Ed Miliband is going for the celebrity point scoring with the announcement of Maggie Philbin to head of a task force to look at ways of addressing the UK IT skills shortage.

I remember Philbin from Tomorrow's World and I think she is great, but I don't see what the task force can reveal that has not already been revealed. Miliband has said himself that too many jobs are being outsourced to non UK workers. If you ask most IT professionals they say the same thing. So what is left for the taskforce to discover?

The use of visas and Intra Company Transfers enable offshore IT companies to bring staff to the UK to carry out roles within customer businesses. These roles are usually entry level and as a result they stop UK IT professionals getting on the first rung of the job ladder, which leads to a skills shortage further down the line.

And the only way to address this is to introduce legislation that stops businesses from having IT jobs done by non-UK workers. But when big business wants low cost services it gets what it wants. Like the current coalition Labour is beginning to pay lip service to controversial issues.

The Tories did the same thing by putting a cap on the number of visas granted to businesses. Although it did not include Intra Company Transfers and therefore did little to stop jobs being done by offshore staff onshore, this kind of policy is popular with voters, particularly those inclined to read the Daily Mail.

Let's face it the Coalition doesn't want to piss India off. 1.2 billion people are a lot of potential customers. And when Labour get back into power they won't want to piss India off.

So unless Maggie Philbin can write official Labour immigration policy I don't understand what she will do.

Miliband also reaffirmed his idea of making businesses create a UK apprenticeship for every job carried out by a non EU citizen. I am not sure if this would be workable in the real world and like the Tories promise to cap visas it will probably not include Intra Company Transfers.

More than the GDP of small country spent on government procurement reports

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I recently asked in a blog post whether we really needed another review of government IT procurement? I asked this following the launch of a review of government IT procurement by the Office of Fair Trading (OFT)

As I said in that blog these things are ten a penny and they make the same conclusions and nothing is done about it. You know the findings off by heart. There are a small number of large IT suppliers dominating the market, it is too difficult and expensive for suppliers to switch suppliers, and who would forget that it is too hard for small suppliers to get into the game.

Well anyway the answer to my question about whether we need another government review of procurement was obviously yes because that is what we got. The NAO published a report on government outsourcing including IT.

Guess what? A few big suppliers dominate the market.

I wonder how much it costs to put together one of these reports? It would be interesting to see what the return on investment is on some of this work.

Could Big Blue patent implications hit Twitter flotation?

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Here is a guest blog By John-Paul Rooney, a partner and patent attorney who specialises in the field of consumer electronics and software at Withers & Rogers LLP.

Rooney looks at how important it is for businesses that are considering floating on the stock market to understand the intellectual property they own. This follows Twitter's flotation and alleged IBM patent infringements.

Patent allegations are unsettling for Twitter

By John-Paul Rooney

"Just prior to its float on the New York Stock Exchange, Twitter received a letter from International Business Machines Corporation (IBM) alleging that it had infringed three of the latter's US patents. The timing of the legal challenge, just ahead of the social media company's planned flotation, may have unsettled some investors and both parties are expected to settle before too long.

As a top global patent filer, IBM currently has more US patents granted per year than any other company (6,478 in 2012) and is estimated to hold approximately 87,000 granted or pending US patents which are progressively more focussed on software and services. By comparison, social media company, Twitter, has just nine US granted patents and 95 pending.

IBM has brought three patents to the attention of Twitter, relating to the provision of shortened website links in tweets, advertising and the sharing of common contacts.  These patents date back to 2000, 1988 and 2001, respectively.  It would appear that these patents, if valid, could potentially be enforced against others in the digital social space.

In May this year, in a somewhat unusual move, Twitter decided to cede some control of patent rights for inventions to the individuals responsible for their development in an attempt to reduce patent litigation. In doing so, they sent a message to the marketplace that they are committed to a laissez-faire approach to the enforcement of intellectual property rights. However, now it seems that this strategy may be back-firing and the social media company's well-meaning, but potentially commercially-naïve approach to patent protection is coming back to haunt them.

IBM has an immense arsenal of patents, built up over decades, and they are used to enforce their commercial rights where there is opportunity to do so. In this case, Twitter is a sitting target, particularly as it is so close to a float and therefore not looking to pick patent arguments. The fact that the technologies developed by the social media company may be under-protected may also have encouraged IBM to look their way, as there is little possibility of a defensive countersue from Twitter.

Facebook faced similar patent infringement challenges ahead of its float last year, which were settled at the time. Since the company has acquired a considerable patent portfolio by buying up patents from IBM and Microsoft. It is possible that Twitter will take the same course of action.

All companies should know what intellectual property they own, what they could potentially own should they choose to protect, and, ideally, what others might own which could affect their business (freedom-to-operate).  This is especially important when a company considers a flotation or other public sale, as can be seen in the cases of Twitter and Facebook.  Intellectual property rights have never been so valuable."

NASSCOM funds research to prove a point, but did it prove anything?

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NASSCOM, the umbrella organisation representing Indian IT services firms and other multinationals, has part funded research by the National Institute of Economic and Social Research (NIESR) looking into the productivity benefits of using skilled immigrant workers.

See this article I wrote about it.

I think the Indian suppliers in particular get a really bad press, often unfair. They are always criticized when their workers take over roles previously carried out by UK professionals. But actually why blame them? UK businesses are demanding staff at a certain price with a certain level of skills and if government rules say they can use staff from overseas then they are obviously going to if it meets their needs.

Like the problems with companies reducing the amount of tax they pay in the UK, the government is the only organisation that can change this through legisalation.
So NASSCOM's charm offensive is to partly fund research linking productivity with the use of skilled immigrant labour.

Whilst I am in no way against the use of overseas about the report doesn't really prove much apart from proving through stats that production increased when the use of immigration increased during a ten year period.

A contact of mine summed things up: ""The association does not give any causal relationship and [that] higher productivity may attract more immigrants, e.g. rising productivity sectors will have rising salaries and profits that are more attractive to the internationally mobile. The 0.06% increase with 1% increase in immigrant share is small especially as they chose to look at 1997-2007 (pre-crash) which was a period of rising labour productivity and growth. Labour productivity rose 28% (on a per capita basis or 22% on a per hour worked basis) in this period."

Doesn't it all boil down to cost. Although there are skills needed in the UK from overseas in IT businesses can save money by having work done by offshore staff that cost less.

IT outsourcing industry in good health as customers call the tune

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I write lots of articles about the IT outsourcing sector growing and contracting and even stagnating. Most of these articles are a reflection of the sales that are being made by suppliers. But what I am really interested in is are IT outsourcing services improving for the business customers, rather than are the supplier revenues and profits increasing.

Although the two are intrinsically linked, in that better services will lead to more sales, in the current climate with things like pay as you use contracts and cloud based services rather than 10 year mega deals sales will go down even if customers are buying more.

Ashish Gupta, EMEA head of Infrastructure at Indian service provider HCL Technologies, explains why suppliers that offering full transparency and flexibility will win the next wave of IT outsourcing contracts.

IT outsourcing is dead...long live IT outsourcing!

By Ashish Gupta

 "If you believe everything you read in the media, you could be forgiven for thinking that the health of the IT outsourcing industry is ailing at an alarming rate. With boasts of reduced spending in IT across industry as a whole, it can sound as though a lengthy queue is forming to perform the last rites, and to write obituaries for IT services companies. Those espousing this view point gleefully to the decline in the number of fixed-term 'mega-deals' in the IT industry in recent years as evidence. So is the IT outsourcing industry really on its last legs, attached to a life-support machine and preparing to draw its final breath?

Paradoxically, the answer in some cases is 'yes'...but also, more resoundingly, 'no'. Allow me to explain. A decade ago, the world of IT outsourcing was a very different place. It was an industry dominated by a handful of big-name service providers that held significant power and influence. These organisations made millions by offering services to end-users in exchange for high fees and fixed-term contracts with rigid, inflexible service level agreements (SLAs) often written on the Service Provider's terms which clients negotiated. At the time, 'mega-deals' were commonplace, primarily because the pool of service providers was so limited. As a result, end-users, who were operating in a relatively immature market, were happy to pay top dollar for the associative reassurance that these 'name' brands were able to offer.
Today, things are very different indeed. With the market for IT services now more mature in the UK and across certain parts of Europe, the tables have turned and end-user organisations are now the ones calling the shots. Gone are the days of a few service providers dictating terms. Competition has widened and prospective customers are now able to dig more deeply and explore their options before they sign on the dotted line and commit themselves to an outsourcing engagement.

As more organisations have looked to cut costs and increase efficiency in light of fluctuating global economic fortunes, customers have been forced to become much more discerning. Instead of jumping at the chance to pay for the right to partner with a "safe" provider, end-users are becoming savvier and looking for greater  flexibility, transparency and cost efficiency. Increasingly, we're seeing end-users conduct forensic searches across the industry before they identify an outsourcing partner capable of meeting their specific needs. 
What this means is that, to some extent, the industry experts are right. IT outsourcing as we've always known it (otherwise known as 'traditional' outsourcing), is dying. However, what very few acknowledge is that in its place, a new, very different approach has emerged, known as Generation 2.0 outsourcing. Where previously the split between end-users and service providers was well defined, Generation 2.0 outsourcers work collaboratively with vendors to identify areas for improvement, and to exchange ideas and thoughts. Similarly, where vendors could once dictate SLAs according to their own priorities, users are now becoming empowered to select service providers that can adapt to their needs. As a result, far greater pressure has been placed on IT service providers to change the way they operate. Today, flexibility and transparency are the watchwords for IT services firms, in the face of stiff competition, and increased customer scrutiny.

There's no doubt that as the market for IT services has matured, so the demand for the reassurance that a few safe names offer has decreased. This, in turn, has created greater demand for new age providers capable of working with a client and also with under vendors in more specialised outsourcing models, such as multi-sourcing.

So although many would be quick to bury outsourcing the fact of the matter is that the opposite is true. Instead of a lifeless industry, we've seen a gradual metamorphosis from the caterpillar of traditional, inflexible models to the flexibility and transparency of the butterfly of Generation 2.0 outsourcing. IT outsourcing as many have come to know it, may well be dead, but one thing's for sure - newer, more collaborative models are alive and kicking, and changing the world of IT services forever!"

How are SMEs managing with HMRC RTI compliance?

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The introduction of Real Time Information by the HMRC this year meant businesses had to comply with new tax rules. Mark Paraskeva, CEO of SME Division at IRIS Software Group, assesses how businesses are coping with the introduction of RTI six months on. There have been a few technical glitches leading to difficulties making online submissions.

Delays in real time: How are small businesses coping with RTI?

By Mark Paraskeva

"It has now been six months since the introduction of Real Time Information, but it seems that many small businesses are still having issues complying with the new legislation. Regardless of your opinion of RTI, it is here to stay so you need ensure your business is compliant.

In a recent announcement, HMRC revealed that 83% of small to medium sized businesses are successfully making RTI submissions, and approximately 44.5 million payments made between 6 April and 5 May were successfully reported in real time.

However, it has also been revealed that up to 600,000 PAYE schemes are still not complying with RTI. HMRC has already started contacting these non-compliant schemes with the possibility of penalties if they fail to achieve compliance.

Many businesses have reported problems when trying to file submissions using HMRC's free online PAYE tool. Some businesses have been unable to make submissions due to gateway downtime and other unspecified issues with the software.

As well as these issues, feedback we have received is that since HMRC updated the tool earlier this year, the system requirements have been increased, rendering many employer's computers incapable of running it. After the update the minimum requirements for HMRC's tool are:

•    Intel 2.8GHz processor
•    1GB RAM
•    500 MB available hard disk space

Some employers whose computers do meet the minimum requirements have still found that the software is not running smoothly on their systems.

If you have been having issues with HMRC's free tool, there are other options available. Some commercial payroll software providers have free RTI compliant software. However, these are aimed at smaller businesses with fewer than 10 employees and are only designed to handle a basic payroll.

Employers with more complex infrastructures or more than 10 employees could be better off looking at paid for options. When choosing a software supplier it is important to look at exactly what you will be getting. Choosing a provider who also offers support can be a huge advantage, especially with complex legislative changes such as RTI and automatic enrolment. If you can, it is a good idea to look for a provider who offers a "complete solution".

On top of paid for training, certain suppliers have also been offering free online introduction courses, whitepapers, advice lines and "health checks" to asses company's specific needs.
Looking past a few initial teething problems, it seems that the worst of RTI is behind us. Feedback we have received has told us that once you have your software in place and your data has been input correctly, complying with the legislation is little more than an extra click of a button."

Francis Maude will not ban civil service offshoring, does he have a choice?

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The Financial Times ran an interesting interview with Cabinet Office Minister Francis Maude.

The interview revolved around the possibility of civil service jobs being offshored and follows the announcement of the finer details of the governments joint venture with Steria, which will provide a shared back office service to multiple government departments.

This will provide services for the government departments and compete for business across the public and private sectors.

It reports how John Torrie, Steria's CEO, said that offshoring jobs are on the agenda and Francis Maude claiming that a ban on offshoring civil service roles will be bad for UK economy.

This is controversial stuff but are the just being honest?

It is inevitable that jobs will be offshored if you look at another shared service in the public sector run by Steria, the NHS Shared Business Service. As this operation has added new customers it has grown in India rather than in the UK.

NHS SBS is a shared business service that uses an Oracle platform and a single set of processes to run the back offices of NHS trusts. About 100 NHS trusts now use the service.
It has been a success. It promises trusts up to 30% cost savings and even paid the NHS back £1m this year.
Through SBS the NHS has offshored work gradually without the negative headlines that go with it. When the service was first set up, half the workers, some 300, were immediately in Pune India and this was up to 1200 three years ago as new customers were added. I don't know how much of the work is offshored but there have been lots of new customers added so imagine it is quite high.
The NHS trusts that decide to use the service will obviously have to make redundancies. But over the years there has not been a huge backlash against trusts offshoring work through SBS. Not many people realise thousands of NHS jobs have been offshored.
So could that be the way to offshore in the public sector?
1- Set up a joint venture between private business and government department.
2 - Look for work within that public sector family, such as police forces, NHS trusts or fire services.
3 - Gradually offshore work as new customers are added.

It always seems to me that people get more upset about offshoring when it is done by an offshore company, such as an Indian firm, rather than when it is done by IBM, Accenture, Capgemini, Steria etc.

OMG, IT services firm to pay UK taxes

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With all the shenanigans surrounding IT suppliers and their clever ways of reducing their taxes it was interesting read a press release announcing the formation of a joint venture between the government and Steria.

In its press notice the new company, known as Shared Services Connected Ltd (SSCL), makes a point of emphasizing that it will pay UK tax.

"Shared Services Connected Ltd will be a UK tax-paying business that will contribute to growth and job creation in this country," said the release. Really?

This will probably be inserted into every press release coming from any supplier that pays tax in the UK. It is a sad state of affairs when businesses have to put in writing that they p[ay UK tax and the fact that we see this as a bonus.

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