Industry news

Supermarket chain Morrisons is looking at investing in online retail after deciding the internet offers "attractive opportunities".

It is the last of the UK's biggest four supermarkets to start trading on the internet but will look into it in 2011.

Its half-year results statement showed pre-tax profits of £412m in the six months to 1 August, and sales of £8.1bn, up 9.1% on this time last year.

The company has also started a £310m programme of IT investment.

The programme will see the company's core systems and technology infrastructure being replaced. So far, payroll, HR and financial systems have been replaced, a wide area network installed, the majority of store hardware renewed and voice-picking technology implemented in grocery and frozen distribution centres.

A new electronic point of sale system is being rolled out, due for completion in 2012. The software needed to run distribution centres and food production facilities is currently being piloted in one depot and one produce plant, and the company said it has been successful so far. Other depots will get the software through 2011 and 2012.

The company's half-year results statement said, "The success of these activities, and our proven ability to implement changes with no impact on the business, gives us great confidence for the remainder of the programme."

The government's decision to allow local health care providers greater freedom of choice in IT systems may open the door to firms like Microsoft and Google, both of which are eager to sell their electronic patient record-keeping systems.

The department of health's director general of informatics Christine Connelly said on Thursday the government wanted to create an environment in which a number of different systems can integrate well.

"The department will leave it to the people who will use those systems to decide for themselves if they want to use Microsoft's products (HealthVault), Google's products (Google Health), or somebody else's," Christine Connelly said. "We will look forward and say this is what we think of these systems and give people advice, rather than as before, this is a system that you will use."

Connelly said that she did talk regularly to firms like Microsoft, but that the department did not have an active programme investigating the Redmond software house's health care software.

"We're looking at lots of different systems, but we are not particularly looking at Microsoft and Google in an evaluation kind of way," Connelly said. She said this was important because it allowed the department to influence the development of the product in such as way it could benefit the department.

Connelly's comments are a sequel to earlier reports that health care records could be transferred to Microsoft or Google under a Conservative government.

At the time, The Times questioned Tory links to Google. It said Steve Hilton, an advisor to then Opposition leader David Cameron, was married to Rachel Whetstone, Google's vice-president of global communications and public affairs. In 2007 Cameron addressed a Google Zeitgeist conference in San Francisco, and Google CEO Eric Schmidt was joining a Conservative business forum to advise on economic policy.

Google declined to comment, and Microsoft did not respond by press time.

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

The move follows negotiations led by Cabinet Office minister Francis Maude in July with CEOs of the government's top IT suppliers to discuss ways of cutting costs. The new approach means the government will procure for IT projects as a single customer, rather than as separate departments.

"We set ourselves a difficult challenge," said Maude.

"Renegotiating contracts in this way had never been done by government before. But the current financial situation meant there was simply no time to waste and we are delighted that Atos Origin are the first to sign today," he said.

"Over the next few weeks as the agreements are signed, I expect to see immediate and big savings for taxpayers. We are not talking about small numbers here, but a total running into hundreds of millions of pounds."

Keith Wilman, UK CEO at Atos Origin, said the move marks a new era for the company.

Atos Origin said it will continue to deliver all its existing IT contracts to UK government, and will look for further business opportunities, building on an agreed centralised approach.

Nineteen IT suppliers were called in by Maude and told to find ways of cutting costs. The 19 companies are:

HP

BT

Capgemini

Fujitsu

Capita

IBM

Telereal Trillium

Atos Origin

CSC

Logica

Steria

Oracle

Siemens IS

Cable & Wireless

Microsoft

Accenture

Serco

G4S

Vodafone

European organisations are losing more than £500,000 per year because of the poor performance of cloud-based apps.

According to a survey of 300 IT directors across Europe by Compuware, 57% of businesses are slowing or shutting down cloud applications, such as e-commerce sites, due to performance management issues.

Richard Stone, cloud computing solutions manager at Compuware, said security will always be an issue but now there is growing concern that third-party providers are causing businesses to lose control of cloud application performance.

Stone claimed IT departments are "in the dark" when faced with managing cloud applications within an organisation. "Existing tools and legacy systems inside the enterprise to monitor applications don't work for cloud apps. The tools enterprises are using are not giving end-to-end visibility," he said.

"IT managers have got to start leading inside organisations by embracing [cloud computing] and not leave end-users to do their own thing. Put the right tools in place to make sure users get what they want but provide performance management," he added.

The research also showed 84% of IT directors expect service level agreements to go beyond simple availability metrics if these are used for business-critical cloud apps.

The study surveyed 300 European IT directors in enterprise organisations with more than 1,000 employees.

In June, LoveFilm DVD decided to take its work elsewhere leaving 41 call centre agents without work. The firm has been able to find work for 16 employees but the rest of the workers are still left without a role.

Hero TSC admitted that time is running out to find new work for the employees prior to the end of the consultation, this week.

The company said: “I am pleased to say that we have managed to cut the number of jobs at risk in Rothesay by bringing in additional work for Office Depot - another client we handle in our Bute centre [in Scotland].

“Unfortunately, it was not enough work to cover all those at risk by LoveFilm’s decision to take their work elsewhere - and that is desperately disappointing.

“We will, of course, continue to work tirelessly to try and bring more business into the centre in the future in the hope that we can restore staff numbers to their previous levels.”

A new 134 seat outsourcer named Ventrica is planning to shake up the market for providing high quality, professional customer contact on behalf of medium to large enterprises. The company is the brainchild of well-known industry entrepreneur Dino Forte, who was previously a co-founder of Converso Contact Centres. Having already secured new business from a global software specialist and an international cosmetics group, Ventrica is looking to attract further household names to its customer base.

Managing Director and founder of Ventrica, Dino Forte said, “There is a massive untapped demand for high calibre customer contact that demonstrates both professionalism and substantial attention to detail. However, whether it’s for lead generation or managing service enquiries, many organisations can’t justify the resources or technology infrastructure in-house to support this type of activity. Ventrica aims to plug a gap in the market by offering smaller scale, 'niche' customer contact services such as B2B lead generation, that focus on the quality rather than the quantity of conversations. Larger outsourcers can provide this same level of excellence, but they typically only consider very high volume work."

“We have invested substantially in both the contact centre environment as well as the latest multi-media technology so we can deliver a premium service that matches many of the bigger players in the industry. We won’t just be managing calls though, we will also be handling other types of customer communication such as web enquiries, web chat, SMS and so on.”

As well as appealing to potential blue chip and medium sized companies, Ventrica’s premises will also help to attract a high calibre of staff. “The offices have been designed in an extremely smart and contemporary style so it is a very pleasurable and stimulating working environment.” says Dino

A range of career opportunities are now available including customer service representatives, telemarketers, service delivery managers and IT. There will also be vacancies for those with multi-lingual skills.

Genpact Limited, a global leader in business process and technology management, celebrated the 10th anniversary of its entry into the Chinese market in Dalian today. Genpact’s global President and CEO Pramod Bhasin and newly-appointed CEO of Genpact Asia Charles Hunting met with the company’s employees to look back on Genpact’s achievements over the past decade and outline Genpact’s vision for the future, including the implementation of the company’s China strategy.

Pramod Bhasin, President and CEO of Genpact, said of Genpact’s accomplishments thus far, “China is a strategically important market for Genpact. It is a fact recognized around the world that if you want to succeed, you have to be in China. China’s service outsourcing industry has grown rapidly over the last ten years, as has the nation’s abundance of capable talent. This makes me even more confident of the future as Genpact continues to invest in the Chinese market and strengthen our China strategy and operations here.”

A pioneer of the outsourcing industry in China, Genpact introduced the new business model of outsourcing to China by opening the country’s first business process outsourcing (BPO) center in Dalian in June 2000. Since then, Genpact has proven its willingness to invest in its China operations and its commitment to the Chinese market by growing its business in China to include five operations centers in Dalian, Changchun, Shanghai, and Beijing, with more than 3,000 employees.

Source:http://www.marketwatch.com/story/genpact-celebrates-ten-years-in-china-2010-09-10?reflink=MW_news_stmp

CIOs are cutting operating budgets in order to increase capital expenditure.

Commercial and public sector CIOs plan to increase capital expenditure by 3% this year, funded in part by a 1.3% cut in operating budgets, according to research from Gartner.

Mark McDonald, group vice-president at Gartner, said economic conditions are changing CIOs' spending priorities. "CIOs felt they could no longer delay infrastructure upgrades and other capital investments, funding them at the expense of operating budgets," he said.

Overall IT spending remained flat, with budget growth projections just 1.1% this year, found the research.

However, smaller organisations are reporting stronger IT spending than their larger counterparts, said McDonald. "The larger the organisation, the tighter it is managing its IT budget, and IT operating expense in particular. This continues a trend we have observed since 2008," he added.

Industries such as utilities and healthcare are most likely to increase expenditure as they are undergoing deep structural change, while government and education industry CIOs report budget declines in the face of tight economic conditions, said the report.

Of the 500 CIOs surveyed, more than 40% said they were positive about the condition of the economy.

Source: ComputerWeekly.com

Bangalore: The US President Barack Obama on Thursday issued a veiled threat on offshoring saying that he would end tax breaks that encourage companies to create jobs and profits outside the US—a threat that analysts said would impact multinational firms more than any Indian IT services firms.

The president was speaking in Cleveland, Ohio. The state has proposed to ban offshoring of all government IT projects. Ohio’s unemployment rate is higher than the national average of 9.5%.

“For years, our tax code has given billions of dollars in tax breaks, encouraging firms to create jobs in other nations. I want to change that,” the President said. Instead of tax loopholes that incentivise investments in overseas jobs, he will propose a “generous, permanent extension of tax credit that goes to firms for research and innovation done in the US”.

This is not the first time that the President has spoken about loopholes in the US tax code. In May last year, Obama had proposed to close loopholes in a tax code that says “you should pay lower taxes if you create a job in Bangalore, than one in Buffalo, New York.”

Source: http://www.financialexpress.com/news/Obama-threatens-to-end-tax-bre...

The summer of 2010 is almost behind us and with it the third anniversary of the global financial meltdown that began with the US sub-prime crisis in August 2007, followed by the collapse of Lehman 12 months later.

Where some were initially optimistic about the duration of the downturn, others were able to discern the start of what would be a protracted recovery; 2009 was a particularly tough year and for many an annus horribilis.

In outsourcing, financial services is, perhaps understandably, where the impact has been felt the most. Certainly, outsourcing may not have witnessed such a drastic halt such as the one witnessed in the public listings and other financial sectors, but a slowdown was most definitely felt by most industry players as the effects trickled down.

“The financial services sector, seen by many as the most traditional user of outsourcing services was very quiet last year. It had little money to invest in new ITO projects and spent most of its time renegotiating contracts. Meanwhile, BPO was almost dead – no one really had the capital for the investment required,” said Alistair Maughan partner at international law firm Morrison Foerster.

However there are clear indications that this trend may be slowly reversing. Indeed, figures released in the latest Market Vista report, indicated that the banking, financial services and insurance (BFSI) sectors in particular have seen a 41% increase in transactions, with most contracts signed in the banking sub-sector; volume recorded was double over the Q1 this year.

The increase in transactions in the BSFI sector is indicative of a larger trend, which we are likely to see evolving: the increased attention to Cloud computing and XasS (anything as a service).

As the private and public sectors move to increase efficiencies and cut spending, Cloud computing presents a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. It encompasses any subscription-based or pay-per-use service that, in real time over the Internet, extends IT's existing capabilities.

ITO suppliers are constrained to respond to client’s business demands through building capabilities to solve technical problems, expand services, and build consultative front ends and customised solutions for client’s differentiation.

Market experts suggest that this could see ITO suppliers in Central and Eastern Europe step up to respond to transformations caused by SaaS and Cloud Computing, adjust costs, upgrade delivery models among others issues.

In the UK there has been much talk about the G-Cloud. A strategy that would support everything from pooled government data centres to a communal email solution, collaboration tools and staff-editable wikis. It could allegedly save government £3.2bn of its annual £16bn IT budget – perfectly meeting the chancellor's 20% savings target. [The current ad hoc network of department- hosted systems is composed of a dozen dedicated government secure data centres, costing close to £250m each.]

“We don’t see an increase in Government IT happening over the next 12 months based on current deal flow as well as on the procurement cycle – it takes a good 12 months to get through a procurement process. This means such projects would not be implemented before autumn 2011,”commented Maughan.

Another trend that has been slowly building up is a move away from megadeals and into multi-sourcing type deals.

Indeed, for some in the outsourcing industry, these mega deals have become a thing of the past. The breaking down of larger contracts into smaller deals could open up the possibility of using smaller suppliers and manageable projects with appropriate governance and flexibility as required by volatile business environments, and altering systems when business change demands it.

“Under present circumstances, the projects will be axed (e.g Building Schools for the Future) or re-shaped. Reducing down the size of projects and capping them at £100m is also likely to be part of the landscape of the coming months,” notes Maughan.

“Anything above a £1m will have to go to ministers with projects over £100m going all the way to the top for authorisation,” continues Maughan “Reducing down the scope of projects is also likely to make them more manageable.”

The blending of the services provisions market is also a trend that has been evolving in the last three years. The distinction between Tier-1 providers (Accenture, IBM, EDS, CSC); mid tier/niche (Capita, Capgemini, Unysis), and the traditional (offshore) vendors (TCS, Wipro, WNS) was more of less clear.

However, things may not be as clearly delineated anymore. Tier-1 players are trying to develop their offshore capabilities while traditional providers are establishing onshore presence; mid Tier vendors are perhaps feeling a squeeze as they find it more difficult to compete with the larger players.

This market consolidation is also illustrated by acquisitions like that of EDS by Hewlett Packard, Perot Systems by Dell, ACS by Xerox or TCS’ purchase of UK-based Diligenta.

Whether reactionary, proactive or a bit of both; the trends evolving in the outsourcing market have been a few years in the making. Nevertheless, it would be unwise to bet on these trends evolving in a particular direction.

And while recent Gartner reports suggest the UK’s Government IT spending will be higher than financial and manufacturing sector. It also assumes that Chancellor George Osborne, in his aim to bring public sector to 1997 levels, will be successful in transforming people-driven processes into IT-driven processes – according to industry experts, that’s 450,000 jobs we are talking about cutting.

It would seem that before anything can happen the government is going to have to bite the bullet and make up its mind: efficiencies and virtualisation vs. unemployment. It’s going to be a tough one.