2013 review

Top 10 IT outsourcing stories of 2013

Karl Flinders

Controversy and outsourcing are never far apart. While the controversy surrounding IT outsourcing is a mere trifle compared with the shenanigans of Serco and G4S, which were accused of overcharging by the government, it is never far from the front pages of the IT press.

The UK government has shaken the industry with its intent to break the oligopoly of large IT services firms that dominate the sector. The government cannot be accused of not making its point as there seems to have been a continuous flow of reports backing up its claim that the taxpayer is not getting value from money from the oligopoly.

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The government has also begun to look East. Suppliers from India are now gaining significant public sector deals. This comes at a good time for Indian suppliers, as growth is slow with traditional time and material models becoming exhausted. But the Indians have reacted and things are changing.

And it is not just the Indian suppliers that are changing; the structure of contracts is being revamped to meet a new reality. Contracts are being torn up mid-term and rewritten as suppliers fear customers will jump ship at the end.

It is not just the Indian suppliers that are reinventing themselves, with US giants such as Dell and HP trying to navigate in unknown territory.

Here are 10 articles that tell some of the stories of the IT outsourcing industry in 2013:

1. OFT launches investigation into public sector IT supply

The Office of Fair Trading (OFT) is launching a formal investigation into the market for supplying IT and communications to the public sector. The OFT intends to “examine whether competition in this sector could work better and the reasons why it may not be working as well as it could”.

2. National Audit Office reports concerns over government supplier dominance

The National Audit Office (NAO) has reported that £6.6bn was spent by the public sector on four outsourced service providers, including providers of IT services.

3. How will Indian IT services firms evolve and prosper?

Indian IT services firms need to reshape their businesses if they are to continue to grow at the rates experienced over the past decade, as traditional markets and service offerings reach maturity.

4. TCS establishes UK centre as part of Home Office contract

Tata Consultancy Services (TCS) has opened a delivery centre in Liverpool to ensure it complies with government rules on security as part of a contract with the Home Office.  

5. Businesses must prepare for IT services firms bearing renegotiation gifts

Renegotiations and renewals inevitably bring better terms, but could businesses be missing out on much more by focusing on cost? Contract renewals and renegotiations are currently propping up the IT services sector as battle-hardened businesses strive to get more for less out of their existing suppliers.

6. Renegotiating outsourcing contracts to fit new reality

Organisations in many sectors seek to renew the terms in their contractual agreements as they adjust to the economic climate. IT outsourcing is going through a period of major change as the result of an economic downturn of extreme proportions alongside major advances in technology.

7. Procter & Gamble could follow General Motors’ move in-house

US manufacturing giant Procter & Gamble is reportedly considering moving outsourced work in-house in a bid to retain control of IT that can affect its competitiveness.

8. Insourcing + outsourcing - outsourcing = backsourcing: the academic's view

There have been a few high-profile examples of big businesses dumping their IT service partners to start doing it themselves. General Motors' decision to take work in-house from HP is a good example.

9. Dell shareholders decide whether to go private as services arm tells Investigating Outsourcing about its strategy

As we all know, Michael Dell wanted to take the company private so he could move the business away from selling PCs to focus on services. With commoditisation, intense competition and falling margins, the hardware business, particularly PCs, is a tough one.

10. Can Dell learn from HP's mistakes in the IT services sector or will Ross Perot be the only winner?

When HP acquired EDS it had a plan to become a global leader in IT services. HP realised that the future was not in the PC and server markets where commoditisation and cut-throat competition was pushing prices down.


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