Industry news

Blackstone, a large US private equity firm has acquired a majority stake in the IT outsourcing arm of India's CMS Computers.

According to a statement, the new division offers ‘IT infrastructure management and outsourced business services’. The division will serve various industry verticals, including card processing, transaction printing and ATM management for the domestic Indian banking sector.

Rajiv Kaul, ex-CEO of Microsoft India has been appointed as executive vice chairman and CEO of the new company.

Virgin Atlantic Airways has signed a new IT services agreement with EDS, extending an existing 25-year relationship between the companies.

The new agreement will last an initial five years during which EDS will provide Virgin with the next generation of its airline reservations solution, EDS Reservation Services. The system will be hosted and maintained on behalf of the airline. New features to be included are Electronic Miscellaneous Documents (EMD), which allow Virgin Atlantic employees to electronically capture and account for ancillary sales, and Ticket Re-issue and Refund (TRR) software that automates a formerly labor-intensive function and improves customer service.

“We are impressed with EDS' vision for their new reservations platform and how this will enable Virgin Atlantic to exploit a service-oriented architecture (SOA) to provide improved customer services, greater agility and lower costs,” said Mike Cope, IT director at Virgin Atlantic. “This builds on our long-standing partnership with EDS during which time Virgin Atlantic has grown to become Britain's second-largest airline serving the world's major cities.”

Also new to the agreement, EDS will use its airline service-oriented architecture (AirlineSOA) that connects software and systems to better integrate Virgin Atlantic's operations and help meet the airline's unique market needs. Each of these new functionalities helps Virgin Atlantic lower core reservations services costs and add new revenue opportunities.

Banking giant HSBC is axing around 500 UK jobs - including IT positions - following a review of the "current economic conditions".

The bank plans to cut jobs from managerial positions, through to IT, support services, administration, and sales and service staff. The cuts represent less than one per cent of HSBC's 58,000 UK staff.

Paul Thurston, managing director, HSBC UK, eplained: "In the past two months we have looked hard at our business, focussing on removing duplication, managing costs and devoting resources to areas that offer the most potential for growth."

"We deeply regret taking this step, but we consider it essential to ensure our business is operating as efficiently as possible and that we are best placed to deal with the economic downturn and maintain our levels of customer service," he adds.

Swiss bank, Zuger Kantonalbank, has extended its IT services contract with CSC for another seven years. The extended deal is valued at US $33 million

Under the agreement, CSC will continue to provide SAP-based applications services, including development, maintenance and support. Specifically, CSC will continue its 24x7 operation and management of Zuger’s SAP banking platform and add new functionality that enhances system efficiency and increases ease of use.

“With CSC’s support, we can continue to lower operating costs while increasing customer service,” commented Beat Mathys, a Zuger Kantonalbank Management Executive. “This will enable us to further increase efficiency and improve our cost-income-ratio in the highly competitive retail banking market.”

Computer Sciences Corporation (CSC) has signed an ITO agreement with Marconi Corporation plc, a global telecommunications equipment, services and solutions company. The contract is valued at £450 million over 10 years.

Under the terms of the agreement, CSC will support and manage Marconi’s IT help desk, desktop computing, networking and midrange operations; develop and maintain software applications; and provide telecommunications services. The agreement encompasses Marconi IT operations worldwide, with the exception of its Asia Pacific and Middle East regions and the company’s UK-based Interactive Systems business.

Upon compliance with local legislative and consultative requirements, approximately 360 Marconi IT employees across Europe, Africa and the Americas will transfer to CSC in June 2003.

British Telecommunications (BT), a subcontractor to CSC through this agreement, will provide networking services, including local and wide area networking, voice and conferencing services, and global remote access facilities. An additional 40 Marconi IT employees, principally from North America and the United Kingdom, will transition to BT in June 2003.

“This agreement will contribute significantly to our committed cost reduction and efficiency program and allows us to focus on our core business, which is building, maintaining and supporting the networks of the world’s leading telecommunications companies,” said Mike Donovan, Marconi’s chief operating officer. “The Marconi employees transferring to CSC or BT are moving to organizations where IT and telecoms services are their core business. This will give them new and extensive career opportunities and increased exposure to leading-edge practices in IT systems deployment and support.”

Patni Computer Systems, a leading global IT services provider, has won a contract with Akbank, Turkey’s leading bank and the most valuable company on the Istanbul Stock Exchange.

The system integration deal will see Patni implementing Akbank’s new customer relationship management product from Chordiant Software, over the next 16 months.

The new CRM solution will complement Akbank’s existing customer management systems to enable Akbank to enhance its portfolio, campaign and leads management processes. Once implemented, the CRM system will also provide Akbank with a uniform and consistent view of its customers to drive up targeted intelligent sales and improve existing reporting facilities.

Brian Stones, Executive Vice President of Patni said: “This is a great win for us. Akbank prides itself on being an innovator in its field and this new system will enable it to enhance its overall customer relationship management system in order to strengthen and maintain its current position as Turkey’s number one bank.”

Outsourcing in the banking and financial services sector is showing short-term signs of a slowdown for the remainder of the year due to the economic crisis, but the market will likely regain momentum in early 2009, according to the Market Vista: Q3 2008 report on global outsourcing and offshoring activity by the Everest Research Institute.

“Despite a 40 percent increase in transactions by financial services firms during the third quarter, a slowdown is emerging due to delays in initiatives and managements’ keen focus on the economic crisis,” said Eric Simonson, Managing Principal, Everest Research Institute. “In the medium-term, restructuring, integration, and redefinition of sourcing strategies by large financial firms will lead to an increase in project-based work for suppliers and increased pressures on captives.”

The Institute’s quarterly Market Vista reports provide data and analysis of deal trends in the outsourcing and offshoring market, captive model landscape, current and emerging locations, key supplier developments, and key developments across the top 20 financial services companies globally. The report also includes a special section on the Asian market.

Other insights for the third quarter activity include:

• Overall outsourcing transactions increased 15 percent over the previous quarter, valued at about US $3.2 billion in ACV.

• Banking, financial services and insurance firms signed 81 transactions, up from 54 in Q2.

• Momentum from Europe continued to grow with a 10 percent increase in transaction activity.

• Captives saw significant momentum - 24 new announcements, compared to 18 in Q2 and 16 in Q1.

• Indian suppliers are experiencing slowdown pressures; hiring by the leading Indian suppliers dropped 22 percent quarter-on-quarter and 49 percent compared to 2007.

• Central American countries (especially Guatemala, El Salvador, Panama and Costa Rica) are taking active measures to improve their near-shore proposition.

A key development was the inclusion of Unisys Corporation to the list of key suppliers tracked. Overall, supplier investment led to 100 percent increase in new center setup, while M&A activity was 68 percent lower than Q2.

Guthy-Renker, one of the world’s largest direct response marketers based out of the US, has announced a US$531 million BPO contract extension with EDS.

The new agreement, lasting four years, will see EDS provide ‘consumer-direct’ BPO services to Guthy-Renker's growing customer base in the United States, Canada, Australia, New Zealand and other international territories. Services include order and payment processing, warehouse and fulfillment, and call center/customer service.

“EDS remains an important and trusted business partner to Guthy-Renker as we grow our business across new products, channels and markets,” said Kevin Knee, co-president and partner at Guthy-Renker. “As we execute our growth strategy, we rely on EDS' global reach, industry knowledge and technology expertise to help us deliver an exceptional customer experience.”

Capgemini, one of the largest ITO companies in the world, has moved to purchase Empire, a privately-held, Czech-based IT services and consulting company and its subsidiary Sophia Solutions, a local expert in Business Intelligence and Data Warehouse.

Through this acquisition and in line with its strategy, Capgemini will further develop its presence in mature Eastern European countries. The acquisition will add 165 new employees to Capgemini.

Under the terms of the share purchase agreement, Capgemini will acquire 100% shares of Empire and 70% of Sophia Solutions paid in cash. Capgemini will be able to acquire the remaining 30% of the shares in Sophia via call options over the coming years.

“This acquisition represents a significant step forward for Capgemini in our strategy to accelerate growth in our core Eastern European countries,” said Peter Laggner, CEO Capgemini Eastern Europe. “These companies enhance our Technology Services capabilities in our consulting oriented practice in the Czech Republic. We are looking forward to delivering on the promise of this acquisition and with strongly motivated management teams we aspire for a smooth and successful integration of the company into our country unit, region and Group.”

The transaction is subject to customary closing conditions and it is expected that it will close by the end of December 2008.

This week has seen public sector sourcing back in the spotlight. Prime Minister Gordon Brown's speech to the CBI on Monday put global thinking about the world economy at the centre of a new financial order that will emerge as the financial crisis dissipates.

Nationalism and protectionism were things of the past, he said, and global sourcing would be part of a more rigourously managed system.

You know something has changed when that most isolationist US president, George W Bush, has also spoken out against protectionism as he prepares to leave the world stage.

But the problems of home-grown government outsourcing have again been in the spotlight at home as the Information Commissioner wins stronger powers that will force organisations – such as government departments and their outsourcing partners – to tighten up data protection policies.

Information Commissioner Richard Thomas has won the support of justice secretary Jack Straw for tougher powers to investigate breaches of the Data Protection Act, fine organisations for data losses – and inspect government departments without prior consent.

Assistant Information Commissioner Jonathan Bamford hit the nail on the head when he told the Financial Times this week that recent public sector data losses were the concomitant of treating data security as an afterthought rather than as a central pillar of system design. “It was obviously a bit of an accident waiting to happen,” he said.

However, Mr Bamford then shot himself in the foot when he added that organisations should invest more in “privacy enhancing technologies”. No: technology evangelism is the root of the problem, not the solution.

Of course, systems must be secure and protected, but it is their management that is lacking, along with a duty of care to educate every tier of the organisation in data protection issues.

No amount of technology will prevent someone losing a storage device the size of a pack of chewing gum, or having a laptop stolen by an opportunistic thief. The blind faith in technology's ability to secure government while also opening it up to the populace is misplaced.

Put people first, with all their human flaws and inconsistencies, then design management policies around that. Finally add technology.

The outsourcing industry should be well placed to educate government clients, but as we leaned last week at the NOA summit, all too often contracts are run by people who are passing through their departments and lack the expertise to run major projects.