Industry news

Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, today announced the results of the second annual Capgemini Executive Outsourcing Survey, which found that Latin America is the third most popular outsourcing destination, with 25 percent of responding companies currently outsourcing to this region. While still perceived by many respondents to be an “emerging” outsourcing destination, this survey revealed that Latin America is not far behind legacy outsourcing destination China, which is ranked second at 27 percent, while India leads with 60 percent of companies outsourcing to this country.

The survey, commissioned by Capgemini and conducted online by Harris Interactive, among 300 senior executives at Fortune 1000 companies also identified the top reasons for executives to select Latin America as part of their outsourcing strategy. More than two-thirds (69 percent) of surveyed executives cited cost of labour as the top reason why their company might outsource to Latin America, while other attributes reported included technology and infrastructure capabilities (49 percent), skilled labor (48 percent), and economic stability (44 percent). These attributes are aligned with the key reasons why companies choose to outsource in general suggesting that outsourcing to Latin America will continue to expand.

Other reasons cited as important for selecting Latin America for outsourcing include its proximity to the U.S., time zone alignment and accent neutrality. These attributes are all unique to this region when compared to other outsourcing locations such as China and India.

The Executive Outsourcing Survey findings also revealed that almost half (45 percent) of executives who do not currently outsource to Latin America say their company would be interested in considering the region as a resource for outsourcing in the future.

In addition to uncovering Latin America as a leading outsourcing destination, the survey highlighted the region’s increasing value to the global economy. An overwhelming majority of executives (89 percent) believe that Latin America is an emerging market that will become increasingly important to U.S. businesses, and that there are advantages to doing business in Latin America (83 percent). Further, more than half (56 percent) of executives believe doing business in Latin America is becoming easier than doing business in other parts of the world.

“As the economy rebounds, companies are looking to use outsourcing more strategically as a tool to increase efficiency, yield significant cost savings and drive growth; this includes considering locations beyond India,” said David Poole, Vice President and Head of Americas Business Process Outsourcing, Capgemini. “The expansion of Capgemini’s outsourcing services in Latin America, and our work with Unilever, Coca-Cola Enterprises and other clients in the region underscores our understanding of our clients’ needs and ability to provide the right global delivery model for multinational businesses.”

Other survey highlights include:

The top five factors listed by executives in choosing an outsourcing destination are labor costs (79 percent), technology & infrastructure capabilities (62 percent), skilled labor (61 percent), language proficiency (49 percent) and economic stability (44 percent);

Less important factors listed by executives in choosing an outsourcing location are tax benefits (26 percent) and proximity to the U.S. (3 percent);

Forty-one percent of executives outsourcing to Latin America cited language proficiency as a key reason;

Forty percent of executives cited the average education of the Latin American workforce as a key factor in their decision to outsource in Latin America.

Capgemini’s Business Process Outsourcing organisation applies unique business insight, business intelligence tools and deep domain knowledge to help clients transform business operations. As part of its global delivery model, Capgemini has eight outsourcing centers throughout Latin America, including Argentina, Brazil, Chile and Guatemala.

For more information regarding the Capgemini Executive Outsourcing Survey and to download a summary of the results, please visit http://apps.us.capgemini.com/harrissurve y

Survey Methodology

This Executive Outsourcing Survey was conducted online within the United States by Harris Interactive on behalf of Capgemini between April 6 and April 16, 2010, among 300 senior executives at Fortune 1000 companies. Company revenue and number of employees were weighted where necessary to bring them into line with their actual proportions in the larger universe of Fortune 1000 companies.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with no response, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, Harris Interactive avoids the words “margin of error” as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal.

The Norwegian Competition Authority has granted approval to EDB Business Partner to acquire rival ErgoGroup in a move that will have a huge impact on the IT services market in the Nordic region.

Besides consolidating EDB's position as the leading supplier in Norway, it will also leapfrog HP and Logica to become the third largest SITS provider to the Nordic region, according to the latest rankings from Pierre Audoin Consultants (PAC).

The acquisition of ErgoGroup fulfils a number of EDB's strategic aims: expanding its presence in Sweden, boosting presence in the public sector, raising its penetration of the SME market and taking it a step closer to its long-standing goal of becoming the leading Nordic SITS provider.

However, PAC believes that the new EDB ErgoGroup AS faces three big challenges. The group will be heavily reliant on Norway, the smallest Nordic SITS market with only a limited number of large client organisations. Both companies have been building their presence in the largest Nordic market, Sweden, with EDB acquiring Spring Consulting and ErgoGroup buying BEKK. A good first step for the combined group would be to look to support the Swedish operations of existing Norwegian clients.

The second challenge for EDB ErgoGroup AS must be to increase its global delivery capabilities. Local rivals such as Tieto and Logica have placed the growth of offshore resources and the industrialisation of processes at the centre of their plans. If EDB ErgoGroup wishes to remain price competitive it needs to address this issue.

The final challenge is to address the SME market. ErgoGroup has been very successful in this area, supported by a strong local presence. However, EDB has tended to focus on large enterprises. It is essential that the ErgoGroup culture is preserved through the integration, or the combined group risks alienating companies in the SME market, which is becoming an increasingly important battleground. An important factor here is that ErgoGroup MD Terje Mjøs will lead the new company which will provide a point of continuity for SMEs, for whom a local interface with suppliers is an important concern.

A contract for this activity has been signed, for a term of three and a half years. As a strategic partner for software testing, SQS will primarily be conducting system integration tests for Deutsche Bank.

To be specific, SQS will take on the testing of business applications for Deutsche Bank in Germany and Switzerland. This task will include the management, design and execution of tests, and the documentation thereof. For the purpose of best practices, SQS will first standardise, integrate, and systemise the required test processes. The chosen pricing model is structured in a strictly performance-oriented manner.

"We are very pleased about our classification as a strategic partner of Deutsche Bank for software testing" comments Reto Züst, CEO of SQS AG for Central Europe and the Middle East, on the subject of the agreement. "We will be providing these testing services as managed services. This proves that the corporate strategy of SQS is on the right path and that the focused activities of the Managed Testing Services area are currently - as planned - the strongest driver of growth for SQS. Through Managed Testing Services, SQS can reduce test costs, increase system quality and enable the further industrialisation of software production."

Security firm IronKey has announced that its Enterprise S200 package of USB flash drives and management software is undergoing certification for government use by the CESG, the UK national technical authority for information assurance.

If approved, it will allow UK government departments to include USB portable storage media in business plans that will comply with data protection laws.

The AES 256-bit hardware-encrypted USB flash drives and management software are being evaluated under the CESG Assisted Products Service (CAPS).

The software is designed to enable organisations to administer policies across thousands of devices over the internet as well as wipe or disable them remotely.

The CAPS program certifies that products and services meet government cryptographic and other data protection standards.

Government departments are coming under increasing pressure to protect data on portable storage devices, said Kevin Bocek, director of product marketing at IronKey.

The Information Commissioner's Office has highlighted the poor data protection record of government organisations and is now able to impose fines of up to £500,000 for serious breaches, he said.

According to Bocek, the CAPS certification will give government departments the tools they need to enable employees to work securely from any location.

"The certification is also relevant to non-governmental departments and suppliers. as the same technology is used in the commercial product," he said.

IronKey is confident of winning CAPS certification for the S200, which has been validated to FIPS 140-2 Level 3 security standards by the US National Institute for Standards and Technology (NIST).

The IronKey Enterprise S200 hardware and software package was launched to the commercial enterprise market in July 2009.

CAPS certified editions configured to run in government-approved modes will be available in the next nine to 12 months, said Bocek.

With stringent government cuts imminent, we have seen the likes of Northamptonshire and Cambridgeshire County Councils sign long term framework deals for the services of an ITO provider, worth between £23.5 million and £70.5 million for IT services. With many of these services certain to be offshored to destinations far and wide, the classic offshoring vs. nearshoring debate is reemerging.

While one cannot deny it’s benefits, offshoring is not necessarily the best strategy for local government, and careful consideration needs to be taken before any rash decisions are made. Some councils are just not suited for offshoring, with aspects such as staffing and local culture posing obstacles that could cause more harm than good. Furthermore, for certain tasks, offshore staff will simply not have the level of skill and knowledge required to complete the necessary local activities.

Therefore, it is my view that nearshore outsourcing has a lot of benefits compared to offshore outsourcing for local government. The outsourcing solutions provided by the near countries such as Ireland to their customers will not have much difference in their time zones and thus can provide services in the same time zone as their customers do. It also helps to avoid problems that can evolve due to language, culture, legal affairs, infrastructure and technology. Furthermore with nearshoring, cost effective structures are available, so it becomes less expensive and easier to travel and communicate for the customer.

Dell Services has today announced eight new healthcare customers, following the recent launch of a new IT consulting services group.

The division, called ‘Dell Services Healthcare Consulting’, has seen rapid growth within the healthcare sector, sealing deals with Bupa Cromwell Hospital, Berkshire Healthcare NHS Foundation Trust, Cambridge University Hospitals NHS Foundation Trust and Papworth Hospital Foundation NHS Trust. Other wins include, Royal Surrey County Hospital NHS Foundation Trust, NHS Lanarkshire, Golden Jubilee National Hospital and Solent Healthcare.

The Dell Services Healthcare Consulting team provides a combination of clinical and business process improvements, alongside technology to help healthcare providers achieve a patient focused environment that is connected, streamlined and efficient. The team is a part of the wider Dell public team, which includes services for implementation services, software development, testing and IT outsourcing. It will also serve the education sector and regional governments.

Stuart Black, chief business architect, Bupa Cromwell Hospital, said: “Based on a positive experience in an earlier project, we asked Dell Services to help us. We talked to another potential partner, but we had a good feeling about working with Dell Services from the start because their consultants clearly had our interests at heart.”

Black went on to say, “Bupa Cromwell also required demonstrable healthcare experience. Our trust in Dell Services was reinforced by the extensive IP it owned, based on numerous hospital projects. The solution will open the door to further innovation. For example, we’re looking at the installation of screens in each patient room so that staff can access patient records at the point-of-care without having to carry a device.”

According to Tim Sheppard, Director of UK Public Sector at Dell Services: “It’s really exciting to see our Healthcare Consulting team doing so well. This team provides the final jigsaw piece in our Healthcare offering. We can now work closely with clients right from the initial clinical or operational strategy through technology implementation to realising the benefits. I look forward to this team developing long term mutually beneficial relationships with our Healthcare clients.”

Tata Consultancy Services, the leading IT services, business solutions and outsourcing firm, today announced that the company had entered into a significant multi-year agreement with SUPERVALU INC. for a full services engagement.

SUPERVALU is one of the largest grocery retailers in North America. The engagement with TCS is transformational in nature and will drive operational efficiencies for the firm through the integration of IT, BPO and infrastructure services. As a part of this engagement, more than 600 SUPERVALU India associates will become a part of TCS.

“For SUPERVALU, this move will allow us to improve operations, freeing up funds to invest more aggressively in our customers. It will also allow us to move more quickly toward business solutions,” said Wayne Shurts, SUPERVALU’s chief information officer. “We have many talented associates in SUPERVALU India, and an added benefit of the deal is that they will continue to play a key role in the future success of the company.”

“The engagement with SUPERVALU reinforces our leadership as the long-term IT partner best equipped to help global corporations transform their businesses using our full services capabilities and domain knowledge. We are delighted to work with SUPERVALU and help them strengthen their leadership position in the market place,” said N Chandrasekaran, TCS’ CEO and MD.

The retail industry unit contributed 12.3% of the firm’s total revenues in 2009-10. The industry unit works with leading retailers globally.

Capgemini UK plc signed a Memorandum of Understanding (MOU) with the Cabinet Office which builds on its outstanding track record of engagement and delivery to HMG. All existing contracts remain and continue to be delivered as planned. Capgemini has also presented a range of new business opportunities to enable the commitment of savings to HMG.

In addition, Capgemini has also put together an extensive menu of new innovative proposals, which would further improve the efficiency of HMG.

Paul Hermelin, Capgemini CEO said: “I am pleased to have agreed this MOU with Francis Maude, Minister for the Cabinet Office. This signing continues our transformational journey with HM Government and enables us to bring the full capability of the Capgemini Group for the benefit of the UK Public Sector. I look forward to working together over the coming months and years to help the UK Government achieve their wider reforms”.

Pierre-Yves Cros, Capgemini’s UK Country Board Chairman said “Capgemini has responded to the request to help Government meet their short term challenge and we have also put forward cross-government solutions, which will help achieve an efficient joined-up government in future”.

Economic fluctuations and business uncertainty, accelerated service globalization, and increasing competition of IT services are major factors that could force businesses to move further toward low-cost IT, according to Gartner, Inc.

Gartner defines low-cost IT as the delivery of managed IT services (infrastructure, application, business process services) designed and implemented to minimize IT price — per-user/unit per-month (PUPM) — while maximizing the number of client organizations and users that adopt the services.

“The price of IT will continue to drive decision making,” said Claudio Da Rold, vice president and distinguished analyst at Gartner. “As credit markets in the U.S. and Europe remain challenging, end-user organizations are reducing costs by sourcing IT services from emerging countries and lower cost providers. Cost cutting, restructuring and the move toward offshore outsourcing continue to increase while growth in emerging countries accelerates, widening the gap between high-growth areas* and stagnant economies**, and low and high-cost IT providers. This trend could drive a prolonged reduction in the unit cost of IT services, significantly affecting the IT services market by 2013.”

The industrialization of IT services*** is also enabling a greater orientation toward outcome-based and pay-per-use services. Early offerings like infrastructure utilities or cloud e-mail show that providers can deliver one-to-many services at price points that are one third of in-house/traditional costs, due to the right combination of industrialized one-to-many services, offshore outsourcing and technologies such as virtualization and automation.

Gartner analysts said that based on the proliferation of advertising 'IT as a service' as a pricing model, business buyers would force traditional providers to switch to PUPM pricing models by 2012.

“If the scenario of low-cost IT accelerates in the next few years, we foresee a growing number of delivery models that could cut the cost of IT by a third or more. This could lead to the emergence of viable low-cost IT providers,” said Frank Ridder, research vice president at Gartner.

In such a scenario, the IT services market could sustain a year-on-year reduction of 10 percent to 25 percent in the average market unit price PUPM for three to five years. A yearly reduction of 10 percent to 25 percent in IT services costs, affecting 30 percent of the market, could cause the overall, average market price to decline by 5 percent to 10 percent yearly. This worst case scenario reduction would equal the revenue of two to four of the largest IT service providers. “This reduction is possible because, in 2009, we saw the IT services market shrink 4 percent, with a market loss of $42 billion, with outsourcing prices plummeting,” Mr. Ridder said. “Such extensive reductions in price and market size would stall growth in the overall IT services market by 2013.”

“Organizations must invest in scenario planning and risk management,” Mr. Da Rold said. “About two or three times a year — depending on dynamics in their business environment — they need to assess their multisourcing environment against risks, including changing service pricing, regulatory changes and providers' viability. They also need to consider leveraging new IT services options depending on their compatibility with their corporate risk profile, and add business value through risk mitigation and business continuity planning.”

Additional information is available in the Gartner report “Uncertainty and Low Prices Could Stall the Growth of the IT Services Industry Market by 2013." The report is available on Gartner’s website at http://www.gartner.com/resId=1419615.

More detailed analysis on outsourcing is available in Gartner's Future of Outsourcing and IT Services Special Report at http://www.gartner.com/technology/research/future-of-outsourcing-it-services/report/index.jsp. The Special Report provides links to research notes that cover various aspects of outsourcing and IT services. This report provides insight and actionable advice for IT services buyers, providers and investors to achieve more successful future outcomes.

Additional information on the future of outsourcing will be discussed at the Gartner Outsourcing and Vendor Management Summit 2010 taking place September 14-16 in Orlando, and the Gartner Outsourcing & IT Services Summit 2010 held in London, September 20-21. This is the only event that comprehensive view of the entire outsourcing market — infrastructure, application and business process outsourcing, global delivery and the use of offshore providers, as well as issues and trends about new delivery models, such as SaaS.

The Telegraph Media Group (TMG) has chosen software provider Cordys to manage its cloud services and applications to allow "rapid mashup" of its business processes.

The publisher of The Daily Telegraph, the TMG, uses multiple software as a service (SaaS) and Google cloud applications, such as Salesforce.com, Amazon Web Services and Google Mail. Cordys' Process Factory software will give TMG the ability to create processes and applications quickly in the cloud across all of its SaaS applications at lower costs, said the company.

Toby Wright, TMG CTO, said, "With our previous structure, a significant percentage of our IT budget and resource was allocated to maintenance and support. By making greater use of cloud platforms for back-office IT and revenue-generating products and services, we are now on target to reach our goal of having the majority of our resource focused on technology and business transformation projects."

Peter Karsten, vice-president sales UK at Cordys, said, "The Software as a Service (SaaS) model we have developed enables business users to build and run their own MashApps by simply combining standard business applications such as Google apps and commercially available services, with web services from anywhere, with the same levels of security as traditional platform implementations."

TMG will use the Cordys Process Factory to integrate and build new cloud applications. Salesforce.com integration will also be used to allow enterprise access to customer data.