Industry news

Hampshire County Council aims to shave £900,000 off its annual IT bill by reorganising its IT services unit and reducing contract costs.

The cuts come as part of the council’s efforts to deal with a £55m hole in its 2011/12 budget. The council also plans to axe 1,200 jobs as part of its cost cutting.

"There can be no debate over whether or not we make cuts, the withdrawal of government funding to meet the national debt leaves us without that choice,” said Ken Thornber, leader of Hampshire County Council.

As part of the IT savings, the council will merge its Culture, Communities and Rural Affairs department with its Property, Business, Regulatory Services and IT department.

It also hopes to improve its productivity through better use of IT. It expects to be able to make a saving of £1m through improving its support and administration functions and enabling more employee self-service.

Recently, Hampshire teamed up with Dorset County Council to develop a joint ICT strategy.

That collaboration was expected to save Hampshire somewhere between £2m and £5m in IT costs over the next three years.

As part of the shared services arrangement, the councils share computer centres, business continuity, technical expertise and technical services. A joint management board was established to explore possible savings on major IT systems, shared contracts and procurement and a joint support and service desk.

"In order to meet the current and future financial challenges we have undertaken a comprehensive review of how the council operates and of all its services and we are now embarking on a change programme that is of an unprecedented scale,” added Thornber.

Source: http://www.computing.co.uk/ctg/news/1938184/hampshire-council-aims-gbp900-savings

Accenture and Carlsberg have agreed to a five-year contract for the provision of application services to the European operations of Carlsberg Breweries A/S.

Under the terms of the agreement, Accenture will support a range of application services in a co-sourcing agreement managed by Carlsberg. The services will support Carlsberg’s “Business Standardisation Programme” which aims to enable future growth through the introduction of common business processes, and an enhanced ability to share best practices across its European operations.

Application services will be delivered in areas such as incident management and problem management, and a 7-step improvement process for incident/problem management. In addition, Accenture will support service validation, test management and request fulfillment.

The contract complements an agreement announced in April 2009 by Accenture and Carlsberg Breweries A/S, under which Accenture supports Carlsberg's SAP and Microsoft software implementations in Europe, and the delivery of a common enterprise resource planning platform.

“The choice of Accenture to help us support BSP reflects their proven experience in delivering similar application services in the consumer products industry and the flexibility it offers in helping us to achieve the aims of our BSP,” said Kenneth Egelund Schmidt, Vice President CIO at Carlsberg A/S.

“This contract underlines Carlsberg’s drive for optimization and continuous improvement,” said Henrik Rasmussen, senior executive in Accenture’s Consumer Goods and Services practice. “The services to be implemented under this contract will help Carlsberg to benefit from a standardized delivery of application services, which is crucial to achieving high performance.”

The two companies will work together to deliver the services through Accenture’s Global Delivery Network, using one of Accenture’s centers in Hyderabad, India, and local service management at Carlsberg in Copenhagen, Denmark.

The application services that will be delivered will be based on the Information Technology Infrastructure Library (ITIL) version 3, which represents a first for the consumer products industry. ITIL is a series of documents, originally created by the Office of Government Commerce, a governmental department in United Kingdom, to help implement an efficient framework for IT Service Management.

IBM says its net income and revenue were stronger than expected in the fourth quarter amid a pickup in services signings, a key part of IBM's revenue stream and an area of concern for some analysts.

Net income rose 9 percent to $5.26 billion, or $4.24 per share, topping analysts' projections for $4.08 per share. In the year-ago period, IBM earned $4.81 billion, or $3.65 per share.

Revenue rose 6 percent to $29.02 billion. Analysts expected $28.18 billion.

Many analysts have been worried about a drop in IBM's outsourcing business in recent quarters as rivals gained ground. In the latest period, IBM's signings of new outsourcing contracts rose 24 percent. The company's total backlog of services deals was $142 billion.

Source: http://newsok.com/ibms-net-tops-street-outsourcing-deals-pick-up/article/feed/236024#ixzz1BTQiYEwh

Chinese education and comms

The theoretical attractions of outsourcing to China are obvious: a large population of capable graduates, excellent communications and transport infrastructure, and a supportive government keen to promote foreign investment. But are those factors enough in the increasingly congested offshoring marketplace?

To date, global firms have tapped into Chinese outsourcing by focusing on regional demand. For example, Capgemini's foundation client for its Guangzhou operations a decade ago was Dairy Farm, the Hong Kong-based, pan-Asian retailer that operates through brands such as Ikea and 7-Eleven.

To this type of operation were added global firms with extensive activities in Asia, such as Unilever and Syngenta, plus a number of large Chinese firms - but the picture has remained fundamentally regional.

The pattern applies equally to other global outsourcers such as Accenture, Genpact, or Infosys, as well as China-centric organisations such as Bleum, and M&Y Global Services. In all cases the strategy has been one of targeting Chinese or global organisations looking for...

But in Capgemini's new centre, there was also something new on display: Chinese resources processing for US and European operations. There was no fanfare for this development. Like other outsourcers, Capgemini's focus is on giving clients access to a global network of centres, in which the location of delivery becomes almost irrelevant.

Nevertheless, it is happening. BPO and IT outsourcing are being carried out in China for global operations, and that means China is finally becoming an option in the global services marketplace.

Price comparison with India

Just how important a role it will play will depend on several factors, not least price. If outsourcers can offer their China services at or near the price of offshoring to the subcontinent, China will emerge as the de facto global outsourcing alternative to India.

But if outsourcing to China is more expensive than the competition, it will need to find a niche specialism to attract global business - such as a focus on specific technologies or business processes. If this is the case, it is not yet clear in IT or BPO terms what these specialisms would be.

Equally, the depth of China's language skills is unproven. Official figures may claim 300 million English speakers in China but the reality is that the number of fluent speakers makes up a small fraction of that figure. The impressive line-up of English speakers fielded by new delivery centres, such as Nanhai, could represent the crème de la crème, rather than a ready reservoir of foreign language talent.

Because of this relatively unproven linguistic dimension, it seems global sourcing to China in the short term will focus on non-voice work, such as development and transactional tasks that do not require a high level of spoken foreign language skills.

Issues of security, politics and ethics

Finally, there are lingering questions about security, politics and ethics, but these do not appear likely to derail China's emergence as a global sourcing location. Concerns about intellectual property haven't stopped the world's largest technology firms, such as Microsoft and SAP, investing in major R&D centres in China. IP security appears to be a risk organisations can effectively manage.

Recent controversies, such as those regarding Google and the Nobel Peace Prize, remind Western businesses and politicians that China is different. But such controversies have not stopped and will not stop the flow of traffic to the East.

China is, of course, a magnet for hyperbole. It is easy to be seduced by the scale of its resources and ambition. But the underlying fundamentals are in place.

With its world-class infrastructure, work ethic and maturing talent pool, it now seems a question of when - rather than if - China will emerge as a key global back-office location. The evidence is mounting. China is coming to an outsourcing deal near you soon.

Paul Morrison leads Alsbridge's BPO and shared services advisory practice

Source: http://www.silicon.com/management/cio-insights/2011/01/17/outsourcing-is-china-the-worlds-new-back-office-39746820/

India still leads the global IT outsourcing market and its advantages over other regions are still distinct. The Indian domestic market has undergone a transformation over the past decade — rising from the periphery to emerge as a viable, high-potential opportunity for the country's IT-BPO sector.

Labour or cost arbitrage does not drive the domestic BPO market like in the global outsourcing market. It's the need to scale rapidly, greater focus on core competencies , enhanced productivity, heightened competition and reduced time to market that is driving domestic demand.

While, the large enterprises with substantial resources have always outsourced a part of their operations, the mid-size and small organisations have been unable to explore this opportunity. With the increasing global competition, the small and mid-sized businesses are being forced to restructure their operations.

To remain at the helm of innovation and be competitive, SMBs are looking at focusing on their competencies and quality rather than spending time and money on backhand operations verticals in which they lack expertise.

The growing competition and market needs are driving companies to search for experts to offload functions beyond their know-how. However, there now seems to be shift in the services that are outsourced. The outsourced services are now the areas that require experts. This is not only helping organisations save time and gain value for money but also helping them scale up by capitalising on their proficiency.

The BPO industry today stands at an interesting inflection point. Service providers are now adding the knowledge component into the mix in an attempt to deliver greater value. Top players have improved by listening, learning and following client's 'real' requirements. They make it a point to 'hear' the real problems and follow them to develop new solutions . The knowledge component is enabling a more value-added role, directly impacting the client's business objectives.

With greater buyer awareness about offshoring knowledge services and increasing service provider capabilities, the share of knowledge services in the overall market will continue to grow. At the same time, the nature of 'knowledge' services is quite distinct from traditional IT and BPO, and viewing these merely as additional services may not work. Unique practices, processes and formulas are developed after thoroughly following client requirements.

Outcoming is the continuous process of following client requirement intelligently and delivering exactly what the client wants.

Outcoming has added a new dimension to outsourcing. Trends towards open standards, interoperability and consolidation have opened up a new set of possibilities and challenges. In the hardware industry, these trends are instantiated in virtualisation, cloud computing and 'blades'.

In the software industry, these trends show up in software as a service (SaaS), service-oriented architecture (SOA), open source and 'composite applications' . In IT services, these trends manifest in the push towards shared services, 'deskilling' and global sourcing.

For the incumbent vendors in these categories, it points towards M&A and consolidation, the blurring of traditional product categories, a confusing world of 'co-opetition' , and too often, threats of commoditisation.

Outcoming is at the intersection of the convergence of these historical trends and enterprising, demanding customers that see the potential of a new set of solutions. There are diverse aspects of the new outcoming market applicable to the IT/BPO industries.

Solve hard end-to-end operational problems

Don't slice up the problem into convenient chunks and take responsibility for part of it. Outcoming requires the seamless blending of software, hardware, research , consulting, analytics, process knowledge, financing and operations.

It is not a question of automation vs people. The answer is to solve the problem efficiently — sometimes combining a leading-edge research asset with low-cost manual data entry or an artificial intelligence algorithm packaged in the same project with a third-party courier service. Sometimes, for an MNC, it involves 'stretching' core competencies and working with local partners in non-traditional categories to complete the value chain.

Think small

Cross-functional solutions should not be 'mega-projects' or over-engineered . Bring together IT, consulting, industry expertise, research and operations in small, focused packages aligned to solve precisely the specific end-to-end operational challenge. High value is created by thinking small.

Output vs input focus

Value is migrating from detailed BoM-oriented contracts filled with input requirements designed by technical specialists into macro-driven , CEO-oriented outcome-aligned SLAs.

Shared risk for applied innovation

Overengineering or 'bleeding-edge' technology risk. The world is focused on innovation , but vendors need to rethink what it means. It is not shipping over the latest chunk of code from the research lab; rather it is delivering the benefit of that innovation and carrying the risk of applying it.

We learn together

The world isn't flat. It is local. There is no such thing as 'global expertise' — rather there is the extraordinarily challenging balance of combining true world-class skill and experience with local market insight and requirements.

eBusiness on demand

The delivery of IT/ ops/consulting in an integrated package aligned to the client business model. An enterprise whose business processes — integrated end-to-end across the company and with key partners, suppliers and customers — can respond with speed to any customer demand or market opportunity.

Over the last decade, India Inc has developed and exported several new management paradigms — offshoring, bottom-of-pyramid, world-is-flat, and jugaad-style creativity. The newest one to be added to the list is outcoming. The dynamics of outsourcing are changing rapidly.

Consolidation among outsourcing companies, creation of larger providers offering a broader range of services and emergence of niche providers is making outcoming a 'strategic imperative' of outsourcing . Outcoming is creating a big opportunity for India, which is well placed to capture a proportion of future growth.

Source: http://www.sourcingmag.com/offsite.asp?A=Fr&Url=http://timesofindia.indiatimes.com/tech/careers/job-trends/Indian-outsourcing-industry-on-the-cusp-of-change/articleshow/7306544.cms

Strong demand for smartphones, particularly in the United States, is helping Carphone Warehouse overcome tough economic conditions, it said as it nudged up its full-year earnings forecast.

Chief executive Roger Taylor told Reuters on Tuesday sales of mobile phones based on Google's Android software had been the highlight of Christmas trading, while smartphones were becoming more popular in the market for prepay phones, which augured well for future growth.

"A good product cycle is outweighing the economic headwinds," he said, adding interest in tablet computers like Apple's iPad could also sustain demand this year.

Retailers across Europe and the United States are worried rising commodity prices and steps to cut government debt, like higher taxes, could weigh heavily on consumers.

However, firms selling must-have products continue to thrive, as highlighted by luxury group Burberry, which also nudged up full-year earnings expectations on Tuesday.

Carphone, Europe's biggest mobile phone retailer, said earnings for the year ending March would be at the top end of a range of 13.5 to 14.0 pence a share.

The group, which owns 50 percent of a venture with U.S. electricals retailer Best Buy as well as a 47.5 percent stake in Virgin Mobile France, said revenues at European stores open at least a year rose 0.7 percent in the 13 weeks to January 1, its fiscal third quarter.

That was just below analysts' average forecast of a 1 percent rise, according to a company poll, with a 2.3 percent increase in Britain offset by a weaker performance elsewhere in Europe, particularly in Spain.

Connections at U.S. joint venture Best Buy Mobile were up 33.6 percent, above the forecast increase of 25 percent, and Carphone said its share of full-year profit from that business would be 90-100 million pounds, compared with its previous estimate of 85-95 million.

"Carphone remains our top pick in mid-cap retail, combining high growth, zero capex U.S. expansion through Best Buy Mobile and a stable category-killer European core benefitting from an exceptionally strong smartphone and tablet cycle," Citi analysts said in a research note.

At 9:33 a.m. Carphone shares, which have more than trebled in value since demerging from telecoms group TalkTalk in March, were up 0.1 percent at 385.5 pence, valuing the business at about 1.8 billion pounds.

Carphone said the six Best Buy megastores in Britain, which are also part of the venture with its U.S. partner, were producing encouraging results, though it gave no details.

The megastores face stiff competition from established electrical goods groups Dixons and Kesa.

Virgin Mobile France added a net 74,000 customers in the third quarter, Carphone added.

Source: http://uk.reuters.com/article/idUKTRE70H0XX20110118

Tata Consultancy Services (TCS), India's largest outsourcer, reported on Monday strong growth in revenue and profit for the quarter ended 31 December.

TCS' revenue for the quarter was $2.14 billion (£1.34 billion), up by 31 percent from the same quarter in the previous year. Net profit of $517 million for the quarter was up 35 percent. The results are in accordance with US accounting rules.

Based on discussions with customers, the company expects its customers' IT spend to remain the same or improve, TCS CEO and managing director N. Chandrasekaran said at a news conference in Mumbai. TCS and other Indian outsourcers derive most of their revenue from North America and Europe.

The results from TCS follow similar strong results from Infosys Technologies, India's second-largest outsourcer. Infosys said last week that revenue was up by 28.7 percent from the same quarter in the previous year, while net profit was up by 18.9 percent.

There is, however, still uncertainty for Indian outsourcers on a number of fronts. The industry has not yet seen a return to growth that is guaranteed to be long term, said Siddharth Pai, a partner at TPI, a sourcing data and advisory firm.

The return to growth has been confined to a few large Indian outsourcers, who are mainly benefiting from a surge in pent-up demand after the recession, and because more work is now moving offshore, Pai said. The Indian outsourcing industry at large has not reached the high growth levels before the recession, he added.

The weak economic recovery in the US and the sovereign debt crisis in Europe could still impact the growth of the offshore industry, Infosys cautioned. Chandrasekaran said the macroeconomic environment was still "dynamic".

Costs are also increasing for Indian outsourcers as they compete for staff with one another and the Indian subsidiaries of multinational services companies such as IBM, Accenture, and Hewlett-Packard. TCS for example added 12,497 staff in the quarter and expects to add between 12,000 to 15,000 staff in the next quarter.

To keep their costs low, Indian outsourcers are focusing more on campus hires, said Jimit Arora, research director at Everest Group.

The appreciation of the Indian rupee against the U.S. dollar and the U.K. pound has also affected margins, as it affected the revenue in rupees for these companies. However despite these pressures, TCS was able to grow its margins, said Chief Financial Officer S. Mahalingam.

TCS added 35 new clients in the quarter.

Source: http://www.computerworlduk.com/news/outsourcing/3257080/tatas-revenue-profits-soar-despite-uncertain-environment/

The Office of the National Coordinator for Health Information Technology awarded Accenture a two-year contract to help identify the standards and specifications that facilitate the exchange of data across the evolving healthcare system.

Under the contract, Accenture will work with ONC to develop and manage business scenarios called “use cases” that ONC will use to help determine the standards and IT systems necessary for peak operation. In cooperation with ONC and other healthcare stakeholders, Accenture will help identify real-world needs, prioritize them through a governance process, and create explicit documentation of the use cases, and provide information for development of computer system requirements and technical specifications that enable interoperability – the seamless exchange of information among diverse providers and systems.

“Standards that all stakeholders in the connected health environment can adopt are essential to achieving the goals of the HITECH legislation and will help drive down costs and increase the quality of and access to healthcare,” said Rick Ratliff, global managing director, Accenture’s Connected Health IT Solutions. “Those standards will pave the way for fully integrated, patient-centric healthcare­ that focuses on prevention and wellness.”

The use cases will focus on patient-related information, such as ensuring that care providers’ certified electronic medical records systems can handle patient requests for clinical summaries. Accenture also will create a comprehensive, sustainable process for ONC’s standards and interoperability framework, as well as use-cases as part of the framework.

ONC’s framework will establish a set of tools, processes and reusable components that enable the refinement and increased adoption of interoperability standards. Interoperability is critical to the expansion of the secure, electronic movement and use of health information across healthcare networks. The framework also supports future standards for regional health information organizations, state-wide health information exchanges and the National Health Information Network.

Hi-tech manufacturers are Britain's most confident companies, research reveals today, with almost half planning recruitment sprees this year.

The research, commissioned by the US-based conglomerate General Electric, suggests that 71 per cent of hi-tech businesses are optimistic that their performance will improve over the next 12 months, even though a quarter of such companies posted double-digit growth in 2010.

The sector is also poised to deliver a much-needed boost to the employment market, with 48 per cent of companies pledging to take on staff during 2011, with plans to expand their workforces by an average of 5.7 per cent.

Four-fifths of companies in hi-tech industries rely on exports for at least some of their orders. But most are confident about the prospects for demand from overseas, predicting a 12.3 per cent increase in orders from overseas buyers. Domestic demand, by contrast, is expected to rise by 5.8 per cent.

While some companies remain nervous about the economic outlook, particularly with commodity prices expected to add to operating costs, the research will boost the Government, which has made the promotion of hi-tech manufacturing a priority as it works to rebalance the economy.

But the research also suggests that more help from the Coalition could lift the sector, with only a third saying that the conditions for hi-tech manufacturing in Britain are positive.

Nevertheless, Mark Elborne, the president and chief executive of GE in the UK, said hi-tech manufacturers were much more confident than many other businesses.

"Our research shows a vibrant and positive sector that can help revitalise the UK economy over the next few years," Mr Elborne added. "Many of those surveyed had a positive 2010 and feel confident about 2011, particularly when discussing the potential in export markets."

Source: http://www.independent.co.uk/news/business/news/confident-tech-sector-set-to-boost-employment-2186257.html

Jeffrey Saut simply looks up to remind himself which tech stocks will be hot in 2011.

Saut, chief investment strategist for brokerage Raymond James, says he is betting on companies that are leaders in cloud computing -- using Internet technology to move computers and information away from desktops and into remote data centers.

Despite the surge in cloud computing stock prices last year, investors are expecting an encore in 2011 as the revenue growth for these companies rises faster than the broader technology landscape.

Will Danoff, who manages the $72 billion Fidelity Contrafund, is among the most closely watched investors who has embraced the cloud. He says that the cloud is one of his investing strategies for 2011 because he expects companies that sell into the sector to outperform the broader market.

IT research firm Gartner estimates that companies that sell software as a cloud-based service will see revenue growth accelerate this year, climbing 16.2 percent. Last year sales grew an estimated 15.7 percent.

The sector is drawing attention because its sales are revving up just as growth in overall technology spending is on the decline. Gartner sees worldwide tech spending growth slowing to 5.1 percent this year, down from 5.4 percent in 2010.

Buyout speculation on cloud computing leaders sent valuations in the sector to nosebleed levels last year. Cloud pioneer Salesforce.com Inc trades at 122 times next year's average forecast for earnings per share, compared to a ratio of 13 times for tech blue-chip IBM.

Oracle Corp Chief Executive Larry Ellison last year told Reuters that he looked at buying Salesforce, but that its CEO, Marc Benioff, wanted too much money for the software maker.

Reuters also learned on Wednesday Ultimate Software Group Inc could be the next to go on the block. Ultimate said it has "no present intention" to sell itself.

MOMENTUM PLAY

Some investors are nervous about the high valuations commanded by cloud computing companies, whose volatile trading has led to precipitous declines on some days last year.

But there is simply too much momentum behind the sector to falter this year. "It will probably still emerge as a leader," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

The optimism on the sector is underpinned by the belief that companies behind them are fundamentally reshaping the way businesses use technology, investors and analysts said.

Cloud leaders like Salesforce.com sell their software through web browsers, saving customers the expense and time of buying and maintaining expensive computer servers.

When Benioff founded Salesforce more than a decade ago, his goal was to make running software for managing corporations as easy as using Amazon or Ebay.com Inc to buy goods. Industry analysts say that to a great extent he has succeeded.

Besides ease of use, cloud computing saves money by providing huge economies of scale. It offers businesses centralized software, storage and computing services that are less expensive to procure. That model is somewhat similar to the one that online retailers like Amazon use to provide discounted goods to consumers.

Raymond James is betting on that the model will work.

Saut says his company estimates that embracing the cloud will shave some 30 percent off his company's annual IT budget, which runs at about $170 million per year.

TOP PERFORMERS

The big names in cloud computing also rank among last year's top-performing stocks: VMware Inc, which sells software to build clouds, saw its shares more than double in 2011. Salesforce.com, which sells software that workers access over the Internet from web browsers, soared 80 percent.

NetApp Inc and EMC Corp, which both sell equipment for storing data in the cloud, were also top gainers in 2010.

Wall Street analysts say they are constantly peppered with questions from portfolio managers eager to profit from the surge in popularity of cloud stocks.

Industry analysts say that cloud computing projects tend to generate quick returns on investments, which means that companies are able to quickly recoup the money they spend on the projects and see tangible benefits to their businesses.

That resonates with Fidelity's Danoff, who holds cloud players including Google Inc, Amazon, Salesforce, NetApp and Citrix Systems Inc.

Quick and demonstrable returns on investment mean that it is easier to get chief financial officers and chief executives to approve budgets for projects, Danoff said.

"CFOs and CEOs will say 'Yes Mr. CTO, this is a good thing. We're going to save money by spending money,'" Danoff said.

Source: http://uk.reuters.com/article/idUKTRE70D2YT20110114?pageNumber=1