Industry news

Microsoft has changed its licensing policies in a deal which will put 100,000 city of New York staff on its cloud services platform.

Under the terms of the deal the city will consolidate the 40 or more different software licenses it currently has with Microsoft into a single agreement and will shift its workforce onto cloud services. The five year deal will save the city millions according to Mayor Bloomberg.

"To deliver services efficiently and function at the highest level, City employees need the same technological resources that top private sector businesses provide to their employees," he said.

"Through our partnership with Microsoft, we've found ways to offer our employees Microsoft's newest, state-of-the-art computing tools while reducing costs to taxpayers. By capitalizing on the City's buying power, consolidating dozens of separate City agency license agreements into a single one, and paying for software based on use, we'll save $50 million over the next five years."

Previously 40 different city organizations had run their own application systems and the move to consolidate is part of New York’s Citywide IT Infrastructure Services program (CITISERV), which will consolidate the City's separate agency datacentres into a centrally-managed facility.

The contract will be a big boost for Microsoft, which is facing stiff competition from Google in its government business.

"With Microsoft's latest cloud-based productivity and collaboration tools, New York City employees will benefit from having better access to information, improved collaboration and information sharing among city agencies," said Microsoft chief executive Steve Ballmer.

“Additionally, this comprehensive partnership provides the latest in operating system, server and development tools laying a foundation for greater innovation and infrastructure modernization."

The news came the day after Microsoft announced the planned launch of its Office 365 cloud offering.

Source: http://www.v3.co.uk/v3/news/2271949/microsoft-scores-massive-cloud

George Osborne said today there was no "plan B" if the speed and scale of his deficit reduction programme poses problems in the future as he stood firm by the "hard but fair choices" unveiled in the spending review.

The Institute for Fiscal Services has warned that the public spending reductions could "reduce the quantity and quality of some public services" to such an extent that the chancellor may want to put some of the money back in and urged him to review his programme after two years.

Osborne announced sweeping cuts to welfare, higher education, social housing, policing and local government that will axe £81bn from government spending and draw the country back "from the brink of bankruptcy".

The most striking of the new cuts announced yesterday was a package of £7bn in extra welfare cuts on top of the £11bn already made in the last budget. This will include the withdrawal of £50 a week from the 1 million people who have been claiming incapacity benefit for more than a year.

Housing charities have also warned of the prospect of rising homelessness among the young as a result of changes to housing benefit rules.

Osborne admitted that his budget was a "hard road to follow" but promised a brighter future at the end.

Labour however denounced the government's "slash and burn" strategy while the IFS said his measures were "regressive", hitting the poor harder than the rich.

Today, the chancellor cited the backing of the International Monetary Fund and big business to underline his conviction in his decisions.

Pressed on what he would do if his strategy proved to have devastating consequences, Osborne made clear he intended to stay on course.

Speaking to BBC Radio 4's Today programme, he said: "People in the Labour party keep saying: 'Where's your plan B?' I've got a plan A ... This country didn't have any plan at all in a few months ago. We have got the plan. We have got some fiscal credibility out there in the world. We've created a platform for economic stability, dealt with this huge budget deficit problem with a measured plan that takes place over four years."

He added: "Yes, some people on the Labour side say that I am going to far but I believe what I am doing commands the support not just of bodies like the IMF but also businesses who are going to create that private sector recovery that we want to encourage."

He said that he had made a deliberate decision to cut benefits, such as housing benefit for single young people, rather than frontline services.

"I have made a conscious choice. I have decided to try to sustain spending on the national health service, on our schools, on some of the important infrastructure like our roads and green energy," he said.

"I have chosen, in part, to pay for that, as part of the deficit reduction plan, by trying to curb the rise in the benefits bill. That has involved some hard choices but I think they are fair choices.

"If we don't deal with the rapid rise in things like the housing benefit bill, which is now greatly more than we spend on the police, then we will have a real problem."

He rejected the suggestion that Britain faced rising homelessness as a result of housing benefit cuts as he insisted that the principle that a welfare system that incentivises people to work to earn more money than they could possibly earn on benefits was "perfectly reasonable".

"I wish I was not doing this against the backdrop of the enormous budget deficit, but these are the cards I have been dealt by my predecessor and I am dealing with it," he said.

And he defended the decision to maintain universal benefits for the elderly, such as free bus passes, regardless of their income brackets, because he said means testing would have ended up being too costly.

Carl Emmerson, the acting director of the IFS, said that the public finances "often do not behave as expected" in response to government efforts to pull economic levers, and that a review after two years would be sensible.

"There are two key downside risks to this deficit reduction plan," Emmerson said. "First, the structural budget deficit could turn out to be larger than the Office for Budget Responsibility's central estimate. Back in June, the OBR gave the government about a six-in-10 chance of meeting its fiscal target without further policy action, so it is quite possible that further tax rises or deeper spending cuts might prove necessary.

"Second, the deep cuts to spending announced in the spending review will reduce the quantity and quality of some public services.

"Should this deterioration prove too great for the government's liking then the chancellor might wish to top up his spending plans. A review of these spending plans in two years' time would be a sensible move."

Emmerson said the chancellor's plans implied the deepest cuts since the 1970s after Britain was bailed out by the International Monetary Fund.

He warned that the plans would hit the poor hardest: "The benefit cuts ... on average will impact those in the bottom half of the income distribution more than the top half of the income distribution. Therefore, they are regressive.

"And the public service cuts, it's hard to know who loses from that, but the Treasury's best estimate ... again suggests that the bottom half will lose more than the top half. So the new stuff we heard about overall does look regressive."

Osborne insisted that people would understand that the alternative to his plans was economic ruin. "Yes, it is a hard road to follow, but it leads to a brighter future and if we don't follow this road, then I think people understand it would lead to economic ruin," he told ITV's Daybreak.

Alan Johnson, the shadow chancellor, said that Osborne's budget was a return to what people expected from the Tories.

He told the Today programme: "What most people saw yesterday from a budget that is increasingly being shown to be unfair as well as unwise and even untruthful in respect of some of the statistics, is a return to what they expect from the Conservative party. We believe the way we bring down the deficit needs to be steady, needs to be sure. This slash and burn approach is something we wouldn't do."

Source: http://www.guardian.co.uk/politics/2010/oct/21/george-osborne-spending-review-there-is-no-plan-b

With cloud computing being the number one sourcing hot topic at the moment - the NOA steering committee was held on Thursday 14th October at Zylog Systems to focus on the commercial, technical and legal aspects of buying or developing, new, cloud-based applications.

Apollo Research analyses coverage of outsourcing in a large sample of UK media, including print, online news sites and blogs. In July and September, cloud computing was the number one subject in outsourcing with a 14% share of all coverage. Only 1.2 % of all of that coverage was deemed to be negative. Cloud computing is big news.

Andy Rogers, Representative for Corporate Users, said: “This NOA steering committee was developed out of user feedback, client interest and recent Apollo Research. The element of trust is a key point for the future of cloud computing. A strategic partnership, such as this one, and sharing of development and innovation is key.”

It is clear that the two main issues regarding cloud at the moment are security and cost.

Time will tell whether new reforms and legislature regarding EU data transfer are needed as many companies are already developing new ways to secure their own transfers.

Andy Beale, Technology Director for Architecture and Services, Guardian News and Media, said: “There should be an increase in security with cloud data transfer and there will obviously be no need for hard-copies, data pens and laptops. However if cloud computing is truly going to succeed, it needs to show its cost and be completely transparent about its expenses.”

The committee agreed that businesses and technology will need to be completely integrated otherwise the full value and advantages of cloud will not be gained. Large tentative enterprises will look to adopt cloud but it will first need to be embraced by the SMEs to demonstrate its true flexibility, costs and security.

Matt Watson, Opal, said: “The market is actually quite far ahead on cloud and there seems to be a lot of people writing a lot of things about it. What the market needs now is some guidance and insights.”

Moving forward the NOA steering committee will endeavour to provide some guidance and insights and produce an agreed model for cloud computing, encompassing Cloud / SaaS Platforms, Identity Management, API Management, Integrations, as well as Subscriber Management and Billing Systems. This model will be used to map the Cloud / SaaS Scene, and also to generate topics for discussion during the NOA’s scheduled Cloud Computing seminar in 2011.

A sourcing focus feature on cloud computing will be available early November.

The toughest public spending cuts in living memory will be achieved only with a mix of unprecedented political will and a dollop of economic good luck.

Chancellor George Osborne put flesh on Wednesday on the bones of some 80 billion pounds of cuts that he announced in an emergency budget in June.

Average spending by government departments will fall by 19 percent over the next four years -- slightly less than the drop of a quarter expected for most departments.

But the cuts will come at a cost of almost half a million public sector jobs and a squeeze on welfare that is nearly two thirds bigger than what was promised in June.

Job cuts on this scale will go beyond efficiency savings and require scaled back or reduced quality services, piling pressure on the government to renege on its plans.

Welfare savings are even harder to bank with certainty as they hinge partly on the long-term unemployed finding jobs, and government growth forecasts for when the cuts start to bite next year are more upbeat than those of many other economists.

Osborne was clear that he believed Britain's budget deficit of 11.1 percent of gross domestic product (GDP), the largest in the G7, left him no option to such drastic action if the country was to avoid a Greek-style fiscal meltdown.

JURY OUT

However, economists said the jury was still out on whether he would achieve this goal with his current plans, which rely overwhelmingly on spending cuts rather than tax rises.

"It depends on political will," said Andrew Smith, chief economist at accountancy firm KPMG.

Such determination could not be taken for granted, despite the Conservatives campaigning in May's election on the promise to reduce the budget deficit faster than the Labour government.

When a Conservative administration last had to make cuts in the early 1990s, they ended up balanced roughly equally between spending cuts and tax rises, Smith said.

"That was partly because when push came to shove, it became very difficult to make the spending cuts. Until you see it happening, it's slightly questionable."

The National Institute for Economic and Social Research expressed a similar view on Tuesday.

Cuts are not distributed equally across government. While health and schools spending is largely protected, day-to-day funding for the ministries in charge of police and prisons is due to fall by a quarter.

"It will be interesting to see how the Ministry of Justice will manage a 6 percent a year cut with upward pressure on prison populations," said Jon Sibson, head of public sector at accountants PwC.

Ultimately there was too much political credibility at stake to avoid the 490,000 job cuts that Osborne forecast.

"If people are determined to get headcount down, the machine will do this," Sibson said. "The extent and quality of some services will go down, there is no question."

However, while the government has direct control of the 395 billion pounds of departmental spending this year, it has less influence on the more than 200 billion pounds it spends each year on debt interest and welfare payments.

Welfare costs in particular could balloon if official forecasts for growth of around 2.7 percent over the next four years prove too optimistic -- whether due to an underestimate of the impact of the spending cuts or because of a global slowdown.

"The resumption of robust growth is crucial to the deficit reduction arithmetic. But the Chancellor is making some rather heroic assumptions," said KPMG's Smith.

"Households may continue to save and pay down debt rather than spend, businesses may remain reluctant to invest and export performance could suffer from a lacklustre global recovery."

"PAPER CUT" OR "AMPUTATION?"

Economists polled by Reuters in September -- when the scale of the fiscal tightening was clear if not its precise make up -- forecast Britain's economy will grow by 1.6 percent this year and by 1.9 percent in 2011.

The CBI and the British Chambers of Commerce said reductions in infrastructure investment were less severe than feared and that tackling the deficit was a top priority.

Others were much more pessimistic.

PwC forecast that a total of 943,000 jobs in the public and private sectors will go by 2014/15 because of the spending cuts, which will damage private sector suppliers too.

This is equivalent to 3.4 percent of jobs nationwide, but regions more reliant on government money such as Northern Ireland and Wales may suffer job losses of 5.2 percent and 4.3 percent respectively.

The worst hit sector is likely to be construction, where PwC forecasts a 5.1 percent loss of output due to a reduction in government capital spending. Business services will be the next biggest victim, with output taking a 3.9 percent knock.

Regardless of these figures, Osborne is likely to draw comfort from the most important audience for his spending review -- the ratings agencies whose threats to downgrade Britain's AAA credit grade is driving the rapid pace of deficit reduction.

"Today's Spending Review ... enhances the credibility of the deficit reduction plan by detailing the spending priorities and measures necessary to stabilise UK public finances and debt, and secure the UK's 'AAA' status," concluded David Riley, head of sovereign ratings at Fitch.

Source: http://uk.reuters.com/article/idUKTRE69J54G20101020?pageNumber=1

Working with any type of outsourcing company will mean relaxing the control you exercise over your brand image to some extent. But how far should an organisation allow this to happen and are there any real dangers inherent in it?

Outsourcing the recruitment process has the potential to cut both ways when it comes to brand values. Give candidates a good, well-managed experience and, even if they don’t get a job out of it, they can come away with a positive view of the client company. Give them a bad one and they may never buy that organisation’s products or services again. Telecoms giant Nokia seems acutely aware of this. Greg Allen, its EMEA recruitment manager recently told a conference that, “Our product brand is a very expensive thing and we are not going to give it to people who go out to the market with the wrong message. A terrible candidate experience falls back on Nokia and that is one thing we won’t tolerate. We won’t let anyone mess with our product brand.”

The potential for brand hubris or nemesis is bigger than ever today because of power of the internet. Online platforms such as LinkedIn and the seemingly ubiquitous Facebook are not just lightening fast communicators of information, they have also become vital sourcing tools for both internal and external recruiters, allowing them to target very specific groups based on their demographics and profile. However could this apparently legitimate use of publicly available data lead to accusations of covert or overt discrimination? For example, while no organisation would dream of advertising for ‘experienced’ people any more, why is it OK to post an advert on Facebook whose key demographic is 18 to 23 year olds. Taking it further, what is to stop recruiters using this same data, consciously or sub consciously, in their evaluation and selection of potential candidates? Does the fact that the individual has chosen to put this information 'in the public domain' (and believe me people - it really is public!) make the information any less sacrosanct?

It’s obvious that handing over stewardship of a brand in the HR and, very specifically, the recruitment space is to enter a veritable minefield. And, as a consequence, many HR directors and other potential commissioners of outsourcing services remain hesitant, like swimmers dithering around the side of an under-heated pool. But little was ever achieved through inaction. The key seems to be a truly rigorous tendering process when selecting an outsourcing firm and an insistence on a business relationship that is not just about client and provider but real partners. Because, as Ian Ruddy, Head of HR Operations at Telefónica O2, puts it, “The day you have to get the agreement out of the drawer is the day you don’t have an agreement.”

Chris Hornsby is business solutions manager at recruitment outsourcing and talent management specialist, Ochre House – www.ochrehouse.com

Surviving the first 100 days as a new CIO

Alex Blues, Head of IT Sourcing, at PA Consulting Group

In the second part of his series of blogs on his first 100 days as a new CIO, Alex Blues, Head of IT Sourcing at PA Consulting Group, discusses the need to demonstrate value for money.

Over the past five years, there has been an increasing focus on improving service and more recently, due to the economic downturn, on cutting costs. Unless you look at these two issues holistically and promote the prospect of creating Value for Money (VFM), you will end up promising a service you cannot deliver.

Traditionally, the board is always told to look at the big picture. However, with IT the big picture is always one large lump of money. The first step in creating VFM is to get the business to understand the detail around the IT budget and more importantly understand the costs that the CIO has control over. The IT budget is always the worst kept secret in any organisation. Everyone seems to be able to tell you the total spend, and that figure is ingrained in peoples’ minds.

However, it is typical for a CIO’s budget to contain over 60 per cent in capital expenditure and business-driven projects. These were not your choice but the business’, but it is your responsibility to ensure they are delivered efficiently. There are also likely to be long term investment items and depreciation – again decisions and commitments made before you arrived, an example of this is data centres.

Once you have identified what the ‘controllable’ aspect of your budget is, the next step is to give as much control of that as possible to the business units. This is where the VFM argument really comes in. Detail the services provided to each business unit, both in terms of volumes, quality and cost. Highlight which services can be changed and the corresponding cost and service charges associated with these choices. The idea here is to give complete transparency to the business and give them the levers which they can use to change their cost or their service levels – albeit recognising that certain changes may require involvement of more than one business unit; or even the whole organisation.

This ensures that the business unit is choosing the right level of service required, at the right cost. This can only be effective if the business unit receives the benefit of making changes, or feels the pain of not making changes. It is therefore vital for IT to be charged to the business units and not as a central overhead.

In the third of this four part series next week, Alex Blues will discuss the requisite sourcing strategy that needs to be put in place.

George Osbourne has announced 19% average cuts to departmental budgets, revealing some of the deepest cuts in public spending in decades.

The Chancellor outlined that the public debit interest repayments now total £120m a day, or £43bn a year and it is hoped the cuts will allow the government to reduce the public debts and trim debt interest payments by £5bn a year to 2014.

Mr Osbourne said: “Reform is one of the guiding principles of this Spending Review. It is a hard road, but it leads to a better future.”

The reduction in public spending means that savings need to be made which should present many opportunities for the outsourcing industry and its variety of expertise.

Martyn Hart, Chairman of the National Outsourcing Association, said: “It’s interesting to note that the chancellor’s announcement of the Government Spending Review followed a similar approach to that taken at the beginning of the most successful outsourcing contracts. By reviewing the performance of the public sector spending as a whole, and identifying core competencies in each department, the Chancellor has been able to determine where fewer resources need to be committed.”

The NOA believe that the announcement could fuel a surge in public sector outsourcing with many government departments outsourcing services which are not core to their business.

Outsourcing can provide a range of different services for the public sector, for instance large integrated companies will be able to offer public savings by offering just one point of contact instead of many and companies with a broad range of services should be able to adapt easily to meet specific demands.

Martyn Hart added: “Although the government have confirmed that nearly 500,000 jobs could be lost as a result of the cuts, it’s also clear that there could be a real opportunity for job creation in the private sector as a direct result of this afternoon’s announcement.

“The Chancellor’s decision to cut the Whitehall administrative budget by as much as a third is a key example of this. By cutting the budget to back-office functions such as accounts and data-preparation by £6 billion, there could be a real opportunity for Business Process Outsourcing (BPO) suppliers in the private sector to benefit.”

The review also saw the Department of Business, Innovation and Skills bracing itself for an annual cut of 7.1% a year - an annual budget of £21.2bn. Outsourcing opportunities may also arise as a result of administrative cuts of £400m.

HM Revenue and Customs are expected to find resource savings of 15% through from “new technology, greater efficiency and better IT contracts,” the Chancellor said.

Technology companies have benefited from the recession as organisations look to increase efficiencies and reduce costs.

Piers Linney, joint CEO of Outsourcery said, “As companies brace themselves for the spending cuts and come under intense pressure to cut costs, they are looking to new technologies to create efficiencies, and alternative ways to achieve savings while remaining competitive, resulting in an indelible change in the economic and business landscape.

“This is fundamentally changing the way in which companies are working as they take advantage of the cuts to drive change within the business which has included adoption of practices such as remote working and outsourcing – which is helping companies preserve cash which is still in short supply.”

Recently many county councils such as Barnet, Suffolk, Brighton and Hove have already committed to outsourcing contracts and more will do so in response to their cuts in funding.

Infrastructure services firm, May Gurney, has been a market leader in local government outsourcing and look after highway maintenance for Northamptonshire, Essex and Norfolk county councils, among others.

Chief executive Philip Fellowes-Prynne said: "We are well placed as the comprehensive spending review measures are announced. We have grown by 50% in the past five years, mainly through outsourcing services, and I expect that to continue over the next five years, hopefully doubling in size.”

It is clear that many sectors will now look towards outsourcing services in a bid to save money however the danger lies in outsourcing cheaply at the cost of improved service to achieve a quick financial gain.

However Martyn warned: “It’s obvious that any project initiated on cost alone, is more likely to end in failure. However if performed correctly, with the right due diligence, it’s clear that outsourcing can achieve real results for the public sector – not just as a short term solution.”

East European governments must cut deficits and repair banking systems to spur economic growth after the financial crisis that pushed some countries close to default, the International Monetary Fund said.

“Policy makers in emerging Europe face the difficult challenge of dealing with the legacies of the crisis, while not hurting the recovery,” the Washington-based lender said today in its regional economic outlook. The tasks include “reducing fiscal deficits to secure sustainable debt” and “repairing banking systems while reviving credit.”

The former communist countries in Europe and central Asia are recovering from their deepest recessions since switching to free-market policies two decades ago. Cheap credit helped growth average 5 percent annually in the boom years. At the height of the credit crisis, the IMF provided about $65 billion of loans to the region, making it the largest recipient of bailouts.

The IMF provided loans to Hungary, Latvia, Ukraine, Romania and Serbia as the countries faced defaults and struggled to refinance debt, often denominated in foreign currencies. The region received more than $100 billion in total, including aid from the European Union and World Bank.

The fund expects the region’s economies to grow 3.8 percent in 2010 and 3.9 percent next year after gross domestic product shrank 6 percent in 2009 as capital inflows came to a halt.

‘Healthy’ Balances

The financial crisis unmasked the underlying fiscal problems in east Europe, the IMF said. While increasing tax receipts led to “healthy” budget balances during the boom years, expenditures were growing rapidly, according to the IMF.

Budget deficits across emerging Europe averaged 6 percent of GDP last year compared with zero in 2008, the IMF said. Average public debt levels swelled to 30 percent of GDP from 24 percent. The average deficit will narrow to 5.2 percent this year and 4.1 percent in 2011, with debt climbing to 30.8 and 32.1 percent, respectively, the IMF forecasts.

“With deficits still at very high levels, and a permanent loss in revenues resulting from the end of the demand boom, it is clear that substantial fiscal consolidation is needed over the next few years,” even if it hurts growth in the short term, according to the report.

Countries with “high fiscal vulnerabilities” must move swiftly to cut deficits and avoid being punished by financial markets, because investors are more focused on public finances after the euro region debt crisis, the IMF said. Deficit-cutting programs that rely on reducing spending rather than increasing revenue will be less harmful for growth, according to the fund.

‘Credible’ Policies

Fiscal policies can help revive credit growth while banks are repairing balance sheets impaired by the growth in delinquent loans, the IMF said.

“Credible macroeconomic policies would also make it possible to keep policy interest rates low, which would not only stimulate demand for credit, but would also encourage bank funding” and limit the reliance on foreign currency financing, the IMF said. “Creditless recoveries in GDP growth are generally slow and shallow.”

The region also needs investment in manufacturing to shift growth away from services and construction, which propelled economies in the boom years, according to the report. Companies must develop new markets for manufactured goods and services, which will require a shift in government policies, the IMF said.

Source: http://www.bloomberg.com/news/2010-10-20/east-europe-must-reduce-deficits-repair-banks-to-nurture-growth-imf-says.html

Aberdeen City Council has chosen Atos Origin to provide managed datacentre services and a virtual desktop environment.

The £10m deal will provide 5,000 council staff with a virtual desktop environment as well as delivering managed datacentre services over five years. The council's IT was previously managed in-house.

Paul Fleming, head of customer service and performance at Aberdeen City Council, said the project will provide greater accessibility and a better service to internal and public users of council IT systems.

"It supports the council's strategy to create a more flexible and mobile workforce," added Fleming.

Chris Bingham, vice president for public sector at Atos Origin, said, "This is a significant win for us both in terms of scale and scope. We are delighted to have secured such an important piece of business in Aberdeen, in a market which is becoming increasingly important to our business activities in Scotland."

Atos Origin became the first IT supplier to sign a memorandum of understanding with the government under its new 'single-client' approach to IT procurement.

Source: http://www.computerweekly.com/Articles/2010/10/19/243413/Atos-Origin-to-provide-managed-services-for-Aberdeen-City.htm

In promising to “leave no stone unturned” in the search for efficiency savings, Cabinet Office minister Francis Maude has revealed the latest figures for cutting public sector IT spending.

Maude claims to have saved the public purse £402m this financial year by scrapping the controversial national identity scheme. He expects to save a further £800m by renegotiating contracts with major suppliers – many of whom are IT suppliers.

“Every pound wasted unnecessarily in Whitehall on operational overheads is a pound that can’t be spent on the services we all rely on,” Maude said in a statement.

These cost savings – potentially topping £1.2bn – address the notion that the government’s procurement of IT has been hamfisted and delivered poor value for money.

But stopping or cutting back projects does nothing to address the concern that the real problem with public sector IT is that billions have been spent, without delivering improvements in efficiency. As part of the effort to address that, Maude has promised to focus on delivering web-enabled public services.

“In an age when 96 per cent of all 25 to 34-years-olds are internet users, just 13 per cent of our contact with citizens is currently carried out online. We have to start looking at ways we can improve the way we communicate with citizens. But we also need to do it in a more cost-effective way than has been tried before,” he added.

Source: http://www.computing.co.uk/computing/news/2271825/government-save-2bn