Industry news

After being inundated with entries for our recent Talking Outsourcing book competition, we have randomly chosen our winner, Rohit Sthalenkar of Levine Mellins Klarfeld Solicitors. Rohit emailed in with the correct answer to our question ‘What was the title of author, Mark Kobayashi-Hillary’s first ever Talking Outsourcing Blog’. You can read his first blog ‘India is catching up fast but still has work to do’ here and catch up on the three years of entertaining outsourcing history contained in Mark’s blog archives. Alternatively, if you’re tired of reading on screen, you might want to pick up a copy of the book yourself at Lulu.com.

Thanks to all those that entered and look out for our next book competition where we’ll be giving away a copy of Collaboration in the Cloud.

A video of the book launch is available to view here.

Delhi International Airport Limited (DIAL) has signed a ten-year IT outsourcing contract with Wipro for the Indira Gandhi International Airport (IGIA) in New Delhi.

As part of the contract Wipro will manage the IT infrastructure of the IGI airport’s new terminal. When complete, it will be one of the largest airport terminals in the world and will be the gateway for the Commonwealth Games scheduled to be held in New Delhi, October 2010.

The parties signed the contract to form a joint venture which will be named Wipro Airport IT Services Limited. Wipro will hold 74 percent while DIAL will hold a 26 percent stake.

Mr PS Nair, CEO, DIAL commented: “Our vision is geared towards providing a future-proof strategy to become one of the top airport operators globally. Wipro’s proven expertise in managing large IT enabled environments coupled with a vibrant innovation culture will be the core driver of this joint venture.”

The Highland Council, the Scottish Highland's local government, has signed an IT services contract with Fujitsu for the next five years. Under the new £66m contract, Fujitsu will manage the entire ICT ‘estate’ for The Highland Council, including additional projects around the ICT curriculum in schools across the Highlands.

The new ICT systems provided by Fujitsu will be developed with energy-efficiency in mind. The council hopes the systems will result in energy cost savings of 2.5 percent per annum and lower its carbon footprint.

Councillor Carolyn Wilson, chairman of The Highland Council Resources Committee, said: “This new contract will offer the Council and all the staff a number of interesting opportunities for new, improved and flexible ways of working in the future and allow significant investment in new ICT systems and infrastructure for both corporate and school curriculum ICT. It will deliver significant efficiency savings - £6.76 million over the next five years – and cut the carbon footprint of the Council through reduced carbon emissions and energy consumption.”

Amnesty International (Amnesty) has signed a contract with Claranet, a managed services provider, to support its website and social networking activities.

The contract has been signed as part of Amnesty’s digital communications strategy, which aims to grow its online presence and reach out to members more effectively through channels such as blogs, videos and its social networking site. The charity anticipates that the new contract will bring about cost savings and reduce the time spent by the IT team on administration and maintenance.

According to the charity ‘Having a strong online presence is essential to [its] continuing fulfilment of its mission ‘to conduct research and generate action to prevent and end grave abuses of human rights and to demand justice for those whose rights have been violated.’’ An example of this is demonstrated in its gathering or real-time news and information via video footage, blogs and forum updates posted by individuals around the world as and when acts breaching human rights occur. This allows Amnesty to respond straight away, communicating news and updates to its members and online communities in order to organise protests, petitions and forums designed to support its human rights campaigns.

According to Amnesty's head of IT, Kamesh Patel, online properties were previously managed by multiple suppliers. This situation was complicated and demanding to manage and made for an inadequate basis from which to build a greater online presence. “As we upped the ante online, it became clear that a hosting platform that could guarantee uptime, high levels of capacity and built-in flexibility would be, literally, mission-critical,” he said.

“By consolidating our hosting infrastructure and outsourcing the management to Claranet, Amnesty now has in place a secure footing which we can build on to realise our digital communications ambitions,” said Patel. “We are now well positioned to continue expanding our web presence and provide the most up to date information on world events to our online community. Claranet has eliminated our hosting complexity, freed up internal resources and provided us with a platform which will serve us well into the future.”

Are your nightmares plagued with IT security concerns that see you waking up in a pool of sweat, fearing that certain files or information could get into the wrong hands?

They are? Then the Round-Up suggests you either see your doctor about getting some sedatives or simply pursue a more exciting lifestyle! No, not really.

IT security anxiety is not an affliction exclusive to you and I. It seems that despite an increasing trend of IT outsourcing, confidence in supplier security remains low in the UK. Apparently a survey conducted by YouGov found that most IT managers (89 percent) said they outsource at least one IT system, but 20 percent believe these are less secure than those run in-house.

Despite these security concerns, 31 percent of companies plan to outsource more in the coming year, according to a separate outsourcing study by PA Consulting. So good news from our perspective!

True to form, the sourcingfocus.com news room has been awash with news of new IT outsourcing contracts being won. The biggest contracts seem to be coming from the UK and the US. So apparently fear plays little part in the contracts end-users are prepared to sign. Again, more good news.

The biggest contracts in the UK this week were signed between Middlesex University and IBM and HM Revenue and Customs through Capgemini.

Middlesex University signed a five-year contract with IBM to upgrade and manage its IT infrastructure and provide disaster recovery services. It appears that the contract was signed as part of a green initiative by the University. The new IT infrastructure will see a reduction in the power and space requirements of its on campus machine rooms, helping it to meet government energy saving targets.

The other big UK agreement was announced by HM Revenue & Customs (HMRC), the UK’s tax authority. HMRC agreed to channel all core external IT spend through it’s current contract with Capgemini. Major subcontractors include Fujitsu and Accenture.

As for the UK’s erstwhile cousins across the pond, the U.S. General Service Administration (GSA) signed a contact with CGI and U.S. Homeland Security has signed a contract with CSC.

The contract signed by the U. S. General Services Administation is another five-year IT outsourcing contract. The contract with CGI has an estimated value of US$32 million and will see the CGI data centre hosting and providing application management support to GSA’s Integrated Financial System.

Finally, the U.S. Department of Homeland Security has signed a contract with CSC to provide information technology infrastructure and cyber support to the National Protection and Programs Directorate’s Office of Cyber Security and Communications.

A positive week for IT outsourcing contracts then. Hopefully this will serve to satisfy end-users fears regarding IT safety. All that is left to say is sleep easy.

QBE, a leading international insurers and reinsurers, announced a strategic agreement with IBM to transform and manage the IT infrastructure of QBE’s UK and Western European offices.

As part of the contract, IBM will develop and maintain QBE's IT support services including its helpdesk, desktops, data centres, LAN, WAN and disaster recovery arrangements. IBM's Portsmouth data centre will manage business support and QBE’s virtualised server estate which will also reduce QBE’s carbon footprint.

Kathy Lisson, COO QBE European Operations, said; “The agreement with IBM underpins QBE’s European transformation of operational support services by delivering a scalable operations platform and raising the service levels for our global operating platforms, particularly in the area of disaster recovery. I am delighted that, after a rigorous tender process, we have appointed a world-leading partner of the calibre of IBM to work with us at QBE.”

Wipro released its revenue results for the second quarter last week. Perhaps not surprisingly it reported that its IT services revenue in U.S. dollar terms had declined by four percent to US$1.1 billion in the quarter against the same quarter last year.

It also revealed that the company's IT services revenue in Indian Rupees for the quarter was higher by five percent from revenue in the same quarter a year ago, because of exchange rate gains. These gains will have an obvious negative effect on offshoring contracts to the country. If one of India’s largest outsourcing providers is experiencing a plunge in revenues, what indication does this have for the omnipotent Indian outsourcing industry as a whole?

It is not only the fate of Wipro that has experienced ramifications from the all-consuming economic depression. Tata Consultancy Services, India's largest outsourcer reported earlier this month a fall in revenue. Similarly, Infosys Technologies, India's second largest outsourcer, reported a decline in revenue. It seems it is a fruitless pursuit when trying to avoid the recession’s unavoidable hold, even in an industry that’s primary focus is to cut costs and increase efficiency.

Ironically it was the spectacular end of the dotcom boom which resulted in the rise of offshoring IT services to lower-cost destinations. Dr Roger Newman, European vice president, Mahindra Satayam concurred; ‘This gave real impetus to the Offshoring boom’. This recession, however, is not treating the offshoring industry so kindly.

David Skinner, a London partner at Morrison & Foerster’s Global Sourcing group explained that ‘Indian providers have suffered an offshoring backlash from the USA and UK because some companies do not want to be seen to be exporting US/UK jobs to India’. He also highlighted the Satyam scandal as contributing to the negative view held by the West about offshoring.

The apparent decline in offshoring processes to India has also resulted in the emergence of new sourcing trends. Converged solutions specialist, Intrinsic Technology Ltd (ITL), has seen a 40 percent increase in companies choosing to implement permanent home-working for employees.

Dave Griffiths, head of the ITL Unified Communications Business Unit, commented on this trend: “Many businesses looking to avoid large overheads and promote green credentials are turning to homeshoring instead of offshore outsourcing as it offers improved manageability.”

All though it seems that all of this doom and gloom is contributing to similar negative predictions about Indian outsourcing circulating the press, there is still a glimmer of hope. Technology Partners International (TPI), an outsourcing consultancy, reported earlier this month that there is pent-up demand in the global outsourcing market that has been deferring decisions in the economic recession. Providentially, TPI expects that the market will begin to improve over the next six to nine months.

Skinner agreed with positive predictions explaining that ‘in ITO, India remains very highly skilled and well priced and so deals continue to be won there’. He continued, ‘Indian companies are also winning more Indian local work and trying to expand their operations in other countries such as China’.

It does look as though the economic downturn has had an unavoidable negative effect on the Indian outsourcing industry. It has also resulted in the diversification of the industry and its offshorings. However, although change is inevitable, the pessimism that has plagued the giants of Indian outsourcing’s revenues will be short lived. The Wipro effect is just a spot in a vast ocean, an ocean that is gaining scope and depth.

Yesterday, Capgemini announced that it is to make a "major investment" in its Business Information Management (BIM) service line, including the hiring of an additional 3,000 consultants and the creation of a Centre of Excellence in India, staffed with 1,000 specialists.

I was interested to find out more and was able to track down Paul Nannetti, the newly announced general manager of Capgemini's global BIM service line, just as he was about to board a plane.

I started out by asking him a little bit about the BIM service line and his new role. He explained that this is the area of Capgemini that assists clients in managing their information lifecycle - the capture, cleansing, analysis and presentation of data, both structured and unstructured, so that business can measure their performance against internal goals and to decide on new strategies. In other words, it's a set of services that tend to fall under the umbrella term 'Business Intelligence'.

While this is a new role for Nannetti, he's been at Capgemini for 15 years. Most recently, he has spent two years working at group level on the company's industrialisation strategy - the way it turns experiences from individual projects into a recognisable 'product' that can be offered to other clients - and on introducing remote offshore delivery centres in India. Prior to that, he was head of consulting in continental Europe for two years. He's also ran the company's Nordic business, its global life sciences practice and its European CRM practice.

So why has Capgemini decided to increase its focus on and investment in BIM right now? "This is a very hot area right now," he told me. "Our technology partners are investing heavily to develop new solutions in this area. Our clients have many challenges in this space, but see many opportunities in conquering them, too."

Nannetti gave me four reasons why companies might hand their BIM processes to Capgemini:

1. They want to tap into the expertise of consultants who have delivered BI in a range of different companies and industries. "These consultants know what works and what doesn't," he said.

2. They require help in navigating the complex and crowded market for BI tools. "We have strong relationships with all the major suppliers in this areas and many of the less major ones - but we bring an objective, technology-agnostic perspective to the decision.

3. They need someone to help with the "translation work" between business people and IT people - so that the information requirements of the business are fully met by the systems and technologies at its disposal.

4. They want to take advantage of the cost efficiencies available by offshoring some of the work involved in BIM.

But is business intelligence work a suitable candidate for outsourcing, I asked. After all, most companies still prefer to outsource tasks that they believe are not core differentiators for them - what could be more core than managing performance and identifying new opportunities?

Nannetti explained that, in many cases, companies will look to Capgemini to take over a significant portion of the IT work; the development, implementation and running of systems; and the production of reports. "But the design of reports and the interpretation of the information they contain certainly needs to be in the hands of business analysis specialists and these will often be in-house personnel," he said.

The India-based Centre of Excellence won't be a single location. It will primarily be based in Mumbai, but work for financial services companies will be carried out in Pune. Staff in these locations will also be supported by staff in Chennai, Hyderabad and Bangalore.

By Dr Roger Newman, head of UK Manufacturing and Digital Convergence Relationship Management at Mahindra Satyam

Recessions drive change and force companies and countries to be more aggressive in order to survive. Each recession is different in terms of cause and response but one thing for sure is that significant changes will occur .The first recession I lived through was back in the 1970’s. I started work in the year when the UK was working to a 3 day week due to the Oil shocks and rampant union activity. At the time a three day week seems like a pretty reasonable start to my working life! However the subsequent years witnessed a dramatic restructuring of the UK’s industrial and services base, one that equipped it to survive and prosper in an ever competitive global market.

The last economic decline in 2001/2002 was caused by overvalued online-based companies, leading to the infamous dotcom boom coming to an abrupt end. As a result, businesses started to offshore IT services to lower-cost destinations to cut costs. This gave real impetus to the Offshoring boom. According to a recent report by analyst house Gartner ‘Gartner on Outsourcing’, today’s economic crisis could drive a similar trend in the way IT services are delivered. There is no doubting that this current economic downturn has driven new ways of providing and pricing IT outsourcing much like the bursting of the dotcom bubble increased the take-up of offshore services.

Although some cautious organisations remain wary of outsourcing following this recession, strong evidence suggests that companies that invest in outsourcing now will benefit when the market finally beings to pick up. For example, businesses will be able to use IT and business processing outsourcing as transformational catalysts to address operational issues and most importantly, cut costs. Additionally, their retained professionals will improve their focus on core business, i.e., strategic, issues. Furthermore, for organisation’s still feeling the after effects of the global economic slump, outsourcing can still help improve the balance sheet; raise cash by selling existing assets and operations to suppliers, and eliminate many operational costs.

So what will be the main changes driven by the current recession? My belief is that the current recession will just accelerate some trends that were already present i.e.

a) Pricing based on outcomes with a trend towards companies outsourcing the compete process, not just the underlying IT.

b) Consolidation of suppliers. Companies will shrink the number of suppliers they have providing the survivors with a bigger share of the budget in return for aggressive outcome based pricing.

c) As a result of the above we will see a reduction in the number of IT service providers. There will be a consolidation into a few large companies who can provide the full range of IT services and some smaller providers of niche technologies or Industry specific solutions.

HM Revenue & Customs (HMRC), the UK's tax authority, has agreed to channel all core external IT spend through it's contract with Capgemini. Capgemini will manage the contract via it's subsidiary, Capgemini UK plc, with major subcontractors Fujitsu and Accenture. The contract agreement follows a previous five-year contract and will run until 2017.

As part of the agreement a transformation program has been established that will see investment in modern, more flexible, technologies to better meet the needs of HMRC’s integrated organisation and drive cost savings, which will be realised from financial year 2011/12. Under the revised agreement, Capgemini, Fujitsu and Accenture have committed to save £110 million a year for HMRC, in addition to the £70 million per annum savings committed in 2007.

Lesley Strathie, Chief Executive, Permanent Secretary for HMRC said: “HMRC and Capgemini have worked together to achieve outstanding savings for the Department. This is just one of the ways HMRC will be reducing operating costs and it signals the intent to bring IT costs down as announced in the 2009 Budget."