Industry news

Back office jobs may be under threat as Barclays is not renewing its BPO contract with Siemens, which ends this year.

Siemens has been running back office processes for Barclays since 2000, with around 500 employees based across Britain.

The bank has released a statement explaining "we do not plan on continuing to base the current activity at the Glasgow and Beeston sites in the future" and that Siemens staff have "been advised that once the activity is integrated back into Barclays, their roles will become redundant".

Barclays has hinted at a possible extension of the contract for a twelve-month period for a smoother transition process, and says it will work closely with Siemens to minimise any potential job losses.

Britvic has selected Atos Origin, the international IT services company, for a three year contract for the management of its back office systems.

Atos Origin has taken over management of the systems with immediate effect and will provide support from both the UK and its Indian delivery centres in Mumbai.

Mike Jones, CIO at Britvic said that “This new contract forms part of a broader initiative to improve and streamline our back-office functions, so that they can better help us meet our business strategies and objectives".

To a lunch meeting today with John Appleby and Colm Mulcahy, respectively chairman and CEO of Saaspoint, a company formed in 2005 to facilitate on-demand CRM implementations built on Salesforce.com.

When I first met Appleby and Mulcahy, barely one year ago at the Salesforce.com ‘Dreamforce’ event in San Francisco, the company seemed to have found its specialist niche partnering with the software as a service (SaaS) tyro as an expert go-between betwixt the vendor and its then mainly medium-sized client base.

In other words, Saaspoint was playing in that large, traditionally barren space where CIOs fear to tread, and large consultancies cannot afford to go.

Today, however, found Saaspoint a different, evolved, and more interesting proposition: the company has moved away from its sole focus on Salesforce.com and into the area of business transformation, wider SaaS consultancy, and partnership with Google.

As I discussed in a recent blog, the ‘Fortune Five Million’ of smaller enterprises that underpin the economy are almost impossible for large consultancies and services companies to sell into profitably without undermining their business models.

That leaves the playing field open for once-niche SaaS packagers, as it were, to move up the value chain and take increasing numbers of smaller enterprises with them.

Saaspoint and others have seen that opportunity and moved swiftly to grasp it, which shows how fast the SaaS market is maturing.

Indeed, Saaspoint is even debating the merits of outsourcing some aspects of its services as it nearly doubles its employee base – and in a year that has witnessed a severe downturn for most of us.

That said, there is some realpolitik at play here: Salesforce.com offerings and services are becoming increasingly commoditised, forcing its intermediary partners up the value chain – and elsewhere – to survive.

Also, they said, the past six months have seen contract signings forced to jump through a few extra hoops to keep client CFOs happy.

On the other hand, Appleby and Mulcahy claimed that most CIOs are now fully on board with SaaS (perhaps, but how many CIOs are there?), while less than one year ago the duo seemed gloomy at the prospect of CIOs’ negative interventions in SaaS implementations.

I took the opportunity to corner Appleby and Mulcahy about my current pet peeve: the baffling and inappropriate use of the term ‘cloud computing’ to describe the simple concept of on-demand software and services delivered over the Internet. How could this hope to win over the smaller, less expert business?

It won’t, they confirmed: terms like ‘cloud computing’ are invented solely to give large enterprises something to get excited about, and large consultancies something to demystify for a vast fee.

Shhh, don’t tell anyone….

After a recent stockholder meeting, EDS has agreed its proposed merger with HP. EDS will now become a wholly owned subsidiary of HP with 98% of the stockholders voting in favour of the deal.

Ron Rittenmeyer, EDS CEO, commented on the decision: “Not only does the combination of these two great companies create immediate value for our stockholders, it also enhances our ability to achieve our customers' needs with our unwavering commitment to quality and innovation”.

The transaction still requires regulatory clearance which EDS expects to come in Q3 2008.

Deutsche Post, owner of DHL, has decided not to proceed with a multibillion-dollar outsourcing deal after the cost savings it expected could not be achieved, according to Information Week.

The decision was reached after a six-month review found that the "benefits, particularly in the early years, do not outweigh the risks", according to an internal memo obtained by the publication.

The arrangements for the collapsed deal were for HP to hire 2,500 Deutsche Post employees, including those working for DHL. It also included taking over various ITO and managed service functions in Scottsdale, Ariz.; Prague, the Czech Republic; Malaysia; and other regions.

Barclays UK Retail, which employs 32,000 people in the UK, has signed a deal with recruitment process outsourcing firm Alexander Mann Solutions (AMS) to manage candidates from August 2008. Half of the AMS team will be based at Barclays’ office in Coventry and an e-recruitment system will also be implemented by Taleo, a talent management firm.

Andrew Rolfe, head of resourcing at Barclays UK Retail, comments;“We aim to provide an efficient mechanism by which to process over 100,000 applications per annum and greatly improve the ease by which talented individuals can secure a great job with us.”

American Nuclear Insurers (ANI), a liability underwriter for American nuclear facilities, has signed a managed services contract with AT&T.

Under the terms of the contract, AT&T will serve as ANI's primary data services provider delivering an e-mail gateway service web security to the company's headquarters.

AT&T will also provide ANI with network-based e-mail security and message management ensuring the integrity of e-mail messages before they enter ANI’s network.

Daniel Antion, VP of American Nuclear Insurers, commented: "Due to the nature of our business, it is critical that we have e-mail and network security measures in place, ensuring secure employee-customer communications and data backup. By implementing security services provided by AT&T, we are confident that our network will be protected from viruses or other service interruptions, resulting in better productivity and enhanced customer service".

UMass Memorial Health Care, a US-based hospital system, has awarded ACS with an ITO contract worth over $100 million,

The contract, spanning five years, will see ACS provide information systems services including the expansion of UMass Memorial's IT systems through deployment of new servers and data storage equipment. ACS will also provide networking, data systems, data center hosting, desktop, help desk, telecommunications, disaster recovery, and resource planning services.

George Brenckle, Senior VP and CIO at UMass Memorial, commented: "This new agreement will enable UMass Memorial to tackle upcoming challenges, including growing demands for storage, high availability computing, clinical information systems and the increasing service levels the technology requires".

The contract will extend an existing six-year business relationship between the companies.

Technology, outsourcing and services giant IBM is to spend hundreds of millions of dollars to create two delivery centres to power the much touted cloud-computing model it believes will be a driving force of future business.

Good news is that the two new datacentres – one in Carolina, and the other in Tokyo – are being designed to be ultra efficient and will recycle or reuse parts of existing facilities. They will join existing cloud centres in Dublin, Beijing and Johannesburg.

"Cloud computing is fundamentally about re-engineering the world's computing infrastructure, to enable game-changing – even life-changing – applications," said Willy Chiu, VP IBM High Performance On Demand Solutions. "To IBM, cloud computing is much more than the normal evolution of a datacentre."

The news comes at the same time as Yahoo, together with chip maker Intel and hardware and services giant Hewlett Packard have announced a collaboration with three universities to develop a cloud computing testbed to help colleges and and vendors design, build and test cloud applications.

The three companies plus the Infocomm Development Authority of Singapore, the University of Illinois at Urbana-Champaign and the Steinbuch Centre for Computing of the Karlsruhe Institute of Technology in Germany plan to build six datacentres to promote arrays of open-source collaborations on a global scale.

This latter project is all very well – if a little late to the party – and it certainly reinforces cloud computing's traditional association with academia.

But that is the point: more and companies now seem determined to adopt the term 'cloud computing' as a synonym for 'internet-based applications and on-demand services', to the general bafflement of the wider public (otherwise known as customers).

As regular readers will know from this blog, software as a service (SaaS) vendors such as NetSuite, Salesforce.com and RightNow are serial offenders in this misappropriation of the term, and have been joined by Google and IBM.

Meanwhile, the three-legged dog of Yahoo, plus traditional industry stalwarts HP and Intel clearly view 'cloud computing' as still being about the academic open source, peer-to-peer sharing of computing resources and processing power, which is the origin of the term.

So the question remains as to why the industry has elected to use a vague, amorphous, enigmatic phrase to describe SaaS and on-demand applications – an area that is surely better described as 'Internet-based computing' or 'on-demand computing'. Since when have clouds been sexy?

No amount of rewriting Wikipedia entries to claim that cloud computing and SaaS have always been synonymous will alter the fact that, for most of the general services-buying public, 'cloud computing' is a baffling and offputting term. Why obfuscate and mystify when the subject ought to be so easy for people to understand?

As the economy weakens, news reaches sourcingfocus.com of two very different approaches to the challenges. First, Transport for London (TfL) is reportedly embarking on a massive shake-up of its outsourcing deals, bringing some work back in house.

The move may be yet another blow to embattled Fujitsu, which is currently dealing with the fallout of its severed relationship with the NHS National Programme for IT. Fujitsu, along with BT, CSC and others is one of TfL's main IT outsourcing partners.

TfL intends to complete the review by the end of next month, and currently has 17 prime outsourcing suppliers – a number it intends to slash and replace with “a blend of in and out”.

The organisation feels that it will have greater control over its intelligence assets by bringing them back in house.

Meanwhile, insurance giant Norwich Union has announced that up to 500 back-office IT and financial admin jobs are to be culled as it outsources two operations, which are currently based in York, to partner firms in Essex and Scotland.

Norwich Union Life CEO Mark Hodges said: "It is too early to give an indication of the likely number of redundancies for both of these partnerships and we understand that this causes uncertainty for staff.

"Our priority will be to keep employees fully informed throughout this process and we will do everything we can to minimise the impact of this decision.” Wise words, as all too often enterprises demotivate staff by keeping the truth from them until the last minute, creating a culture of rumour, gossip and mistrust.

Rather than being a short-term cost-cutting decision, in Hodge's estimation, Norwich Union says it is investing in future growth opportunities, including a greater focus on the Internet.

One thing any seasoned observer of enterprise IT will tell you is that the larger and more bureaucratic the organisation, the more cyclical and seasonal their outsourcing strategies will be.

Many such organisations go through cycles of farming work out, becoming a hostage to third-party terms, conditions, and prices, and then setting up in-house units to do the work at apparently lower cost while regaining control over quality. In the medium term those attractions wane, the unit is deemed not to be core to strategic objectives, and then the cycle begins again.

The economic downturn will doubtless bring many such stories to light before the year is out.