Industry news

Giant data centre in China's Hubei Province will provide cloud computing services to businesses and government agencies when completed in 2016

Big Blue will collaborate with local provider Range Technology Development on the 620,000 square metre facility in Langfang, Heibei Province. The data centre is expected to be completed by 2016, and will be used to provide cloud-based services to Chinese businesses and government departments. These will include disaster recovery, storage and mobile device management, IBM says.

"The data centre offers the world-class infrastructure capabilities and advanced network based services to support the business growth of our clients," said Zhou Chaonan, chairman of Range Technology Development, in a statement. "This initiative plays a critical role in the economic development of China in light of the pressing demand for managed hosting in the areas of cloud computing and mobile devices."

The agreement to build the data centre was agreed during Chinese Premier Hu Jintao's state visit to the US last week.

A source familiar with the matter told the Wall Street Journal that the data centre was anticipated to generate about $200 million in contract revenue for IBM over the next five years.

Figures published by IT research group IDC valued the market for data centre services in China at $667.1 million in 2009. This is forecast to grow by a further $1.9 billion over the next five years.

Source: http://www.information-age.com/channels/data-centre-and-it-infrastructure/news/1595988/ibm-to-build-largest-data-centre-in-asia.thtml

Predicting what will happen over the next 12 months is never easy - but here are the main topics I expect to be hitting the outsourcing headlines in 2011:

Public Eye

Perhaps the most predictable ‘prediction’, is the colossal challenge faced by the public sector.

The Coalition Government has attempted to redesign how our public services are run to make them more cost-effective. Its decentralisation of powers means that local authorities must engage with communities, social enterprise and the private sector more effectively. The Chancellor has also asked councils to question whether non-essential services can be provided by a third party, thus helping to sustain services but reduce costs.

The sector's ability to cut costs by traditional means, such as staff cuts, is limited, so sourcing and shared service arrangements will come only as a matter of course. Many councils have already begun materialising the cuts, and while Suffolk County Council seemed to be the first to take the hit, by slashing its £1.1bn budget by 30% through outsourcing almost all its services, I’m sure we will see many more following suit.

Cloudy visions

Cloud computing is the ‘IT’ word of the moment - literally!

Cloud brings together trends in both technology and IT operations and with both Business and IT decision-makers expecting to allocate 30% of their IT budgets to the Cloud over the next five years, it is going to demand new IT and business operating models and radically different sourcing mind-sets from CIOs and business function leaders.

This year we will continue to see amazing new offerings from companies that create services based upon cheap and scalable infrastructure. The ability to access business applications quicker, faster, cheaper and in a virtual business environment are the major drivers.

As awareness of the Cloud as a business platform increases and as the functioning feasibility of the Cloud is confirmed through increased adoption by businesses, the Cloud will serve as an additional driver for further growth in the outsourcing space.

Further, and as price points for entering the Cloud become more attractive, we should witness Service Providers increase Cloud based offerings - expanding existing delivery platforms.

Near-shore. On-shore. Best-shore?

2011 will see economic and political phenomena contributing to the growth of nearshoring and onshoring locations. This trend will continue to gather steam as it seems the ‘offshore train’ left the station several years back.

End users will be increasingly outsourcing to destinations in Central and Eastern Europe or even within own country. Factors that will be driving the choice of nearshore outsourcing in 2011 are:

•geographical proximity

•Strong R&D potential

•Strong language skills

World Domination: Made in China

Last, but not least, China’s outsourcing industry seems to be progressively closing the gap between itself and the perennial leader India. With the China slowly rearing its outsourcing head, it seems fairly obvious that the country will forge a ‘local’ presence and potentially purchase a major outsourcer in Europe. World domination is not quite happening just yet, but it’s unquestionably on the horizon.

One thing is for sure - 2011 is sure to be a busy year for everyone with a vested interest in outsourcing!

Dispelling the Myths of HR Outsourcing – Blog 2

Myth 1: HR outsourcing will save you large amounts of money. The truth is that most multi-process HR outsourcing is not done solely to save costs, but is instead aimed at accessing capabilities not available within the organisation – for example a new HR system or multi-lingual service centre that cannot be afforded in other ways.

Indeed, no one in the HR outsourcing business can claim credibly that it will save huge amounts of money. Headline numbers of 40% savings are unrealistic and overlook other costs, including severance costs, supplier management costs, the cost of exiting the contract at the end and the effect of currency and wage inflation.

Modest savings are available, especially for UK companies that are willing to move work to Asia, but when requirements become complicated, for example serving distributed populations around Europe with varying language requirements, savings become harder to achieve.

On the face of it, typical single digit savings for multinational contracts might not seem worth the pain of making outsourcing happen. But the headline numbers do not speak to the other major benefits that the client gets from outsourcing. These come from transforming the HR organisation’s capability, for example having access to much better HR data, and having a partner to provide transactional work, while the internal team concentrates on delivering HR’s strategic role in the business.

Myth 2: You shouldn’t outsource HR while transforming other areas. It is common for organisations to look at their transformation options across the range of their corporate functions at the same time. HR teams often have a supporting role in such transformations and sometimes argue that they shouldn’t be transformed at the same time. This is a valid concern because there is a lot to do.

But there is a risk in leaving HR out of a multi-functional transformation and outsourcing planning processes. Firstly, if HR is not included up front, the organisation may never get around to realising the benefits of transforming HR at all; and secondly, the HR director may discover that their own plans for transformation are incompatible with those of other functions. By failing to join in with the organisation’s transformation effort, HR can lose its voice and find a strategy has been imposed upon them. The worst result would see an HR team included in another department’s outsourcing deal or put in a shared service without being consulted properly.

In most cases there is more to gain by combining HR transformation activities with those in other functions, such as Finance and IT, bringing the best characteristics from each function into the change programme, helping to ensure that its objectives are followed through across the organisation.

Next week, Tim Palmer examines a further two myths of HR outsourcing and dispels some commonly-held yet erroneous beliefs.

Business software giant SAP has announced record results for Q4 2010. The results included the highest software sales and largest profits in the company's history.

Software revenue increased 35 per cent to €1.5bn (£1.3bn), as the number of deals made increased by 36 per cent on Q4 2009.

A figure of €933m (£807m) was added to operating expenditure as a result of the TomorrowNow case, in which Oracle successfully sued SAP for copyright infringement.

CFO Werner Brandt said: "We may consider an appeal [which could reduce that amount]. The amount of the jury award cannot be reliably measured at this time. So SAP has based the provision on the jury award, but will examine this again going forward."

Despite this additional expenditure, total operating expenditure was down 62 per cent year on year. Brandt said that the company had achieved more than €1.8bn (£1.5bn) in profit after tax.

The European region performed especially well in software sales and software-related services, growing by 20 per cent.

Co-CEO Bill McDermott said: "Emerging markets in Europe are growing fast. We are optimistic in Europe."

The company is bullish about its future, largely due to confidence in its technology innovations.

Co-CEO Jim Hagemann Snabe said: "We defined a winning strategy based on innovation, over consolidation. Not only can we go into new areas like on-demand, mobile and in-memory computing, but we also got our core business to grow again."

Snabe emphasised the importance of the acquisition of enterprise and mobile software provider Sybase to SAP's strength in the mobile market, in addition to the performance of enterprise software solution ByDesign, which he claimed will change the on-demand market.

He stated that there are more than 250 customers of the product now, but that figure is expected to grow beyond 1,000 by the end of the year.

He concluded: "In-memory computing is a true breakthrough. It's a complete re-thinking of the way data is stored, and allows you to scale to infinity in terms of speed and size of computing."

Source: http://www.computing.co.uk/ctg/news/1939553/software-vendor-sap-announces-profits

As government departments tighten their belts, senior figures in Whitehall have revealed how technology is becoming cheaper to run and delivering more efficient public services.

The government will exceed Treasury targets to cut £3.2bn from its annual IT spend by 2013-14, Dr Martin Read, board member of the Cabinet Office efficiency and reform group, told the Government ICT 2011 conference in London yesterday.

Read said the government was on course to trim about £1bn from its IT spend this financial year, following the renegotiation of contracts with its largest suppliers, most of which are tech vendors, and the scaling back and cutting of major IT projects.

Having reduced spend, Read said the key to further efficiencies lay with revising how the public sector uses technology: "The challenge is now to do the clever bit, approaching the way we do IT in a different way."

There was no shortage of suggestions for new ways government will "do IT" in future, ranging from using cloud computing to delivering public services online, and from using shared services to using more smaller suppliers.

Mark O'Neill, CIO for the Department for Culture, Media and Sport and the Department for Communities and Local Government (DCLG), said cloud computing will "disrupt" the way government uses IT by opening up access to online services capable of outperforming and undercutting bespoke alternatives from its suppliers.

"There is a fundamental disconnect between the IT available in the corporate space and what is available to people at home," he said.

"With [online finance management service] mint.com, you probably get better reporting than somebody running a multimillion-pound ERP system... with Skype faster and cheaper IP telephony than in a corporate environment."

O'Neill said new cloud services could help break the stranglehold major IT suppliers have on the public sector, where more than 60 per cent of government IT spend goes to six large vendors.

"It is about giving the existing systems-integrator model a good kicking," he said, adding: "Cloud gives us the ability to disaggregate the deals we have built."

Cloud isn't the only new tech being considered. O'Neill said if the DCLG got rid of every printer and gave each member of staff an Apple iPad instead, the money saved on printing costs would cover the cost of the iPads within 18 months.

Two departments that are already well underway with technology-led savings drives, the conference heard, are HM Revenue & Customs (HMRC) and the Ministry of Justice (MoJ).

HMRC manages one of the largest outsourced IT operations in Europe, the £750m-a-year Aspire contract that provides the vast majority of its IT services.

Since the contract began in 2004, it has been renegotiated to reduce costs to HMRC - with the latest settlement expected to cut annual costs by £161m from 2011-12.

Speaking at the conference, Mark Hall, deputy CIO of HMRC, said of those £161m savings, £62m had come from reinvesting money it had saved in new efficiency measures.

"We had a £49m opportunity... reinvested it in decommissioning and simplifying our estate, which in turn yielded us another £62m," said Hall.

"We are replacing 25,000 PCs and are replacing the whole printer estate across the enterprise without spending one pound of additional investment. All that money has been found from savings."

He said the HMRC policy of reinvesting savings would help it meet Treasury demands to cut its IT bill by a further £75m, on top of the £161m annual savings HMRC has already agreed.

Ultimately, HMRC plans to reduce the 600 or so systems it relies on to just 13 core tech platforms.

"We recognise we have to switch off and streamline legacy IT," said Hall.

"That is bringing us more simplified systems, more standardised systems and reflecting in technology that is allowing us to work better as a department."

At the MoJ, the department is breaking down business silos and moving towards shared service delivery.

MoJ CIO Andy Nelson said: "Today the MoJ runs 20 major datacentres, but why can't we run that workload out of two or three instead, and use one or two suppliers rather than the many we have today?

"In doing that we have greater standardisation, the joining up of applications and infrastructure, and that allows us to join systems across the MoJ."

Nelson said the department plans to build a single technology platform, likely to be Oracle E-Business Suite 12, that will run all finance, HR, payroll and procurement functions across the MoJ.

Parts of the MoJ will begin using the platform next year, ahead of a rollout across the department. The MoJ expects the move to the shared services platform will save £135m over 10 years.

"The approach will be that services should be provided [centrally] through corporate services, unless proven to be provided better locally," Nelson said.

"That's a very different position from where we've come from."

Source: http://www.silicon.com/management/public-sector/2011/01/26/cloud-and-ipads-identified-as-secrets-of-leaner-government-39746863/1/

With businesses subject to strict regulations about where data is held and how it is moved, cloud computing has been off the agenda for many organisations because most services are hosted outside the UK.

Rackspace has operated European-based datacentres for their hosting services for some time but has lacked cloud capabilities based in the region. The company has more than 100,000 customers using its cloud services globally.

By locating cloud infrastructure in the UK, Rackspace will provide cloud-based storage and processing to customers without data leaving the country, something analysts believe is an important move.

"Geographical location of data is important. A lot of the US vendors don't appreciate that having a cloud-based infrastructure that's located geographically in the US means that almost all European countries have data that they can't possibly shift there legally," Freeform Dynamics analyst Tony Lock told silicon.com.

Lock added that the UK-based cloud infrastructure is "an essential first step" for Rackspace if it is to attract more customers from within the European Union.

By bringing its cloud infrastructure to the UK, Rackspace hopes to overcome concerns about the geographical location of data

(Image credit: Shutterstock)

"It makes it easier to get over some of the inhibitors that people put up there. It's definitely good from that point of view. There are lots of inhibitors to cloud adoption - this removes one of them for UK-based organisations," he said.

Quocirca analyst and director Bob Tarzey agrees that the launch is important for Rackspace, as it will give it an advantage over rivals.

"Rackspace is positioning itself as a global cloud service provider. To do this effectively, it needs to have global infrastructure and offer service-level agreements that data will be managed and stored within certain geographic limits. Its ability to do this will give it another value-add over the wholesale cloud infrastructure vendors, like Amazon and Google," he told silicon.com.

However, Tarzey added that Rackspace will face stiff competition from local hosting providers, such as Attenda and Savvis, which already have proven cloud-based systems in the UK.

The services available in Rackspace's UK cloud infrastructure include the Cloud Files storage service and Cloud Server computer processing technology, which can support Windows and a number of Linux distributions.

With management an important element in cloud computing, Rackspace has integrated the Cloudkick infrastructure-management dashboard technology into these cloud services, allowing customers to

manage applications run in both the US and UK on a single interface.

"Our UK offering allows companies to avoid offshore data issues and weighty upfront capital investments, which helps them become more strategically agile from a business perspective," Rackspace president and CEO Lanham Napier said in a statement.

He added that the UK-based cloud infrastructure will reduce latency for European companies using Rackspace cloud services compared with when the services were hosted in the US.

However, Rackspace and other cloud providers still have issues to overcome to drive uptake of cloud services.

Freeform Dynamics' Lock cited the need for businesses to know if data stays in Europe in the event of the UK-based cloud infrastructure's failure, and whether it could be released as part of the Patriot Act, to which Rackspace would be subject as a US-based company.

The company will also need to inform customers about how they can extract data from cloud services if they decide to move to another provider or bring the data back inhouse.

"Getting into cloud is easy; getting out of cloud could be difficult. Therefore Rackspace has got to show people that it's got a way to move off if you want to. People want to know, 'If I move to a particular supplier, how do I move out again if I want to change?'" Lock said.

Another potential improvement is for the service-level agreements for cloud services to be brought up to the same standard as hosted services, which would build business confidence in the reliability of cloud computing.

Source: http://www.silicon.com/technology/software/2011/01/21/rackspace-uk-cloud-aims-to-allay-data-concerns-39746849/

Cloud computing is an important and growing platform for Instant-On Enterprises, where everything and everyone is connected.

While cloud computing delivers benefits such as faster deployment of new services, reduction in IT headcount and a pay-as-you-go model, it has traditionally lacked in areas that enterprises need, such as security, availability and ease of integration.

The new HP Hybrid Delivery solutions provide the benefits of enterprise-grade cloud computing, while meeting the specific needs of businesses and governments.

“Cloud computing is going mainstream and HP is leading the way,” said Ann Livermore, executive vice president, HP Enterprise Business. “HP has the enterprise experience, breadth of portfolio and global service delivery organization to lead our clients through this transformation.”

HP Hybrid Delivery cloud solutions: Cloud for the enterprise

HP Enterprise Cloud Services-Compute delivers “private cloud as a service” from HP’s state-of-the-art data centers. Governed by specified policies for service, performance, security and privacy, it provides clients with rapidly deployed, secure computing with scalable IT capacity. Built on HP’s leadership in Converged Infrastructure and the breadth of HP’s software portfolio for automation and management, it delivers all the resources necessary to access a hybrid private cloud.

HP CloudSystem is the most complete, integrated system to build, manage and consume services across private, public and hybrid cloud environments. It combines the strength of HP’s Converged Infrastructure with the established leadership of HP Cloud Service Automation software to deliver unified security, governance and compliance across applications, as well as physical and virtual infrastructure.

HP CloudSystem also supports HP Cloud Maps, an industry first that provides preconfigured catalog objects to automatically provision the optimized application and infrastructure resources. HP CloudSystem enables new cloud services to be up and running in minutes.

HP Cloud Discovery Workshop helps businesses and governments develop smart strategies and the optimal path for leveraging the cloud. The one- or two-day workshops have multiple modules that cover a wide range of topics, including business model implications, security and identifying the right services for the cloud. The workshops are led by seasoned HP professionals with experience and expertise in global cloud deployments.

HP Financial Services are available for clients building private cloud deployments who want to minimize capital requirements. HP can combine its cloud offerings with financial offerings from HP Financial Services helps clients maximize their financial goals in parallel with their pursuit of advanced technologies.

Around 80% of government departments are locked into outsourcing contracts, according to analysis of government contracts from price measurement firm ProBenchmark.

This means the government's push for savings in many cases is unrealistic, said ProBenchmark sales director Simon Scarrott. "These are 3rd and 4th generation contracts where professional procurement have run expensive multi-tender processes, which has taken the majority of the 'fat' out of the charges," he said.

The total cost of re-tendering in the current round of public sector cuts could be over £200 million, said the analysis.

In many cases the cost of this process to the government and to the vendors involved were collectively higher than the short to midterm savings, said Scarrott.

"If a deal is close to market price and fit for purpose then informed re-negotiations could bring a fresh, invigorated and effective deal in far less time (approximately 80% faster) and for a fraction of the cost (to all parties)", he said.

Source: http://www.computerweekly.com/Articles/2011/01/24/245058/Government-departments-locked-into-outsourcing-contracts.htm

The VPN provides Morgan Crucible with a single network and platform to deliver voice, data, video and applications. It is able to use a single infrastructure to connect branch offices, headquarters, remote users and third parties such as suppliers and customers.

Morgan Crucible highlight that these services enable the deployment of applications across more than 80 sites in Europe, Middle East, Africa, Asia Pacific, Canada, Latin America and the US, whilst maintaining seamless communications across the entire company.

"As a global company, protecting our business-critical infrastructure is one of our top priorities," said Kevin Dangerfield, chief financial officer for Morgan Crucible.

"AT&T has been committed to delivering a solution that is not only highly-reliable but also enhances productivity and streamlines our operations across the globe".

By outsourcing its online infrastructure, the company claims it has been able to extend the reach of its IT team and as a result deliver additional value to the business.

Further to this, Morgan Crucible is employing an application traffic analyser service. It is hoped that by doing this it will be able to better monitor the network performance and avoid any system irregularities across its global sites.

This is well known territory for AT&T who as an international network operator uses a traffic analyser on a far greater scale at their Global Network Operations Centre in New Jersey. Similarly, this picks up any network nodes that are experiencing anomalies or unusual amounts of increased traffic.

"A global integrated communications network is essential for an industry leader like Morgan Crucible," said Dave Langhorn, AT&T sales centre vice president for the UK.

"Our services and solutions can support and improve their competitive advantage and deliver consistent global architecture to allow them to communicate efficiently and cost effectively".

Tourvest Duty Free (TDF) has won the inflight retail contract for flagship carrier British Airways. Three operators submitted bids for the contract—Alpha Flight, Duty Free Air and Ship Supply (DFASS) and TDF—after an invitation to tender was issued by the airline in the first half of last year.

A memo to suppliers from BA Inflight Retail stated: “It is BA’s intention to outsource inflight retail to Tourvest in [the second half] of this year. As a result, product listings commencing or ongoing at July 1 will be jointly reviewed by BA and Tourvest. Therefore, listings that commence May 1 can only be guaranteed for May and June.”

An official statement from BA said: “We are looking to reduce the complexity and cost of our inflight retail operation and believe outsourcing it to another company will deliver benefits both to our customers and to ourselves. We expect to complete the switch in the second half of 2011. In the meantime there will be no change to what our customers experience on board.”

The tender was issued in the first half of last year as BA announced record annual losses of £531m ($850m), the worst since the group was privatised in 1987. Since then it has made a remarkable recovery, recording a profit of £158m ($253m) in the six months to September 2010 and reversing a loss of £292m ($467) for the same period the year before. The growth was driven by higher pricing driven by long-haul premium traffic rather than growth in passenger numbers, according to analysts.

Source: http://www.dfnionline.com/article/British-Airways-to-outsource-inflight-retail-programme-1860779.html