April 2014 Archives

Is the dirty end of IT outsourcing where the money is?

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Back in the day all IT services firms were talking about the importance of increasing margins by offering services on top of services. Many years ago when I worked in the IT channel press everybody was talking about how hardware was dead and no one could make money out of it.

But according to Sean Finnan, former head of EDS in the UK and more recently director of European IT services at IBM Global services it is the old fashion datacentre space where the money is today. Not even hardware just datacenter space.

This he says is the result of all the cheap finance that has been available lately. Businesses have borrowed money on low interest rates and build and kit out datacentres. They then rent it out for years to come.

And there is certainly demand for datacenter space with companies of all sizes requiring the more and more datacenter space. There are also an increasing number of cloud suppliers that need somewhere to host their software and make it available to customers.
Finnan who is now partner of an independent consulting company which focuses on IT outsourcing among other things, told me about the change.

"The value add bit is still important but the so called 'dirty end of the business' of running the datacentre is having a renaissance," said Finnan.

"Cheap credit has been used to drive extensive datacenter builds. This is not even hardware but space."

Finnan said that businesses are building datacentres on the doorstep of particular types of companies, such as retail and financial services hubs.

Steria and Sopra merge to get on more supplier lists

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Interesting story last week that two of France's IT service providers have come together in a "friendly" merger that will cut costs and probably more importantly make them more attractive to potential customers and get them on more multi-sourced IT lists.

The merger will create a group with €3.1bn sales, 35,000 staff and customers in 24 countries. It is also expected to cut operational costs by €62m a year.

According to the people in the industry that I have spoken to this is a reflection of the multi-sourced outsourcing environments at big companies today. As a consequence suppliers are trying to make sure that they are on "the list" of suppliers that businesses use.

Today businesses are increasingly drawing up lists of suppliers they will buy from and are splitting up the services they buy between different suppliers. Suppliers have to be on these lists to stand a chance.

When I ask about certain suppliers I often get the response from experts saying they are on the list or not as the case may be.

Steria is the better known brand in the UK, with sales worth over €700m, compared with Sopra's €80m UK sales. The coming together of Steria and Sopra will put the companies on more lists and enable them to offer more services to the lists.

Outsourcing advisor  Jean Louis Bravard said businesses and their third party advisors compile lists of suppliers that they will consider for projects. "With Steria and Sopra combined they will get to the €3bn revenue mark which will put them on more lists."
And that list is becoming attractive. In Europe and particularly the UK IT outsourcing is steaming ahead it seems.

The latest figures from ISG reveal that in the UK there were 59 contracts signed in the first quarter of 2014, worth €1bn. This represented a 66% increase in value compared to the same period a year ago and the highest number of contracts in a single quarter for three years.

So what do you need to get on "that list?"

Could Facebook/bank destroy the retail banking giants?

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I have written a few articles recently about how large internet companies like Google, Facebook and Twitter could be the biggest threat to retail banks for many of their services.

Facebook is moving into financial services. Read this article I wrote.  In the meantime banks are struggling with a lack of consumer confidence, pressure from regulators and creaking IT systems.

Why shouldn't a massive internet firms offer a current account for example? They have the technology and the customer trust. They already hold lots of customer details. Retail banks like RBS, lumbered with legacy IT, might end up being just B2B, leaving internet firms to offer retail banking services.

A good contact of mine in the banking sector believes major change is on the horizon.

He said: "I think Amazon, Ebay and Paypal will become banks soon."

"The dinosaur banks won't be around in 10 years except for business to business products. Cost base too high and service level too low combined with poor reputations and pressure from regulators, governments, public and media. The writing is on the wall, extinction is inevitable, but they are in denial at the moment."

I hope Amazon's pay as you go cloud is easier to cancel than Lovefilm

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Could cancelling Lovefilm subscriptions be the only blemish on Amazon's almost dreamlike customer services?

I recently wrote an article on this blog about Amazon Web Services. The article was about how IT services firms all want to be friends with AWS so they can build services on top of the raw computing power that AWS offers. Here is the post.

I then interviewed AWS's UK managing director and subsequently wrote this story.
It is an article of positives but I should have asked the managing director of AWS for some advice about cancelling my Lovefilm subscription (owned by Amazon).

I have used the "Lovefilm by post" service for years and it is a great service. Problem is my wife and I don't get time to watch the films. Last year I tried to cancel and gave up. I even sent an email to Lovefilm about this and had no response. It seemed inevitable that I would have to call them. I put it off and then ended up staying a member.

But having looked at the latest unwatched film sitting next to the DVD player unwatched I decided to try again. I failed again. I followed all the instructions and have not managed to do it.

I have to say I have never had the slightest inkling to complain about Amazon. We are huge users of Amazon for pretty much anything we need that can be bought online, but where is the Amazon perfect customer service when it comes to cancelling Lovefilm by Post?

As I said earlier I hope it is easier to unsubscribe from a cloud service.

Anybody else having the same problem?

Could IT arise from the Ukraine turmoil stronger?

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I was one told by someone that It suppliers have an attitude of "any news is good news." What they meant is if a journalist is writing about you in a reputable magazine it is good news even if the actual news isn't good.

In other words if you are on the journalists radar it is good news.

The troubles in Ukraine, a country still in limbo, have certainly increased the number of IT stories about the country in my inbox.

I was actually looking at Ukraine's IT services sector before the troubles really kicked off because a contact of mine, Sam Kingston, told me he was leaving T-Systems, where he was UK head, and joining Kiev based Ciklum as COO.

We also wrote an analysis about the country's IT sector back in 2011.

But there is nothing like a world event to bring focus on a nation. I hope it isn't all negative.
The Ukrainian IT sector is certainly pulling out the stops to get its message out loud and clear. Just this week I have received two separate press releases about how the Ukrainian IT industry is reacting to the political crisis.

The first was about the Ukrainian government and IT Industry's plan to position Ukraine as a European IT powerhouse by 2020. It has launched a working group.

"We wish to transform the Ukrainian economy from a resource-based economy to a knowledge-based economy" said Pavlo Sheremeta Minister of Economical Development and Trade.

The plan wants to create 100,000 new jobs in the IT sector by 2020 and generate over $10bn export revenues from IT services (mainly from EU and the US). It also wants a $1bn investment in modernizing the Ukrainian education system.

Then I had something sent to me about how despite the troubles Ukrainian IT Industry growing. The press release was about the launch of Ukrainian Information Technology (IT) Development Center.

Its founder Ihor Pidruchny hopes to raise awareness to promote the Ukrainian IT industry. It  will feature a social media campaign on Facebook, Twitter and LinkedIn to encourage interaction with Ukrainian IT talent. The initiative's mission is to let the world know that despite the current political situation, the Ukrainian IT industry is going strong.

Many in the IT services sector see countries in central and Eastern Europe as the main threat to India's offshore dominance. These nearshore destinations as they are known offer lower costs but close proximity. They also have a very strong IT skills base, party the legacy of the former Soviet Union.

Read this written in 2011: Outsourcing in the Ukraine: benefits and drawbacks

Also read: Report on Central and Eastern European nearshoring.

CIOs are in a state of flux but it's just cultural

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Technology is changing. The consumerisation of enterprise IT is putting pressure on CIOs to change how they operate.

So how do CIOs retain relevance in a world where business executives buy their own devices and expect to be able to connect to enterprise apps anytime, anyplace?

Steve Nice CTO at IT services firm Reconnix wrote this guest blog in the subject.

The Changing Role of the CIO

By Steve Nice

"The role of the CIO in 2014 is in a state of flux. CIOs are increasingly becoming overlooked, ignored or side-lined by their fellow c-suite executives, despite increasing reliance on technology, and therefore the IT department, to ensure the success of businesses the world over.

Reconnix recently commissioned research, the results of which highlighted how technological advancement will affect current CIOs. A striking 73 per cent of IT leaders were unsure that the CIOs of today will be the right people to lead IT within UK businesses in the next five. This begs the question why do CIOs feel so disenfranchised and detached from the decision making process?

Unsurprisingly it is those who are stuck in their ways and reluctant to drive change that feel most at risk. Gartner has stated that only 18% of CIOs are responsible for digital. This statistic is clearly far from ideal given the increasingly digital nature of the world.  A new generation of CIO, who drives the corporate culture away from digital deficiency, is helping re-address this. At the same time our research indicates 37% of today's IT leaders still believe that not enough is being done within their organisations or the industry to guarantee that future CIOs will have the skills needed to achieve business objectives.

Most importantly, with trends such as mobility, cloud collaboration and BYOX still on the rise CIOs must understand the ways that new technologies can, and do, help facilitate business efficiency and flexibility. Cloud computing services for example benefit the CIO, and by extension the business, by offering improved collaboration, as well as reducing the complexity of the IT infrastructure.

As much as the technology is important, it's also a question of engagement. If a CIO is stuck in their ways then they, and their business, will be left by the wayside whereas a forward thinking CIO, who engages with the board, will help produce real change. This is why it is essential for CIOs to be able to communicate effectively with other department leads in the organisation. The best communication is multi-directional - the CIO will need to take on board what other areas of the business need to succeed and interpret how to achieve these goals with technology solutions.

It's as much a cultural shift than anything else. If IT leaders approach their role as delivering 'Business as a Service', if they push an open, innovative agenda whilst persuading the board how change will benefit their aims, but also the wider aims of the business, then their position as a future CIO will be cemented."

High Performance Computing on demand attracts SME interest

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High performance computing in the cloud will make supercomputing a possibility for companies of all sizes.

I have written about the attraction of public clouds such as Amazon Web Services for raw computing power to support things like app dev   and here in this guest blog post from CEO Bull UK & Ireland, Andrew Carr, we learn how high-performance computing is moving from the realms of academia and into the SME.

High Performance Computing on demand attracts SME interest

By Andrew Carr,

"We are seeing a radical shift in the high-performance computing (HPC) market today. Traditionally, it has been dominated by academic institutions with the necessary funding to take on big supercomputer projects. This is changing fast.  Fuelled by an understanding of HPC's potential to reduce 'time to insight' and accelerate time-to-market, commercial organisations from engineering firms to geoscience companies are expressing interest in HPC. In the UK, the Government is playing its part too, recently announcing its intention to invest £270 million into research into quantum computing.

Talent and Technology - The Magic Formula for SMEs

The latest developments in the HPC market are now even bringing HPC into the orbit of small to medium-sized enterprises (SMEs). The emergence of a cloud-based approach to HPC - HPC-on-Demand is helping this previously neglected group harness the power of supercomputing for digital design and simulation and compete on a level playing field in this area with their larger enterprise peers.

This innovative approach enables SMEs to buy access to a supercomputing resource provided through the cloud on an as required basis rather than forcing them to make an upfront investment in a complex IT hardware implementation. They don't waste their investment by having infrastructure running idle. 

The key to the success of any HPC-on-Demand service, especially for SMEs is flexibility. The customer can choose everything from the operating system to the task scheduler and the size of the storage capacity used. They should also have the flexibility to choose from a range of different services whether their preference is for Infrastructure as a Service (IAAS), Platform as a Service (PAAS) or Software as a Service (SAAS).

The other area that SMEs need to address is talent. Skills shortages still represent an obstacle to HPC's long-term success - and SMEs with their limited resources often struggle more than their larger enterprise peers to attract the right level of graduate.

Today, many universities in the UK are developing courses that respond to industry's needs. Also, there remains a rich source of people, even among non-technology graduates with the potential to become excellent HPC consultants.  The question is how can industry attract and then develop this talent?

Some technology businesses are doing this themselves and building networks of HPC specialists to identify and develop people. Others are working with universities to provide post-grad and pre-grad education to introduce valuable skills to the market. SMEs can often tap into this emerging skills base by bringing in freelance consultants with the right level of expertise on an as required basis.

When they engage with recruiters to look for full time staff or freelance consultants, SMEs should look to deal with specialists that can spend time identifying what each is looking for. That means they may only deliver up two or three candidates for each available HPC spot but those candidates are more likely to fit the bill.

Delivering Enhanced Competitive Edge

Talent and technology are now coming together within SMEs, enabling them to profit from the new focus on HPC.  With expert freelance or full-time consulting staff increasingly in place, SMEs are benefiting from the ability of HPC-on-Demand to drive 'time to insight' - the time taken between the presentation of the problem and reaching an understanding of how to solve it.

By shortening this cycle, SMEs have the opportunity to cut the product development phase, increase innovation time and reduce time to market. HPC-on-Demand gives SMEs the opportunity to drive through innovation, understand more complex issues, achieve more accurate and predictable outcomes and make solutions or services development faster and more efficient.

Perhaps most importantly of all, HPC-on-Demand enables SMEs to compete on a much more even basis with their larger rivals than ever before. It's an unprecedented shift in the balance of power and with the market set to develop further in the future, it is likely to be a sustained one."

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About this Archive

This page is an archive of entries from April 2014 listed from newest to oldest.

March 2014 is the previous archive.

May 2014 is the next archive.

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