Industry news

Convergys Corporation, a global leader in relationship management, has acquired Intervoice, Inc., for US $335 million in cash at a value of $8.25 per share.

The combined entity will provide clients with a suite of solutions, from a single source, that enhances customer and employee interactions and simplifies operations. With Intervoice, Convergys hopes to extend its leadership position in relationship management adding additional strengths in the software-based interactive voice response, contact center, and mobile messaging technology and applications markets. This position is supported by combining the innovative technology and large, global client base of both companies.

Dave Dougherty, President and CEO of Convergys, commented: “This acquisition is about investing to address the current and future needs of our clients. Convergys is committed to delivering, and in fact enhancing, Intervoice’s product roadmap. Together, we will ensure that all Intervoice and Convergys clients and partners have access to industry-leading technology, professional services, and support solutions that enhance.

News that the Conservative party has commissioned a review of NHS IT policy is welcome. Like it or not, the Tories are increasingly seen as the Government in waiting while Gordon Brown and his Cabinet and ex-Cabinet colleagues conspire to shove prudence back into the cupboard of history.

With a festive period of internecine warfare in the offing on the ruling side of the House, David Cameron has set about seeking learned opinion about how to paint the three-legged, comatose white elephant he may inherit a tactful shade of blue.

This is no root and branch review of the National Programme for IT, however, but it does follow hot on the heels of the Public Accounts Committee's recommendation that NHS IT be thoroughly re-examined. That it is being done by the Opposition is surely an indication that Brown has no wish to generate any more bad news himself.

However, who has Cameron engaged to review how NHS IT will meet patients' needs over the next decade? None other than that venerable and – if I may be so bold – slightly quaint organisation, the British Computer Society, which is to world IT what the British Interplanetary Society is to conquering space (a good egg, a worthy cause, and a noble effort).

The BCS, founded in 1957, a registered charity, and incorporated by Royal Charter in 1984, is the qualifying body for chartered IT professionals.

Its aim to be the leading place for IT-related thinking did not extend to buying the bcs.com domain, however, which belongs to the British Cardiovascular Society. Nevertheless, it revels in its .org status.

Above reproach though the BCS may be, the news is depressing for one simple reason: the last organisation that ought to be reviewing what the NHS wants from its IT is a society of IT professionals. Ask the doctors and the NHS trusts and the admin staff and the nurses!

Engineers know how to build things from the ground up and take them apart again, and can tell you how and why everything works (or doesn't) but they don't have to know why they're doing it. Still, at least Cameron is not engaging a vastly expensive consultancy to do the work.

• Richard Granger has moved to Australia.

Oracle has acquired ClearApp, a supplier of application management solutions.

Leng Leng Tan, Oracle vice president, commented, “With the addition of ClearApp's technology our customers are expected to get continuous and uninterrupted top-down views of their business services and applications”.

The deal is expected to close in the second half of 2008. Until then each company will continue to operate independently.

The Office for National Statistics has selected Lockheed Martin UK to provide IT services for the 2011 Census for England, Wales and Northern Ireland.  The £150M contract was awarded after an extensive procurement process which required the Lockheed Martin UK-led team to demonstrate its ability to provide secure and accurate data capture and processing support services.

Working with the ONS and the Northern Ireland Statistics and Research Agency (NISRA) authorities, the team will design, install and support an innovative system using state-of-the-art character recognition and colour processing for paper census forms. The system will, for the first time, allow for census questionnaires to be completed via the Internet in England, Wales and Northern Ireland.

Ian Stopps, CEO of Lockheed Martin UK, commented: "We are proud to again support the Office for National Statistics in conducting its census. Together, with our industry team, we are committed to delivering a system that enables the government to efficiently and effectively perform the 2011 Census while ensuring that all information remains secure and confidential".Oracle Corporation UK, Polestar Group, Royal Mail, Steria Ltd, and UK Data Capture Ltd.

Lockheed Martin, who successfully provided the data capture elements of the 2001 UK Census, as well as previous censuses for Canada and the United States, has created a consortium of UK-based companies with proven experience. Team members are Broadcasting Support Services (bss), Cable & Wireless, Logica (UK) Ltd.

DGM-Sistemas Lda, an Angola-based IT company, has awarded a three-year contract to Unisys Corporation to help develop and roll out a new citizen ID card program for the Ministry of Justice of the Republic of Angola.

The deal, valued at approximately $22 million, will see Unisys companies develop the back-end systems and biometric ID cards for over 20 million Angolan citizens by 2015.

The aim of the card programme is to reduce fraud and modernise the Ministry’s Criminal Registry.

Unisys will create a centralized citizen registry capable of recording demographic details, digital photographs, digital signatures and fingerprint scans captured at fixed and mobile stations. Around three million records with existing biographic information will be migrated to the new application.

The worldwide application management (AM) market is growing at 7.2 percent according to a study by NelsonHall the independent analyst firm.

Dominique Raviart, Research Manager at NelsonHall, commented, "Application management has undergone a lot of changes in the past years, moving away from T&M to SLA-based provisioning and overall becoming much more industrialized than in the past".

Raviart added, "Clients are now awarding much larger standalone contracts than in the past".

Key findings revealed in the NelsonHall research report include:

• Spending in AM on a worldwide basis will be growing by 7.2 percent. Volume will be up by c.9 percent while price reductions will impact overall spending by c. 2 percent.

• Clients are turning to multi-sourcing and are awarding standalone AM contracts. Simultaneously, the size of those contracts is increasing, including in the past two years several deals above the $1bn landmark.

• Offshore and nearshore sourcing represents almost 30percent of AM spending worldwide. While spending in onshore services will be flat until 2012, client demand for offshore and nearshore growing by 14 percent on average each year. Despite this growth, the delivery of AM services located offshore and nearshore will only account for 38 percent of AM spending by 2012 or around 60 percent in terms of headcount

• The potential for offshoring remains high. Yet it is constrained by public sector reluctance to offshore.

More details of the report can be found here: Nelson Hall AM Research

The IT Services market in India is estimated to grow from US$4.1 Billion in 2007 to US$8.1 Billion in 2011, representing a compounded annual growth rate (CAGR) of 18.6 percent from 2006 to 2011, according to a new report from Springboard Research.

The report, titled “India IT Services Market and Forecast 2006-2011”, finds that the IT Services growth rate in India is well above the 10.5% CAGR of overall Asia Pacific market and makes India the fastest growing IT Services market in the Asia Pacific (excluding Japan) region.

According to the report, the Indian IT Services market is heavily dominated by infrastructure Services, which are estimated to garner 54 percent of the market in 2007. Springboard further forecasts the segment to grow in line with the overall market and reach US$4.27 billion by 2011. However, Applications Services with a CAGR of 19.6 percent remain the fastest growing market segment, while IT Consulting – typically used by vendors as entry point to reach clients in India – is estimated to grow from US$0.22 Billion in 2007 to US$0.40 Billion by 2011.

Sanchit Vir Gogia, Senior Research Analyst for Services at Springboard Research, commented: “India is the epicenter of growth in Asia Pacific IT Services marketplace. Not only is the India IT Services market forecast to be the fastest growing in the region, the country also has a rather unique position in the worldwide outsourcing arena through a well-educated and language-proficient workforce, that sets it apart from other Asian competitors”.

Some key findings from the report include:

· Infrastructure Application Integration is the single largest category in India and is expected to contribute approximately 21 percent of the total IT Services opportunity in India by 2011

· Enterprise IT Outsourcing enjoys the highest growth momentum in India with a CAGR of 24.4 percent during 2007-2011 and is expected to become the second largest market opportunity in the country by 2011.

· Enterprise Application Integration, the second-ranked market in India currently, will slip to the third place by 2011 despite registering a high CAGR of 19.1 percent. Together, the top three markets will garner over 42 percent of the Indian IT Services market by 2011.

· The report uses Springboard’s Market Attractiveness Index to rank 15 individual IT Services markets on the basis of growth opportunities. According to the Market Attractiveness Index, the top five IT Services markets in India are:

1. Infrastructure Application Integration

2. Enterprise IT Outsourcing

3. Enterprise Application Integration

4. Custom Application Development

5. Network Integration

When Hillary Clinton rose in front of 80,000 people to nominate Barack Obama for Democratic presidential candidate last week, she handed him not just her support, but also, it seems, her anti-offshoring campaign.

In accepting the historic nomination, the increasingly statesmanlike Obama took the opportunity to lambast offshoring and outsourcing as he outlined his approach to government.

Obama said he would “stop giving tax breaks to corporations that ship our jobs overseas, and I will start giving them to companies that create good jobs right here in America." While this is not a new promise from a Democratic candidate, it has never had such a global audience.

Indian firms – who are the main beneficiaries of US outsourcing activities – have reacted with a mixture of alarm, stoicism and optimism. While they look to Europe and elsewhere for new business opportunities, the fact remains that some 60-70% of their BPO revenues flow from the US.

Nasscom president Som Mittal responded that any decision to outsource is a strategic economic one for US companies, not a political one, and that outsourcing had helped boost the US economy over the boomtime of the past decade.

"Obama earlier said India and China will help the growth of US. US tech firms have thousands of jobs, but not enough talent at home," he added.

Infosys' T V Mohandas Pai reiterated the point, saying that almost 50% of the revenue of the top 1,000 US companies comes from outside the country.

What is certainly true is that many US firms believe they face a homegrown talent crunch, as well as the need to cut costs in these chillier economic climes.

Offshoring is also a way of outsourcing risk and hothousing R&D and development at a fraction of the cost of doing it at home. So slamming companies that outsource to the global market may be an easy patriotic bell to ring, but it ignores many of the reasons that US companies do it – and the inherent benefits to the US economy of doing so.

Nevertheless, many parts of the Indian BPO market are feeling the pinch as the depth of the economic downturn encourages some commentators – not to mention our injudicious chancellor – to talk of a serious recession.

But there is some good news for India as increasing numbers of financial services firms in Europe, Australia and New Zealand are offshoring work to the country.

A recent Deutsche Bank report has identified restructuring as the main impetus behind the trend, with offshore software development, business process outsourcing, call centres and accounting all on the rise.

The study also found that 32 percent of IT workers and 38 percent of support staff within European banks work overseas. Meanwhile, half of all retail banks worldwide are seeking to offshore at least part of their IT functions over the next five years, said the Deutsche Bank report.

Is Brazil finally emerging from the shadow of its BRIC cousins?

Early in the decade, Goldman Sachs devised a new acronym for emerging economies. Unlike the tiger nations of the 1990s, these countries were to be known as BRIC and the 21st century was expected to be theirs. However; whilst Russia, India and China have forged ahead, Brazil has been seen as lagging behind, unable or unwilling to take advantage of increasing globalisation.

But, is the general scepticism about Brazil’s inclusion amongst the BRIC countries justified? The country is politically stable, it has a rising economy, a well-educated workforce and a burgeoning financial market of its own. Brazil is certainly also experiencing solid growth. Last year it became a net creditor to the world for the first time; in May Standard & Poor gave the country its first ever credit rating and in February, according to Morgan Stanley Capital International, Brazil became “the world’s largest emerging market”, as a rally for Brazil stocks combined with falls in China left Brazil with a slightly larger market value: “now accounting for 14.95% of the MSCI emerging markets, it is also bigger than Korea, Russia or India”.

Is Brazil finally emerging from the shadow of its BRIC cousins? Is its boom sustainable and is the time now right for increased foreign investment?

Certainly, there are still concerns about the country; its sluggish approach to fiscal reform and worries about inflation contribute to a sense of unease. Its GDP is steadily rising and represents firm progress, but at 5.4% a year it is less than the growth in other BRIC countries; India and China report 8.9% and 11.5% respectively.

It seems however, that although the numbers may be trailing the others, Brazil has many other benefits. Compared to other BRIC nations it has respectable corporate governance, there is a sustainable supply of well-educated people and the developing economy is supported by its convenient geographic location, making it better placed to service Europe and the USA. Brazil also doesn’t have the wild east reputation of Russia, the introspection of China, or the prospect of price/wage inflation that has bedevilled India. Perhaps it is this that is driving Brazil’s improvement against its rivals and luring foreign investment?

This, and the development of the financial centre, Sầo Paulo. With over 20m people, the city also has a massive student population. The university is the largest in Brazil and the third largest in Latin America, turning out a regular supply of well-educated, young Brazilians.

It would be missing the point therefore, to see Brazil as the new India for outsourced projects, or this growth as a temporary blip. We’ve all known for years that scouring the world for the cheapest day rate doesn’t usually get the best results for an outsourcing project. What’s important today is the level of service and commitment. Brazil is unlikely to follow India down the cheap and cheerful route. It understands the importance of tying service levels and deliverables to appropriate costs, especially in a multi-layered, financial services project.

This sector in particular can take advantage of Brazil’s increasing prominence. Most banking IT projects require a combination of skilled resources, which can be delivered in a variety of locations; the 4Ps of outsourcing - project, people, place and only then price. Brazil is exceptionally positioned to respond to this need. The idea is to consider the needs of the project first and then identify the right people to complete it. After that the various places and the price become obvious. With its high-calibre workforce and its association with Europe, Brazil is well-placed to fulfil the people and place side of the project.

Yet, this is not just about Brazil’s ability to service the rest of the world. Of increasing significance, is not only Brazil’s new economy and its geographical position, which makes it well-places to service both Europe and the USA, but its own, rapidly growing, banking sector. Brazil is becoming the project part of the 4Ps, the centre of the project and not just the service provider. For technology companies, particularly ones serving the banking sector, the country must now represent a logical investment prospect?

If the 19th century was dominated by Great Britain and the USA defined the 20th century, then it seems that the emerging economies, BRIC with Brazil included, are well-placed to impact the 21st century. As this decade progresses at least, Brazil is definitely emerging from the shadow of its BRIC cousins.

57 percent of Shared Service Centres (SSC) have problems with regulatory compliance, according to a study released by outsourcing consultants, Alsbridge.

The study, undertaken annually, also found that 89 percent of shared service managers foresee challenges with their SSCs, which is a worrying statistic given the pressure being placed on both private and public sector organisations to implement shared service agreements.

Elaine Harrison, Senior Manager at Alsbridge plc, commented, “SLAs should provide a link between services provided by the SSC and the business objectives by creating cost/performance accountabilities. However SLAs should not be seen as a substitute for an effective governance framework”.