Industry news

Worldwide IT spending is on pace to total US$3.2 trillion in 2009, a six percent decline from 2008 spending of US$3.4 trillion, according to Gartner, Inc. Continued weak IT spending because of the economic situation combined with the effect of exchange rate movements has resulted in Gartner lowering its 2009 forecast from its 1Q09 projection. In March of this year, Gartner had forecast 2009 IT spending to decline 3.8 percent.

"While the global economic downturn shows signs of easing, this year IT budgets are still being cut and consumers will need a lot more persuading before they can feel confident enough to loosen their purse strings," said Richard Gordon, research vice president and head of global forecasting at Gartner.

"The forecast decline in spending growth for the hardware and software segments in 2009 has almost stabilised, and only minor downward revisions have been made to these forecasts this quarter," Mr. Gordon said. "However, the full impact of the global recession on the IT services and telecommunications sectors is still emerging, and forecast growth in these areas has been further reduced significantly. Moreover, the rise in the value of the U.S. dollar against most currencies in recent months will have a material downward impact on 2009 IT spending growth, which by convention we report based on U.S. dollars."

All four major segments of IT — hardware, software, IT services and telecommunications — will experience declining revenue, something that did not happen in the 2001 downturn. The computing hardware segment will experience the steepest decline in 2009, with spending projected to decline 16.3 percent. The software segment will show the slightest decrease in 2009, with spending forecast to drop 1.6 percent.

Additional information is available in the Gartner report "Gartner Dataquest Market Databook, June 2009 Update." The report provides detailed regional data for worldwide IT spending through 2013.

Under the agreement, EDS is managing the American Express end-user desktop computing environment and its global voice and data networks. In addition, EDS will provide on-site services for about 60,000 employees in more than 130 countries around the world.

Matthew Robinson, Chief Technology Officer of American Express, commented, “Our goal is to drive American Express’ growth, innovation and customer service using secure technology that enables a more productive, efficient and collaborative workplace.”

Mark DeBenedictus, Vice President of financial services at EDS, an HP company, added, “American Express was looking for a partner to manage and transform its technology environment for better business outcomes. To do this, we’re combining EDS’ financial services industry knowledge with workplace and network services expertise.”

The Illinois Department of Human Services (IDHS) has signed a five year ITO deal with Affiliated Computer Services Inc (ACS) for the deployment of an electronic payment card (EPC) system. The new system will be designed to improve the distribution of state payments to child care providers and specialised personal assistants.

It is hoped that with the EPC program, IDHS will be able to accelerate payments to recipients by using a reloadable MasterCard(R) debit card accepted by thousands of retailers and at ATMs nationwide. The card will be offered as an option to traditional paper checks for payments to service providers participating in the state's Child Care Assistance Program, which offers quality, affordable child care to families. Additionally, it will be available to personal assistants who help with household tasks and personal care to people with disabilities.

"Our goal with the debit cards is to expedite the delivery of monthly payments to licensed and licensed-exempt child care providers and bi-monthly payments to personal assistants," said Grace Hou, IDHS assistant secretary. "This process will heighten security associated with transactions, and provide easier and less costly access to funds for those who may not have checking accounts."

ACS already serves four million cardholders with 24 EPC programs for state and federal clients, disbursing payments for programs such as child support, Temporary Assistance for Needy Families (TANF), unemployment insurance, disability and state employee payroll. The addition of child care providers and personal assistants will significantly expand the use of EPC services. EPC is also available to healthcare providers as a more convenient method of payment delivery.

Businesses across the globe are under severe pressure to decrease their carbon footprint and make their operations greener and more sustainable. But, with cost pressures stronger than ever, will the current economic climate dampen the enthusiasm for IT companies to proceed with sustainability initiatives?

A recent report by carbon market analyst New Energy Finance (NEF), suggests so. It highlighted that although reduced economic activity due to the financial crisis will decrease levels of CO2, in the long term a lack of funding for carbon-reduction initiatives is likely to have an adverse effect on emission levels. Nevertheless, the importance of reducing carbon emissions is an issue that will not go away, regardless of how the economy stands. As we’re frequently reminded, we need to act now. Worryingly, at the March 2009 Climate Change Summit in Copenhagen, scientists predicted that sea levels could rise by a metre by the end of the century - endangering 10 per cent of the world's population. This new estimate illustrates the crucial need for organisations to take accountability for the environmental impact of their operations.

Businesses are already facing an urgent requirement to comply with upcoming environmental legislation as governments across the world look to reduce humanity's impact. To help them, governments will provide much needed support for sustainable business practices through tax-breaks and incentives. For example, in the United States the green stimulus package recently signed by President Obama, includes $71 billion allocated towards energy and environmental initiatives and another $20 billion for green tax incentives. The aim is to stimulate economic demand and at the same time make it greener, cleaner and more sustainable. Britain, Germany and China are all using stimulus bills to make huge new investments in clean power and drive growth in smarter, more efficient and more responsible ways.

As a knowledge-based industry, IT outsourcing is not considered a major contributor to greenhouse gases compared with greenhouse gas intensive industries. However, the industry’s major players often have huge numbers of employees (over 63,000 in our case) who are distributed throughout the world, so there are opportunities to generate significant internal carbon reductions. At Cognizant, our aim is to reduce waste and improve natural resource productivity to reduce operating costs and green house gas emissions. These savings that can be passed onto customers, and lay a foundation of return-on-green-investment to prepare companies for upcoming regulation.

In addition to being green themselves, IT service providers now have to be prepared for environmental measures to be included in contract negotiations. Providers and their customers – the end-users – need to be clear on exactly what they want to achieve. Consider the following example; a company is trying to run its business as sustainably as possible. It decides to outsource a portion of its IT function, which currently contributes 100,000 tons of green house gases (GHG) per year. When it moves the work to the outsourcer, ideally they should meet the company’s business’s Service Level Agreements (SLAs), and should also be able to perform the work at a reduced level of GHG emissions, say 80,000 tons. If the outsourcer is less efficient and does the work at 110,000 tons, then the decision to outsource has actually increased the overall GHG emissions and is contradictory to their sustainability goals.

By collaborating to formalise targets at the planning stage, all parties can make sure that any goals set out in the SLA are tangible and realistic. This means that progress can be easily measured, reviewed and redefined as required.

In the public sector this has been formalised, with the UK government announcing last year that sustainability would be a factor in all procurement decisions. However, it remains an important issue in the private sector too. Government regulation and concerns about corporate accountability mean companies need to pay attention to sustainability, even if the recession has pushed it down the agenda. A survey conducted as part of The Brown-Wilson Group’s Black Book of Outsourcing revealed that 21 per cent of European and American companies that outsource have already added green elements to their contracts, with a further 36 per cent wanting to switch to a greener IT partner over the following 12 months. With this in mind, outsourcing providers who ignore the environment do so at their peril.

An effective first step in any sustainability process is to focus on reducing the demand for energy through conservation efforts; this yields the highest immediate environmental benefit and return-on-green-investments for both individuals and corporations. A McKinsey study has estimated at a global scale that there is $900 billion in energy savings, which could be captured with $170 billion in efficiency investment. Energy efficiency is now frequently referred to as “the fifth fuel” since it represents such a tremendous opportunity to reduce the consumption of the other four primary fuels: coal, oil, natural gas, and nuclear.

When Gartner included Green IT in its Top 10 Technologies for 2009, it suggested that shifting to more efficient products and approaches can allow for more equipment to fit within an energy footprint. Gartner also warned that organisations should consider the impact environmental regulations will have on the business and consider alternative plans for data centre and capacity growth. Outsourcing firms present a more sustainable option here, since they will generally use more efficient data centres and can exploit economies of scale.

Virtualisation also appeared in the Top 10 Technologies for 2009, both in terms of server virtualisation and virtualisation in storage and client devices. While virtualisation isn’t a panacea for carbon reduction, and if poorly managed can create a complex IT environment, it’s also a major tool in driving down overall IT costs and environmental impact. Cognizant has virtualised over 450 servers in its data centres to reduce energy consumption, virtualising eight per cent of current servers with the goal to reach 80 per cent over next three years. As a result of virtualisation, Cognizant reduced server procurement by 35% in 2008, despite growing by 32%. We’ve used our knowledge in this area to directly help our customers. We worked with a major PC peripherals manufacturer to reduce its number of servers by more than 50 per cent through server virtualisation. We also implemented a programme to help a major publisher reduce its data centre energy consumption by 40 per cent, resulting in comparable energy savings and a big reduction in carbon emissions.

There are, of course, less complex measures that can also be taken, such as individual power consumption, paper use and travel. These projects are often relatively simple to implement but provide dual benefits – a reduction in carbon emissions and significant cost savings. Service providers can also put these into practice within their own organisations, generating further savings that can be passed onto customers.

One such project Cognizant has implemented is a power management program that puts desktop PCs in hibernation mode after-hours. It’s a simple step, but one that will save Cognizant an estimated 18.75 million kWhs of electricity annually, resulting in $2.5M annual cost savings and an estimated 17,500 metric ton annual reduction of carbon emissions – the equivalent of flying back and forth between New York and India over 5,500 times (according to The Carbon Neutral Company).

When it comes to paper, any company irrespective of size can re-evaluate the need for printing and introduce simple measures that make vast differences. For example, Cognizant implemented a green BPM solution for a large pharmaceutical company, helping it save 1.2 million pages annually and resulting in a CO2 emissions reduction of approximately 20 metric tons annually.

Business travel in a global company can also be a major source of emissions. Along with others in our industry, we are working hard to reduce this. Cognizant is focussed on reducing its travel by encouraging the use of collaborative tools such as online meetings and telepresence. For example, we hold an annual IT management meeting in India to formalise plans for the coming year. This year, we conducted a virtual offsite meeting instead, using Microsoft Live Meeting to virtually bring together 25 of the management team from around the globe. Achieving a 10 per cent reduction in travel would lower our carbon emissions by 2,800 metric tons annually.

Environmental legislation will only increase over the next few years as the effects of global warming become more apparent. As legal requirements become more complex and far reaching, demand for green outsourcing partners and engagements will increase.

The business community needs to understand that going green and cutting costs are not mutually exclusive. Implementing a green initiative can be difficult as it requires a new mindset across an entire company – but often even simple steps can reap significant financial benefits, and the best outsourcing firms can often help. As inherently globalised businesses developing best practice across many fields of IT, outsourcing providers can draw on their experience of working with blue-chip IT firms and instil the knowledge and process developed internally within their client base. With increasingly demanding legislation expected over the next few years, companies should prepare now and let IT lead the way in their green programmes.

The routine outsourcing of core elements of business by European and North American companies to developing economies in Asia has had a dramatic macro-economic effect.

During the last fifteen years, western companies (whether they realise it or not) have been funding the R&D of the Asian region and have effectively invested in the creation of a new breed of competitor. In particular, India has emerged as a significant economic force in its own right. Although the effects of the global economic climate are still being felt in the region, with the IT sector likely to miss its target of $60billion worth of exports by next year, India is faring better than most, and its economy is expected to grow at six per cent this year, according to the Reserve Bank of India.

Whereas India was originally positioned as an outsourced off-shore low-cost destination by western firms, ambitious indigenous Indian firms are rapidly altering the dynamic of the outsourcing sector by becoming major providers of international services in their own right. This can be clearly seen in the IT sector, with Indian service providers such as Infosys, Cognizant and Wipro Technologies now considered important IT players on the international stage. Interestingly, Wipro Technologies recently announced its intention to increase its US and European staff – the company currently employs 97,000 people of which about eight per cent are outside India.

There is no reason to suppose that other sectors won’t soon follow suit. For example, consider the Indian telecommunications sector, which has a domestic market of 1.2 billion people with a reported 15 million new mobile telephone users signing up each month . Indian mobile operators are currently driving growth by offering call rates for less than Rs1 per minute, and with the new government in place, India is poised to see 3G, WiMax, unrestricted VoIP (Voice over Internet Protocol), number portability, MVNOs (mobile virtual network operators), and large investments in infrastructure that should augur well for the tech sector in the long term. Likewise:

• Reliance Communications acquired Vanco in the UK, a respected provider of VNO (virtual network operator) services to European corporate customers until running into financial difficulty

• Tata Communications is building a global fibre network

• Bharti Airtel is bidding for MTN in Africa.

This solid growth and investment in the face of global recession are indicators of India’s emergence in the telecommunications arena. Whereas Asian telecommunications operators may not currently compete to provide western multinationals with global managed network services, it is probably only a matter of time before this market is shaken up by the emergence of some new contenders from the far east. Vendors and consultants in the West must take note.

Atos Origin, the Worldwide Information technology (IT) partner for the Olympic Games, is rolling-out the first online accreditation system in co-operation with the International Sports Federations, Vancouver Organising Committee (VANOC), immigration agencies, and several law enforcement agencies. Over 90,000 people will require privileged access to the 2010 Olympic Winter Games. This marks the first time the system has been launched completely online and demonstrates the critical role that technology now plays in enabling sustainable Games.

The accreditation system for the 2010 Olympic Winter Games identifies the accredited participants for events, manages registration processes and assigns access and other rights to individuals. In addition to IT capabilities provided by Atos Origin, the accreditation process includes extensive security and immigration verification, as the 2010 Olympic Winter Games accreditation badge also serves as an entry visa for Olympic family members for the duration of the Games. The system will generate approximately 90,000 accreditation badges for approved 2010 Olympic Winter Games participants a few weeks before the games begin. The deadline for applications for accreditation is October 1, 2009.

Previously, applications for accreditation were printed and sent from around the world. The online accreditation system is one of Atos Origin’s many initiatives to deploy technological solutions that help the organising committee deliver more sustainable games and significantly reduce the amount of paper used during the games. Another sustainable initiative introduced for the 2010 Olympic Winter Games is hosting the Volunteer Portal completely online.

“Atos Origin continues to demonstrate a great deal of initiative and imagination in coming up with tailor-made solutions to meet our needs for IT systems and infrastructure for hosting the Vancouver 2010 Olympic Winter Games,” says Ward Chapin, VANOC’s chief information officer. “Through great initiatives like the online accreditation system, Atos Origin is also significantly contributing to our goal to make the Games as environmentally responsible as possible.”

The Atos Origin contract with the International Olympic Committee (IOC) is the largest sports related IT contract covering: Salt Lake City in 2002, Athens in 2004, Torino in 2006, Beijing in 2008, Vancouver in 2010, London in 2012, Sochi in 2014 and the 2016 Olympic Games. Atos Origin has primary responsibility for Information Technology, which is related to consulting, systems integration, operations management, information security and software applications development for the Olympic Games.

The European Commission (EC) has awarded Capgemini Consulting, the global strategy and transformation consulting brand of the Capgemini Group, a four-year contract to provide eGovernment supply-side benchmarking for all European Union (EU) Member States plus Norway and Iceland.

The contract is an extension to a previous seven-year deal with the European Commission. The benchmark study has been conducted annually since 2001, assessing a total of more than 14,000 public agencies in 31 countries. It reveals, in a comprehensive ranking system, which European countries have the most mature eGovernment services in place.

eGovernment is widely seen as an enabler for public sector transformation, giving European citizens and businesses easy access to modern and efficient governmental services online, wherever they are, at any moment in time. The objective of the survey is to provide a benchmark for the different European countries to compare progress and share best practices relating to this issue.

The survey is a core part of the i2010 initiative launched in 2005 by the European Union to bring the benefits of the information society to all Europeans citizens.

The conclusions of this benchmark study will be published by the end of 2009.

Lloyds TSB have made a splash in the UK headlines this week. That said, you are probably thinking, what bank hasn’t been in the media recently? However, Lloyds are ruffling feathers for an entirely different reason to the economic doom bank stories of late. The Daily Mail has reported that the bank has been using foreign contractors, namely from India, to replace British IT workers. This has not been confirmed by Lloyds but what has been confirmed is that current IT workers have been told they must take a 15 percent pay cut. ComputerWeekly.com has also reported that the Lloyds Banking Group has cut an extra 2,100 jobs with the worker’s union calling for the bank to stop offshoring jobs. It sounds like Lloyds are in desperate need of some damage control PR.

So it seems the British press is not overly comfortable about the high profile outsourcing contracts recently being undertaken. In reply the bank announced its decision “…not to offshore any further permanent existing operational roles, therefore keeping roles in the UK whenever possible."

Lloyds, you may not be offshoring at the moment, but I can think of just a few companies who are. Some interesting deals have hit the virtual sourcingfocus.com press this week.

Affiliated Computer Services (ACS) has announced that it will supply an intelligent ticketing system for the first tram system in the Persian Gulf region. This marks the company’s first major contract in the Gulf and follows ACS’ new Dubai offices.

Another contract that is going ahead this year is between the BT Group and Tata Communications Ltd. The two world’s largest providers of voice and IP services have signed a voice services agreement as part of a global supply arrangement.

Through the five-year agreement, Tata Communications will become BT’s primary supplier of International Direct Dial (IDD) and other voice termination services outside BT’s own footprint countries and BT will become Tata Communication’s main distribution channel for its IDD traffic into the UK, eventually expanding into other markets across Europe.

The Round-Up will have to be especially on the ball this up coming week on all news outsourced related. It will be interesting to see how outsourcing contracts are being perceived in the media following the publicity Lloyds has received. Good press or bad press, it’s never a dull moment in the world of outsourcing.

Join me next week to find out what news the Round-Up has managed to stumble across. Let’s hope things look brighter for offshoring too.

Green IT has been on the radar of service providers and end users for some time now. Increasing regulations involving carbon reduction, energy efficiency and environmental impact have meant that green IT has crept up the boardroom agenda and is now probably one of the most discussed topics amongst C level executives. Analyst firms have recently been getting their teeth stuck into the issue and this week Datamonitor released a report entitled ‘Can green IT bloom in an economic downturn?’ CFOs are not keen on being put in a position where they have to hand over money in response to meeting government regulations, but would they change their mind if they could see that money making its way back into the coffers, with interest?

Over the past few years, green strategies amongst businesses have predominantly been half hearted initiatives. Organisations have been keen to appear to do something rather than to actually implement an effective strategy. Greenwashing became synonymous with big conglomerates and corporations were found to be making outrageous false claims about carbon neutrality, green infrastructure and other green fingered exploits.

Now however the paradigm has shifted. Greenwashing has lost its impact as stakeholders and the public have wised up to the real issues at hand and are adept at spotting phoney strategies.

Of course, any investment in time or money into the green agenda is spurred on by increasingly tougher government (or EU) legislation and not some altruistic need to save the planet. However, businesses are starting to explore whether there is a return on investment with initiatives which previously would have had CEO’s gritting their teeth as they watched their money go down the green drain. Green IT has become one such area where investment may mean efficiency and cost savings for many firms. The Datamonitor report has highlighted that organisations do not see green IT and cost-effective IT as mutually exclusive. Here is why:

The first area where savings are made is energy costs. Greener technology means less energy is used and the dial on the electricity meter doesn’t spin as fast. This may seem like a small saving, however when you consider the billions of pounds spent in keeping the world’s data centres running, a 10-25 percent energy saving means big bucks.

For vendors, investing into green IT may be one of the best moves they make in terms of winning new business. The majority of public sector contracts have rules and regulations with regards to the green credentials of a potential third party supplier. By investing in green technology, suppliers can make themselves as attractive as possible to green fingered government officials. Private sector end users are also not exempt from environmental regulation.

The Carbon Reduction Commitment is due to come into force in 2010 and businesses of all shapes and sizes will need to be aware of their emissions. Data centre outsourcing will increase as end users look to cut back their carbon by outsourcing it to the greenest suppliers. There is plenty of opportunity for vendors pushing a green USP.

Cloud computing is frequently being considered as a green IT tool. Companies are considering this virtualised route as a way of not only reducing the amount of old and inefficient servers they have, but also as a way of allowing employees to work anywhere and everywhere. Working from home (hotels or pubs are also very popular) schemes are allowing businesses to totally streamline the amount of IT they have and in turn reduce their carbon footprint.

Vendors are offering bespoke cloud computing applications that allow work to take place on a huge scale, meaning thousands of employees are able to work seamlessly with one another without having to switch on the office lights. Combine this with the reduction in emissions as a result of fewer workers needing to make the daily commute and cloud computing seems like an attractive green route.

Of course, all this comes at a price. Initial investment into any new technology is costly and if done without careful forethought can cause disruption to business. During times when IT budgets have been cut, the last thing on an IT manager’s mind would be to spend resources on helping the environment. However, businesses need to thoroughly investigate the ROI opportunities associated with clean technology and properly implemented green strategies. If people can show that being green can bring monetary benefit to a business then CFOs up and down the country will be prepared to listen to a proposal.

Displaying ROI in green technology will benefit both the business and of course the one thing that tends to be ignored in all of this, the planet.

The law is truly an ass, to paraphrase that famous Dickensian line. Though outsourcing in its current form was not prevalent at the time Oliver Twist was written, Dickens could not have known how perpetually right his turn of phase would be. One of the areas keenly affected by the ins, outs and peculiarities of the law is outsourcing. The trouble is that the law in many countries is based on a body of legislature hundreds of years old while outsourcing as a business process has only come to prevalence over the last twenty years. In effect, the law is still catching up with the outsourcing world, and changes in ‘standard business’ legislation can have unexpected and costly effects on the industry.

A recent example hailed from the European Commission, the part of the EU responsible for new legislative proposals. An update to the 1990 Merger Regulation, which defines the Commission's regulatory role for mergers, saw certain large outsourcing deals brought into the category of mergers and acquisitions. This means that where an outsourcing supplier is buying all or part of the IT assets being outsourced by a company (that has sales over $6.8 billion globally, $340 million in Europe and potential sales in excess of $340 million a year) could go to the European Commission for approval. This change extended certain deal negotiations significantly and even made it possible for suppliers to face anti-competitive scrutiny if they make too many acquisitions in the same sector

Phil McDonnell, head of competition at London-based law firm Addleshaw Goddard, comments: "You have got to build in some time into your procurement to give the supplier time to go through the hoops. There will also come a point where a regulator will say a supplier has too many deals in the same sector," he said. "I don't think we are at that point yet, but that is where it is heading."

This is clearly a big alteration and there have been many other laws which also force significant changes. Another such area was TUPE, the employment legislation designed to protect employees from suddenly finding themselves out of a job when, for example, a company becomes overly reliant on one client and then the client transfers work elsewhere. The regulations stipulate that an employee that has been working entirely on that one client be automatically transferred to their employment. The employee does not have to go but can if he or she chooses. Of course such changes had and still have big implications on the outsourcing world, for example in wrangling over accommodation of staff transfers, redundancy payments, and pension arrangements.

“The application of TUPE can have a very significant commercial impact on the deal itself, both on entry and exit if there are a number of employees whose employment (and therefore the liability to pay wages) transfers with the outsource,” commented Duncan Pithouse, Partner at DLA Piper.

The fact that the outsourcing industry is still relatively young means there is not really any legislation that is specific to the outsourcing space. It is the sector-specific and overarching business legislation that outsourcers need to be aware of.

“Whilst traditionally there has been no "outsourcing legislation" per se…there is a raft of legislation and regulation that affects an outsourcing arrangement, and which can apply on a mandatory basis in all of the countries that are "in scope" of the outsourcing deal, and that differ from deal to deal,” commented Pithouse

Indeed, legal hotshots in the outsourcing space make it their business to stay on top of the implications of new legislature on the industry. Meaning there is usually a lot of speculation and commentary in the run up to changes which in turn helps outsourcers plan ahead. So what are the key issues that the legal world is currently seeking to address?

It’s impossible to get through an article nowadays without some reference to the financial crisis, and to do so would be crass. The impact of a lack of ready finance has driven big changes in outsourcing.

“We have seen that the fall-out from the economic crisis of the past 18 months, and its particular effect on certain vendors, has driven a much greater appreciation of the risks involved in outsourcing key functions to an external party, which in turn has led to a greater focus on appropriate contractual protection, especially in relation to supplier financial standing and termination rights,” commented Mark O'Conor, another partner at DLA Piper.

Trust in business is a rare thing nowadays and outsourcing vendors are not escaping the spotlight. MiFiD, an update to the regulation of UK financial instruments that came into force last year again extended the necessary outsourcing due diligence process.

“The Markets in Financial Instruments Directive (MiFID) has amended the Financial Services Authority's rules on what constitutes a material outsourcing for a regulated financial services entity. As such, certain sourcing and outsourcing arrangements must now feature all of the provisions listed in Chapter 8 of the FSA Handbook,” O’Connor added.

An additional effect of the financial crisis has been a resurgence in protectionist thinking brought on by continuing mass redundancies. The more prevalent redundancies become, the more they are covered in the media which puts outsourcing directly on the agenda. Many companies are being forced into more outsourcing and specifically offshoring, to ensure basic survival. Though outsourcing is a business necessity in most cases, the public do not generally like it and politicians follow suit.

“[We are seeing] a tightening of immigration rules - for example the new requirement that overseas applicants for skilled employment have increased levels of qualification (e.g. a Masters Degree in the case of solicitors). This inhibits the ability of outsourcers to move the most skilled people to the locations at which they will prove most effective except on a short-term basis,” explained, Partner, at Pinsent Masons: Iain Monaghan.

While such changes, this a UK example, do not block sending jobs offshore, they certainly make things more difficult for outsourcing and offshoring to operate effectively. The rules also necessitate an increased understanding of rules around visas and work permits in outsourcing circles.

Outsourcers have clearly had to deal with a lot to derive those wonderful cost and skill benefits they covet. But there is something else rapidly breaching outsourcer’s legal horizons that is possibly the biggest re-thinking of the business they have faced to date. Environmental issues have been bubbling away on business radars for a long time now but years of mass inaction from government and business have brought the law into play.

“The push towards "Green IT" brings in a whole host of European and worldwide legislation linked to environmental concerns and climate change. These include the Batteries Directive, the suite of Directives known as REACH (concerning the regulation of certain chemicals) and the revisions to RoHS and WEEE Directives (the "lead directive" prohibiting certain non-biodegradable substances like lead solder in computers) which are relevant to ITO to the extent that these clauses need to be expressly included in the agreement.” Duncan

Legislation linked to the disposal of corporate purchases has been developing for some time and the WEEE recycling directive did cause some turmoil in 2008. The biggest impact of the green wave is still yet to come however. As governments finalise plans for carbon trading schemes such as the Carbon Reduction Commitment planned for 2010, challenges will emerge in the calculation of carbon usage across outsourced relationships. Increasingly green suppliers will likely also prove much more attractive to companies under green governments.

It’s clear that legislative changes provide regular cause for change in the outsourcing industry and also create numerous extra costs. But are the changes all bad? Duncan Pithouse sees it as more of a two way street:

“To the extent the changes drive a greater appreciation of, and treatment of, the risks of outsourcing, the changes are for the better. This simply means that the better prepared both customers and suppliers are, and the more appropriate the contract terms are, the better the ultimate - and long term - deal will be. On the negative side, the changes do mean that outsourcing becomes "harder" and organisations undertaking outsourcing, and those providing outsourcing services, need to have a deeper knowledge of legal landscape for their sector,” he said.

The key then is preparation, preparation, preparation. Outsourcers need to become increasingly legal-savvy and understand exactly which parts of the law, in any country, they are operating in affect their outsourcing deals. An eye on the horizon as new legislation is laid out, is also increasingly important.

“Be as prepared as possible and as early as possible and make sure that the contract is robust enough to protect from a change in law but flexible enough to adapt to changes. Plus the contract should anticipate changes in law and deal with how those changes will be catered for, and paid for. Without express wording, customers and suppliers may find themselves locked into protracted negotiations as to whether compliance with the new law should sit at the doorstep of the customer or supplier,” added Duncan.