Industry news

Japan’s Sony Corp is increasingly outsourcing television manufacturing to contract makers, primarily its Taiwanese partners, during this fiscal year to boost its market share.

The electronics giant expects for 50% of its TVs to be produced by its manufacturing partners during the fiscal year ending March 31 of next year.

Sony would see Hon Hai Precision Industry Co, one of the biggest electronics manufacturing service providers, become its biggest local partner. Taipei County-based Hon Pai acquired a second TV factory, located in Slovakia, from Sony in March.

This year, Sony added Compal Electronics Inc, a top contract notebook computer maker, to its manufacturing partner list.

Alcatel-Lucent has acquired OpenPlug, a mobile software and applications development tools vendor.

The OpenPlug toolset will be incorporated into Alcatel-Lucent’s Developer Platform and external linkOpen API Service, thus broadening the functionality available to service providers, enterprises and developers for the exposure of network assets and the rapid introduction of new services across mobile and Web domains.

The move advances Alcatel-Lucent’s Application Enablement strategy, which is focused on combining the trusted and secure network capabilities of service providers with the speed and innovation of the Web to provide a richer end-user experience.

The acquisition will allow Alcatel to offer OpenPlug’s functionality to service providers, enterprises and developers so they can create and deploy applications across multiple mobile devices and within service provider app stores.

This is the second acquisition Alcatel-Lucent has made over the past three months to expand and enhance the application ecosystem. In June, the company acquired ProgrammableWeb, the technology industry’s go-to source of API-related content.

Central Bank of India (CBI), one of the largest public sector banks in India has awarded IT solutions supplier Wipro a five-year total outsourcing agreement to provide state-of-the-art, technology-driven, core banking solution for seven sponsored Regional Rural banks (RRBs).

The engagement will allow the Central Bank of India to achieve its objective of financial inclusion and bring low cost and efficient banking services to the rural masses.

The Centralised Core Banking Project is expected to facilitate efficient internal operations for the seven Regional Rural Banks. It is also expected to provide the competitive edge by enabling regional rural banks offer innovative products and services at optimum costs.

The Core Banking project would integrate 2,000 sites which include branches, extension counters, satellite offices, regional offices, head offices and back offices in a phased manner. The solution would also offer alternate delivery channels like Internet banking and mobile (including SMS Alerts) banking.

Wipro will also setup a 24-hour centralised Helpdesk facility for the project covering applications, Data Centre, networks, security and end user systems.

The software has been provided by Infosys using “Finacle” along with other standard products such as ALM, Govt. Business, Internet, ATM, EMS, AML etc. With this, RRBs of Central Bank of India will be in compliance with statutory & Regulatory requirements including MIS.

The contract is the outcome of a competitive bidding process which attracted several global and Indian IT majors.

Earlier, last week, Wipro signed a 7 year Total Outsourcing contract with 5 RRBs sponsored by UCO Bank, a leading Public Sector Bank, for implementing a Core Banking Solution (CBS) across 803 branches of the sponsored RRBs. The contract with Central Bank is the second in the series of wins for Wipro, related to driving financial inclusion through RRBs.

Global data centre provider Equinix is to build its second international business exchange™ data centre, HK2, in Hong Kong. The new $63 million HK2 IBX data centre will provide total capacity for more than 1,450 cabinet equivalents.

Targeted for opening in the third quarter of 2011, the $20m first phase of the HK2 IBX centre will offer an initial 450 cabinet equivalents. The expansion enables Equinix to continue serving the Hong Kong market with business exchange services for global enterprises, banking and financial companies, and cloud and IT service providers.

The Hong Kong market is one of the largest concentrations of banking and financial companies in the region. The HK2 facility will have direct fibre connection with the HK1 IBX data centre.

This connectivity will enable prospective customers at HK2 to enjoy close proximity and direct access to the financial ecosystems, including trading venues, buy and sell side firms, market data providers, technology providers and financial networks, at the HK1 IBX data centre.

The HK2 is the fourth in a series of recently announced IBX data centre expansions in the Asia Pacific region. Equinix has recently announced the expansion of SY3 data centre in Sydney, the third phase expansion of the existing SG2 centre in Singapore, and launched a new market in Shanghai with its partnership with Shanghai Data Solution (SDS).

UK-based distribution and outsourcing group Bunzl has delivered half-year results bang in line with expectations as a recovery in North American revenues offset ongoing weakness at the distribution and outsourcing group’s business in the UK & Ireland.

The group’s largest business, Outsourcing Services, has seen profits increase and is benefiting from some significant sales gains made earlier in the year. This business continues to develop its position in the more resilient sectors and is also benefiting from growth in support services to the resources sector.

The company expects the challenging economic environment will further impact its businesses, but underlying growth in North America should continue.

The UK & Ireland is expected to improve margins despite tough conditions holding back revenue, though Continental Europe is seen “sluggish” compared with a strong second half of 2009.

Positive results are likely to see the company continue its acquisition-based growth strategy. The company, has made eight acquisitions so far this year spending some £100m, said the expected boost to revenue will come through in the second half of the year.

The two most recent acquisitions are California-based Cool-Pak, which will increase the company’s presence in a specialist area of the food processor market in the US; and AM Supply in Brazil expanding Bunzl’s product offering into the developing oil and petrochemical sectors

The Nursing and Midwifery Council (NMC), the nursing and midwifery regulator for over 660,000 registered nurses and midwives in England, Wales, Scotland, Northern Ireland and the Islands, has signed a five year contract worth up to £5.2m with Business Systems Group (BSG).

Under the agreement, BSG will be managing and hosting NMC’s core IT infrastructure across two different data centres.

This will include the managing and hosting of NMC’s servers and networks, disaster recovery, systems monitoring, technical design and ongoing consultation.

BSG will also be providing database and operating system support and managing NMC’s Microsoft Exchange email, Citrix desktops and telephony (using Cisco CallManager).

The contract requires BSG to ensure 99.9% service availability and timely incident management. All software applications will be hosted by BSG, including NMC’s OpenAccounts financial management system provided by BSG’s sister company, COA Solutions.

BSG will also be providing the NMC test and development environments, including release management, as new applications come online.

NMC’s IT infrastructure and systems are currently managed in-house by a four person IT team, they will be TUPEd across to work for BSG.

Earlier this year, advisory firm Gartner released figures which projected that 2010 would see global cloud services revenue reaching $68.3bn; a 16.6% increase from the $58.6bn recorded in 2009.

But that is not all; the industry is poised for strong growth through 2014, when worldwide cloud services revenue is expected to reach $148.8bn.

Indeed, according to Gartner estimates, enterprises will spend $112bn cumulatively on software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS), combined over the course of the next five years.

With such forecast and figures on the line it is no wonder HP and Dell are both keen to increase their share of the cloud computing pie as the bidding for data storage firm 3Par over the last week has illustrated.

However, raising the stakes on 3Par is not the only thing HP is doing as it looks to position itself in the cloud computing segment.

The company has also announced the launch of HP CloudStart, the industry’s first all-in-one solution for deploying an open and flexible private cloud environment within 30 days.

Built on HP Converged Infrastructure, HP CloudStart simplifies and speeds private cloud deployments. Consisting of hardware, software and services, HP CloudStart empowers businesses to deliver pay-per-use services reliably and securely from a common portal, and offers the ability to scale and deploy new services automatically. Furthermore, real-time access to consumption and chargeback reports allows clients to operate their private clouds in the same fashion as a public cloud.

Currently, North American and European markets represent the largest markets from a geographic perspective, and all have seen an increased adoption of cloud computing and cloud services among enterprises.

However, emerging markets – like Asia – are likely to see an increase in growth over the medium term.

Indeed, according to Gartner, the US share of the worldwide cloud services market is likely to be diluted to 50% by 2014 (down from 60% in 2009), as other countries and regions begin to adopt cloud services in more-significant volumes.

Perhaps anticipating the rise of commercial opportunities in other regions and markets, Japanese electronics company NEC decided to set up a joint venture with Neusoft, China’s largest IT outsourcing provider, to offer cloud computing services in the country; NEC’s first move to offer such services outside its home market.

According to NEC’s projections, the cloud computing market in China to grow to $2.3bn by 2012, expanding at an average pace of 30% each year.

In meantime, cloud computing still raises strong concerns to issues such as security, availability of service, vendor viability and maturity. But this may not be deterrent enough in the war over 3Par, which according to analyst may see HP victorious.

In the midst of the budget adjustments, the re-shaping of the NHS model, talks on immigration and the PM’s visit to India it has been an interesting few weeks for the outsourcing community.

So what do we (think we) know? The government will make the necessary cuts and suppliers will take them onboard. As it is unlikely either side wants to spend time and resources on costly legal battles suppliers are likely to get concessions from the government.

And while some suppliers like Connaugh seem to be suffering from price-pressure, most are looking at these budget cuts as an opportunity. This was certainly the position Steria’s chairman and CEO, François Enaud, expressed during a recent interview.

Enaud has good reason to be optimistic. As July turns to August, and financial results are published, many vendors are reporting encouraging figures for the first half of the year.

Indeed, Steria’s half year figures seem to have been positive across most European geographies – Spain was perhaps the exception as their results were ‘close to flat’ but given the difficulties the Spanish economies has faced in recent months, this is still good news.

While results for HCL, Wipro and Patni also showed a positive trend.

Curiously enough vendor outlook seems to be fairly optimistic while data recently published by TPI in its Q210 Index indicates a preference for a more cautious approach as there are still too many variables out there for there to be any certainty. I wonder who has got it, right?

In the meantime during his first visit to India as PM, David Cameron had his work cut out as he tried to dispel fears of curbs on IT outsourcing by the country’s government departments.

This is far from an obvious task as the question of immigration crept on to the agenda, adding to already existing unemployment concerns. A tough act: to balance public expectations, trade and international relations, and a public purse strained by a 3 year old financial crisis.

My guess is the PM’s rich brown hair won’t stay that colour for long!

Figures: we are inundated by them. Constantly bombarded with interpretations and statistics, sometimes it can be hard to make sense of it all.

For example, figures from the US point to a very plausible double dip recession, whereas the messages from the UK have been mixed, to say the least.

Certainly, there is the issue of exams and results and between incredible (I would stress the ‘in-’ prefix) A-Level and GCSE results, and talk of an exam-driven culture, the concern many have is how well prepared for the future are pupils leaving school – especially where IT is concerned.

But this is just the tip of the iceberg. The education question leads us down an equally troubling (from the UK public/government perspective) path.

Indeed, the diminishing number of pupils taking IT means that while the demand for IT-related skills is on the up, the domestic offer is on the decline. As IT companies try to fill the 500,000 new IT jobs that, according to experts, will be required over the next five years, they are much more likely to look into sponsoring skilled foreign workers.

This brings us to immigration. The coalition government promised to cut net immigration by over 150,000 each year to l00,000 or less. Non-EU work visas have already been capped.

So what is it going to be: satisfying the domestic demand for IT jobs which may see immigration cuts be revised or reverted? Or sitting back while discouraged IT firms move elsewhere – and I don’t know how well that would fair for the economy long term.

Certainly, the Office for National Statistics may have put out figures indicating a 1.2% quarterly rise in GDP between April and June; apparently demonstrating the fastest growth in nearly a decade. But, is the growth indicative of an improving trend? Is it sustainable or is it misinformed optimism?

It’s funny how although economics is a science many of the factors that contribute to it and its indicators are subject to ‘confidence’ and its presence or lack thereof.

And while GDP figures show a recovery gathering speed, economic commentators have surprisingly discovered that the less privileged in society are likely to be hit the hardest by the budget cuts.

Talk about mixed messages?!

In the second of a three part series, Tim Palmer, the lead in HR Transformation at PA Consulting Group, begins to answer the two fundamental questions that must be satisfied before embarking on successful sourcing contracts.

Last week, we began to assess how sourcing contracts are best constructed in the current climate and identified two fundamental questions that determine how the contract is defined and how successful the relationship will be in the long term – what is the overriding intent for the sourcing project, and what compromises are steps too far?

Often, the answers to these questions do not become fully apparent until the closing stages of a shared service implementation or outsourcing negotiation, when the client realises there is no point pushing further as the service provider has no more to bring to the table.

There are therefore four steps that should be built into any sourcing approach to ensure that objectives are mutually agreed and achieved. The same need for balanced risk exists for both captive shared services and outsourced relationships. Similar steps can be used when planning shared service projects, helping to create a common purpose for the implementation and helping to agree an accounting approach for factoring in the risks involved.

Step 1 – Understand your intent

As you prepare for a sourcing evaluation, work out the most critical goals for your solution. Prioritise between ‘must’, ‘should’, ‘could’ and ‘will not’ have features. What are you prepared to give up to secure your ‘musts’? This is a particularly important conversation to have if flexibility and the ability to scale services up and down are key priorities. To arrive at your overall intent, you will need to consult with key decision makers and stakeholders throughout the organisation.

Step 2 – Put the intent at the centre of the sourcing process

As you move through your selection process, make your intention clear – be it with potential providers or your internal team. Embed the intent in all that you do; it should be the core part of any prequalification process. Do this by speaking to potential service providers and articulating clearly what you are looking for, asking for their help, insight and ideas. The best outcome is where any providers that cannot deliver exclude themselves from the process, and those that can, gear themselves up to meet your intent in the most appropriate way.

If flexibility is a key requirement for your organisation, use scenarios to illustrate how the service providers will behave when significant, unpredictable business changes occur. Assess their willingness to live with the intent that you have set out by performing sensitivity analyses on the pricing and business case. (Keep thorough notes on their responses, these may prove invaluable later.)

There are two further steps for ensuring that you start as you mean to go on when devising sourcing contracts – checking the approach and the contract align with your intent, and then implementing the business change, also in line with intent. We will tackle these in more detail next week.

This blog is an extract from PA Consulting Group’s book, ‘Surviving and thriving in the economic crisis: The sourcing opportunity’, and is available free of charge. To request a copy of the book, please visit http://www.paconsulting.com/sourcingopportunity