Industry news

Let’s start with some stats. The judgment came in at just under 10 years after the original contract. The trial lasted for 110 days, involved 500,000 documents and 70 witnesses. The judgment is almost 500 pages and 2,500 paragraphs long. Legal fees are estimated at over £70 million to date, and set to rise further.

The dispute arose out of a £48m IT services contract between satellite broadcaster BSkyB and global IT contractor EDS (which is now part of HP). BSkyB had a catalogue of complaints – they ended up delivering the project themselves after all, but as well as the “run of the mill” contract claims BSkyB also alleged EDS lied in the pre-contract tendering process. They said 9 EDS employees lied about 5 different things.

EDS made a good fist of it. 8 of those employees were found to be honest (if not always possessing accurate memories) and the court found that no one at EDS lied about 4 of those issues.

But one was enough. One lying witness about one issue may have cost EDS upwards of £200m.

The lie was a simple, maybe even a common one - about being able to complete on time. But without it the court were convinced that BSkyB would have gone to PwC instead of EDS, and saved itself a lot of grief, and money, if it had. Every bid team in the land should be thinking hard about that.

And the worst part for EDS (well, HP now of course) is that the lie (as opposed to the contract claims) blew away the agreed liability cap of £30m. BSkyB were claiming £700m, but after the judgment seem to be reigning that in to closer to £200m. The final figure will be determined in February, when everybody has to return to court.

The judgment is a classic – not because it makes any new law – but because it reveals how dishonest people can dig bigger and bigger holes for themselves. EDS’s main witness lost all his credibility, his job, and the case when he claimed to have a real MBA from a real University. He went to the course for months, describing in detail about his regular plane rides and the college buildings, only to be shown not only that the college never existed, but that BSkyB’s lead barrister’s dog, Lulu managed to get the same “qualification” by applying online. Shame on EDS’s Mr Galloway when all was revealed, the final blow being that Lulu was awarded better marks than him.

HP is going to spend even more time and money on an appeal. And maybe a few pounds more on some employee background checks, just in case Lulu is looking for a job…

AstraZeneca is to cut 8,000 jobs worldwide as it embarks on outsourcing more of its research and development.

Some of the work is due to be transferred to China in a move cut costs, it has been widely reported.

Shares in the company fell 140p to 2905p, wiping £2 billion from its market capitalisation and making it the biggest faller in the FTSE 100.

David Brennan, chief executive of the AstraZeneca said: “As the majority of our employees are in the UK, the US and Europe, you could expect more job cuts there

It has been all over the news this week and we are just as enthralled by it here at the sourcingfocus.com news room. The long-awaited end to the Sky and EDS dispute has been revealed, with Sky being awarded a substantial part of its £709 million lawsuit. The Round-Up read with interest an article on the Computing website which revealed that EDS’s key witness had bought his degree online. No surprise that this undermined the witness’s credibility, not to mention the credibility of the entire EDS case. Check out Tom Young’s article to see how this revelation played out in court.

For those of you who are more interested in the implications this case has on the outsourcing sector and the overall legal implications, look no further then sourcingfocus.com. The NOA chairman, Martyn Hart, has detailed what he believes will be the effect on the outsourcing industry in the Hart of Outsourcing and Alan Owens, partner at Morrison & Foerster outlines the ensuing legal implications in this week’s Guest Blog.

So apart from the end of this major battle, what else has been happening this week? Unlike Sky, McDonald’s is more than happy with the delivery of its outsourcing contract as it extended a long-term ITO contract with ACS.

Under the renewed agreement ACS will provide McDonald’s with a range of managed IT services including, desktop support, messaging services, data centre facilities management and network operations.

When it comes to popular publishing outsourcing destinations, India remained ahead of the game, it was revealed this week. Research carried out by Valuenotes Database revealed that 66 per cent of the 237 respondents selected the offshore giant. The US was second favourite followed by the Philippines, UK and China. With India and China continuously being pitted against each other it seems India is the Asian Tiger who prevailed in this particular race.

A UK company also revealed big news this week. AstraZeneca is to cut 8,000 jobs worldwide as it embarks on outsourcing more of its research and development. Great news for the industry, but not such good news for employees at the sites being closed in Loughborough and Cambridge.

Like most companies, AstraZeneca has stated that cost is a major motive for this move to outsource research and development.

That’s one point to China, and one point to India this week.

British American Tobacco has signed a multi-year outsourcing contract with Wipro Technologies to provide application support services.

Global IT service provider, Wipro Technologies will help the tobacco giant improve the effectiveness and efficiency of its application support services for its global business operations across 130 countries.

Under the contract, the two companies’ will partner up to provide an enterprise-wide global application support delivery model. This will consequently reduce the total cost of ownership and allow for more opportunities for value added services for the business users of British American Tobacco.

“The global capabilities of Wipro match very well with the needs of British American Tobacco as a Global Enterprise,” said Phil Colman, chief information officer, British American Tobacco.

“We believe this is the right way forward for us in terms of our IT strategy. We will be considerably more effective across our global enterprise. These changes will help us improve the application support service quality, facilitate better integration, enable enhanced knowledge sharing and, ultimately, help us become more competitive,” added Ben Fourie, Head of Global IT Services at British American Tobacco.

Meggitt have signed an engineering management outsourcing contract with HCL. The contract is worth $50 million and will see HCL providing engineering services for the company’s global operations.

The contract was awarded after a multi-vendor review which ran for several months. Terry Twigger, Meggitt’s chief executive commented: “This strategic initiative will help us respond to the current economic environment while successfully positioning us for future growth.”

Meggitt is a UK headquartered company with a presence in North America, Europe and Asia. It specialises in extreme environment engineering

Bharti Airtel has invited bids to outsource the management of its inter-city optic fibre cable network.

It has been reported that the deal is estimated to be worth up to $1bn over a five-year period.

“We will form a JV and have a stake in the company to which we award this contract,” Bharti’s chief executive officer, Manoj Kohli, told the Economic Times. Kohli also suggested that Bharti hopes to close the deal before the end of this fiscal.

Bharti operates optical fibre cable network of over 100,000 route kilometers. The company is also set to renew its multi-billion network-outsourcing contracts with Ericsson and Nokia Siemens this year.

India continues to be the most popular publishing sourcing destination, according to research carried out by Valuenotes Database.

With 66 per cent of the 237 respondents selecting the offshore giant, the destination pipped other publishing offshore locations to the post.

The US was second favourite followed by the Philippines, UK and China.

“An increasing cost of production and print, coupled with the global economic slowdown, has led to the industry struggling to address the increasing demand of digital content as opposed to print acting as the driving forces behind publishing outsourcing,” said Rakhi Vig, manager of product sales with Valuenotes Database.

“Whilst we have seen publishers trying a variety of approaches - going digital, reducing print publishing, and cutting costs, believes the industry is yet to find that one formula that addresses all its problems.”

The UK and Irish IT services market will see a slow increase in growth this year, according to analysts Ovum. The countries can expect real-term growth of less than two per cent in 2010 and won’t return to pre-recessionary levels until at least 2011.

By the end of the forecast period in 2013 the UK and Irish IT services market is expected to grow to over £32 billion. However, less than a third of this will come from the public sector which is facing big cuts.

However, the IT services market has been through the worst effects of the recession, according to the analysts. But the recovery promises to be a slow ascent rather than a quick bounce-back.

Dr Alexander Simkin, co-author of the forecast, said: “Some IT services vendors are pinning their hopes on a marked uptick in the UK and Ireland in 2010. [But] They need to take a more realistic view: the market will remain challenging for at least 12 months with only modest growth overall during 2010.”

Fast food giant McDonald’s has announced it will extend its existing relationship with IT provider, ACS for an additional five years.

Under the renewed agreement ACS will provide McDonald’s with a range of managed IT services including, desktop support, messaging services, data centre facilities management and network operations.

ACS will also supply McDonald's with an end-to-end application performance monitoring service, enhancing the diagnosis of performance issues across the core technology stacks, support planning and infrastructure readiness.

"Sourcing has been a key component of our strategy to enable and empower our business. The extension of the ACS agreement is a sign of our further commitment to this strategy and to all the benefits we've received from our relationship with the ACS team. We look forward to the continued successes we have achieved with all our sourcing partners,” said Chris Millington, vice president and chief technology officer for McDonald's.

IBM has signed a business process outsourcing (BPO) contract with Convergys to provide customer service and data accuracy services for the upcoming 2010 US census, in a project that will need more than 1,500 agents.

As part of the outsourcing deal, Convergys’ contact centre agents will call citizens who have submitted incomplete or inaccurate census questionnaires to improve data accuracy.

“For government funding to be done fairly, the Bureau of the Census needs to count everyone, count them once, and count them in the right location,” said Jim Boyce, Convergys President, Global Sales and Services.

The Bureau of the Census counts all United States residents every 10 years and will mail or deliver census questionnaires to each household in March 2010.