Industry news

Local authorities view IT schemes as crucial to improving performance this year, a survey of council IT staff has indicated.

While 47 per cent of those surveyed at the recent Civica annual conference admitted they were expecting spending cuts, nearly 60 per cent suggested IT was a key investment area in 2010, according to computing.co.uk.

Further findings indicated that key strategies for driving efficiencies include the re-engineering of workflow processes (33 per cent) and greater use of mobile and flexible working (31 per cent).

David Roots, managing director of surveying company Civica, said: “Rationalising, re-engineering and automating processes is critical to delivering greater service effectiveness while reducing costs in all areas. There is still plenty of scope for local authorities and their partners to exploit technology in addressing the ‘more for less’ demands put upon them."

UniRush, a US pre-paid card company, has signed a three-year outsourcing deal with Firstsource Solutions, one of India’s largest BPO providers.

Under the agreement, Firstsource will take responsibility for Unirush’s customer services and back-office management for the company’s e-work division. It is hoped the deal will deliver increased operational efficiency whilst reducing risk.

Ram Palaniappan, general manager, UniRush, commented “The partnership will support our extraordinary growth and allow us to continue our tradition of outstanding service delivery to our customers and our partners.”

Medical equipment outsourcing is on the rise because of the ageing population. Advancements in technology, the desire to lead an active lifestyle, the rise in chronic conditions and increased public and private spending, are also contributing to a sharp rise, according to a new Bharatbook report.

The report, “Outsourcing in the Global Medical Equipment Industry – The Market Expected to Register High Growth in the Future”, forecasts that the medical equipment outsourcing market will reach $40.1 billion by 2016.

It analyses the key drivers behind outsourcing of manufacturing, clinical research and other support services to low-cost service providers based in Asian countries and elsewhere.

Israel's Ministry of Immigrant Absorption has signed a five-year, 42 million Israeli shekel (approximately $11.2 million) outsourcing contract with Ness Technologies.

The contract includes an option of an extension of up to an additional five years.

As part of the agreement, Ness Technologies will operate and maintain the ministry's IT systems 24/7, including applications, infrastructure systems, communications, and workstations. In addition, Ness Technologies will upgrade the ministry's helpdesk.

Sigal Lebovich, manager of the Information Systems Department of the Ministry of Immigrant Absorption, commented: "Ness will assist us to leverage our IT resources and further develop our ICT systems to streamline the immigrant absorption processes. We will continue to improve service to immigrants based on these advanced IT systems."

The ministry's Information Systems Division is responsible for the operation of ICT systems for immigrant absorption, including registration of immigrants, management of assistance resources such as public housing, financial assistance and customs tax grants. The division supports 600 users at 40 sites nationwide, and operates two IT facilities - one in Jerusalem and another at Ben-Gurion International Airport.

SNS Bank has outlines its intention to outsource both the execution and administration of its security transactions to BinckBank.

Once an agreement has been reached, outsourcing is expected to be finalised early in 2011.

Under the agreement BinckBank would takeover SNS Bank’s total security-related process for both its investment fund and stock exchange investments.

“SNS Bank aims to be the best in selection, servicing and distribution for both investment fund investors and independent investors,” said Henk Kroeze, chairman of the board of directors of SNS Bank.

“Outsourcing the process that extends from transaction to administrative processing to BinckBank fits in with this strategy.”

The DVLA, the UK’s driver licensing body, is proposing to outsource 20 medical adviser jobs in Swansea.

The doctors whose positions may be outsourced, work to decide whether drivers with certain medical conditions are fit to hold a licence. The medical advisers are supported by a team of 300, but there is no indication that any of these positions will also be outsourced.

The news is causing worry in Wales with the British Medical Association Cymru and the Liberal Democrats expressing concern over road safety and the security of further jobs at the DVLA.

Dr Richard Lewis, the BMA’s Welsh secretary, commented: “I am extremely concerned that the DVLA are proposing to outsource the service currently provided in Swansea by 20 medical advisers which could lead to the loss of these jobs from the area, and can only be construed as a clear step towards privatisation of the service."

In reply, a DVLA spokesperson was noncommittal: “We are considering how the DVLA’s professional medical advisory function can be best provided to meet growing demand and ensure that appropriate medical expertise is available when needed.

Kraft has managed to ruffle the feathers of the British public yet again, with more news pertaining to the nation’s favorite chocolate-maker, Cadburys. It was reported this week that the American food giant is going ahead with plans to offshore its chocolate production to Poland. Gone is the English reserve, as Cadbury’s national officer claimed that the Somerdale branch is to be only the first casualty of Kraft’s ownership.

Poland may or may not be renowned for its chocolate-making skills but one things for sure: the British public won’t take kindly to yet more foreign intervention.

Moving on now from Picnics to planes; it was revealed this week that civilian contractors are being sent to Afghanistan to operate military pilotless aircraft.

QinetiQ has operators working with the Royal Netherlands Army in Uruzgan province in central Afghanistan providing a system of unmanned aerial vehicles that can be called on at any time by the Dutch forces.

Meanwhile, Chinese and Indian students are top dogs apparently when it comes to IT literacy. According to a study released by Accenture, China and India stand to gain a global competitive advantage because of the importance placed on IT.

Western Europe did not fare very well however, as the research revealed that they felt technology was too time consuming. Meanwhile, the Americas (Brazil, Canada, and the United States) and Asia-Pacific (Japan) have positive perceptions of technology, but still not at the same level as young people in China and India.

And finally, the UK’s driver licensing body, DVLA, has announced proposals to outsource 20 medical adviser jobs in Swansea.

The doctors whose positions may be outsourced, work to decide whether drivers with certain medical conditions are fit to hold a licence.

Chocolate, military personnel and medical advisors - what a range of things to outsource. Who knows what could come next…

Once again, I have been circulating around the NASSCOM show, and have met a wide variety of spokespeople from the public and private sector, and from suppliers and client-side companies alike.

As I mentioned in my blog from yesterday, the overall mood seems optimistic, albeit a cautious optimism. Having met Sudip Banjeree, the CEO of L&T Infotech, a global IT services and solutions provider, I now understand more. He told me that prior to the recession, the industry was somewhat relaxed as profits were readily available and the services front was building revenue. However, as a result of the recession, the industry is far tighter. There is, and will continue to be, a greater emphasis on long term benefits (both internally and in terms of their delivery to clients), reduced discretionary expenses and a focus on adapting capabilities. The second shift that Banjeree has seen is in the distribution of business – there used to be, before the recession, a strong emphasis on the US, UK and Western and Eastern Europe. The future growth that Banjeree predicts will have to be directed at other markets as companies search for lucrative and cost-effective opportunities.

Sachin Tikekar, Chief of People Operations at KPIT Cummins, a global IT consulting organisation, added that the recession will cause business models to change substantially. This will not necessarily include product-built solutions from service companies per se, but templatised solutions that allow service providers to cut time to market while at the same time providing value to customers.

I was also lucky enough to grab a few moments with John Suffolk, the CIO of the UK Government. He told me that India was still a “hotbed of innovation” and that the conference was especially important to the UK given the sheer number of Indian suppliers involved directly with UK companies and the need to encourage this to continue.

Commenting on the imminent election, Suffolk added that IT is absolutely a core method to drive efficiencies in any organisation and the UK public sector is no different. It was also reassuring to hear that while the UK is in the top two or three European countries for IT availability and sophistication, there are still ambitious plans afoot to improve despite the economic situation, primarily via innovation and driving efficiency.

Talking of innovation, Tikekar mentioned that there is almost an expectation of this in the sourcing community, both from the maintenance perspective, and proactive expectations. However, innovation, according to Tikekar, should not be pursued if it involves too much risk. For instance, cloud computing may be a prime way to show innovative approaches, but a premature jump into it without the necessary infrastructure changes could be disastrous.

All in all, a very interesting day, and with presentations that proclaimed predictions of double digit growth in 2011, an increase in the number of mergers and acquisitions and an emphasis this decade on infrastructure and systems integration as opposed to BPO and software maintenance, it doesn’t look like the sourcing industry will be getting any less interesting any time soon.

Well, after three days, NASSCOM 2010 has ended. An event that has become truly global in both scope and interest, and included national delegations from the countries and regions we have grown to expect to see, such as Eastern Europe, but encouragingly, also from new and more exotic ones such as Colombia and Brazil.

Looking back over the last few days, it seems prudent to review the predictions for 2010 and 2011. I spoke to a great many CxOs over the three days and no two discussions were the same. Nonetheless, there were a few excerpts of crystal ball gazing of particular note, especially on the final day. One such was from Arvind Thakur, the CEO of NIIT Technologies, one of India’s top 20 IT service providers, who commented that there will be three key verticals of opportunity over the next 12 months or more. Given the ageing population globally, there will be substantial opportunities in the healthcare sector as more and more investment becomes necessary. Also, as has already been seen in certain fields, climate change will only grow in importance. Lastly, following global unrest in recent months, investment in security and its surrounding systems will grow substantially.

To add to this, Baru Rao, CEO of Cap Gemini, a global leader in consulting technology, outsourcing and local professional services, asserted that consortia will grow in number. Cross-industry collaborations of banks and manufacturers, for example, may ‘club together’ and outsource to a certain supplier – according to Rao, this is a tried and tested course of action that is only likely to develop.

But these growing opportunities and changes in approach will not be without challenges. Indeed, Francois Enaud, CEO of Steria, an IT and BPO provider, commented that the greatest test for 2010 will be the need for businesses throughout the sourcing industry to move from a solution-driven approach to a purely service-driven one, perhaps even costed on a “pay per use” structure.

Of course, in early 2009, the Satyam ‘crisis’ was the biggest sourcing story for some time. While its effects do not seem to have been as disastrous as first thought, it seemed pertinent a year on to see how the Indian market reacted, and therefore survived. Abhijit Mazumder, the Head of Strategic Solutions at TCS, an IT services, business solutions and outsourcing organisation, told me that apart from the obvious economic ramifications, one of the greatest effects was psychological – a great deal of effort had to be put into mitigating the fact that suddenly a market that saw perennial growth year on year was suddenly not only going to fail to grow, but potentially plummet. As Mazumder explained, the winning strategy for the Indian companies that confounded expectations was to concentrate on streamlining and securing the core of the company so that when the good times returned, they were ready to respond and capitalise.

So with these comments, and those from the first two days, it appears that there is a consensus on three trends that we will see develop throughout the remainder of this year, and most likely beyond. Firstly, sourcing strategies are no longer about costs, but are now increasingly centred on customer value – a move that is being driven by supplier and customer alike. Linked to this, pricing models will change to being based upon outcomes not inputs, and lastly, platform-based solutions will gradually replace bespoke solutions in popularity.

Doubtless, 2010 will be an exciting year for sourcing and, the threat of another unexpected Satyam-esque incident aside, has the potential to be one of the key industries to be a part of.

So, until next time...

For those who have not visited India recently the pace of change is amazing. Europe has a lot to learn from India's aviation industry. The planes are clean and cheap, a bus (not a five mile walk) takes you to the plane, and new terminals are replacing the crumbling buildings of only five years ago. But I am not trying to romanticise India because squalor and opulence lives side by side with this rapidly growing economy.

My reason for being in India on this occasion is to attend NASSCOM 2010 (National Association of Software and Services Companies) – an event that I have seen grow from an offshoring trade show to one of the largest global conferences, sponsored by the likes of CSC and Accenture, now with as many as 1600 delegates, 120 speakers, 130 suppliers and 22 trade delegations promoting their country as an offshore destination.

Over the course of the three days of the conference, starting today, I will be interviewing various notable personalities in the outsourcing space, including some of the event speakers, and each day presenting a summary of their thoughts and the apparent industry trends.

To start with, compared to last year the atmosphere is upbeat. Last year the recession was politely ignored but still the elephant in the corner, Mumbai was still reeling from the terrorist bomb attack and the Satyam debacle was in danger of wrecking the Indian Outsourcing industry. This year these issues have been forgotten but there is still a sense of realism that the days of 30-40 per cent growth are ancient history.

Norman Pitman and Michale Bieler, respectively the VP EMEA Business Development and the Director of Sourcing Advisor Relations of CSC (a global IT and Business Process Outsourcing consultancy, and event sponsor), agreed today that there is an air of optimism. Indeed, Pitman intimated that the pipeline for the forthcoming financial year will be one of their strongest yet, particularly on account of UK public sector opportunities.

Meanwhile, KK Natarajan, CEO of Mindtree (a global IT solutions company) explains that this increased optimism and market change has largely been driven by customer needs as much as market forces. Customers are, he claims, becoming far more selective in terms of their outsourcing partners, and far more demanding in how fast the return on investment arrives, which has in return prompted a market for specialist service providers. Indeed, this message was echoed in the day’s presentations as sourcing is appearing to be more about providing business value than cutting wage bills.

Also throughout today’s discussions, both with individuals and in the speaker slots, it has become apparent that cloud computing is going to dramatically change the industry. But Pitman was keen to emphasise that cloud computing should not be seen as a fresh new technology, but instead as a concept that has been available for some time and is now enjoying a refreshed market.

Nonetheless, Pitman and Bieler added that on-demand computer power has been a major part of many sourcing contracts recently, even a requirement by many customers, and the supposed advent of cloud computing has been a perfect way to fulfil this.

Tomorrow, I will be interviewing more delegates and trying to answer the question of how 2010 will compare to 2009, what will the major trend changes be, and how sourcing contracts have been, are and will be changing.