Industry news

Those of us in the sourcing ‘business’ know that outsourcing is all about companies making decisions about where to source, or procure, services. When we talk about the subject, we tend to think of it in isolation. It’s a business strategy and there are well-established guidelines for deciding when to outsource, when to offshore, when to call in consultants – and when not to. But, in my new book I’ve strayed off the typical path worn down by outsourcing commentators and into a world inhabited by sheepdogs and terriers.

Just take a step back from the typical outsourcing debate for a moment and consider how companies are functioning today. Companies can source services, and even entire departments or functions, from the best of breed operators anywhere in the world. The Internet has created a robust pipeline that allows almost free data and voice transmission without boundaries. Yet, there is an opposite phenomena too – increased migration.

People are increasingly willing and able to travel for work. The EU already allows a free movement of labour, but most developed countries are on the prowl for new talent to plug skills gaps and are using points-based methods of securing that talent, wherever it may come from.

So, people are more capable of moving to the work and work is more capable of moving to the people. It’s a more fluid work of work out there and companies are increasingly structured in a way that reflects this. There is less of an ‘HQ’ culture and more of a loose global collective or federation, all interconnected and moving in the same direction, but not necessarily with all those actors being employees of the same company – or being employed by anyone at all!

Academics have written about this extensively. Business guru Charles Handy predicted all this in the 1980s and sociologist Manuel Castells wrote three volumes on what he called the ‘Network Society’ – so what’s new?

Well, the difference now is the sheer presence of this phenomenon in all our lives. It is now a reality for all of us. None of us in any walk of life can avoid globalisation any longer. The recent troubles in banks all over the world demonstrates how closely linked they have become and how a butterfly flapping its wings in one country can destroy a bank in another.

So how could I write something new on the subject that would add to the debate? Well, I decided that there was plenty of theoretical material already out there. I wanted to write something short, punchy, and different – so it would in fact serve to spark off more debate about how jobs, education, taxes, migration, and outsourcing are all interlinked.

So I came up with ‘Who Moved My Job?’ It was just published this month. The book is about three English sheepdogs: Winston, Charlie, and Blair, who find their idyllic life on Manor farm disrupted by the arrival of lower-cost foreign herding dogs. They embark on an adventure that changes their lives forever. Mozi, Pandit, and Lech (from China, India, and Poland) are trained in local herding methods by the English dogs and soon establish their dominance on the farm – even working longer hours without complaint. The three Border Collies embark on an adventure where they are forced to discover a new career, enduring life in Battersea Dogs Home, living rough in a London cemetery, and the nagging doubt that perhaps they can’t adjust to the fast-moving world outside the jobs they know and love.

The book has been fun to produce, but is clearly an experiment for me because it is so different to most of the books commenting on outsourcing. A new detailed academic study of the issues might get more recognition within ivy-clad university walls, but what is going to stimulate more debate and understanding in the media and with the general public – the people really affected by these changes?

Bring on the dogs!

Mark Kobayashi-Hillary is the author of ‘Who Moved My Job?’ and is Offshoring Director of the National Outsourcing Association.

www.whomovedmyjob.com

HP has signed a five-year technology infrastructure agreement with Syngenta, a world-leading agribusiness.

Under the terms of the agreement, HP will use its ‘Adaptive Infrastructure’ as a service solution to transform Syngenta’s current infrastructure-based services into subscription-delivered services.

Martin Walker, global chief information officer, Syngenta, commented, “We chose HP ‘Adaptive Infrastructure’ as a Service so we can achieve faster infrastructure and application modernization with reduced risk and cost.”

Financial details have not yet been released.

The UK’s leading energy solutions provider, IMServ, has won an £11m contract with outsourcing company Logica, for operation of the British Electricity Balancing and Settlement Systems for ELEXON.

As the central IT services provider to Elexon, Logica’s key role is to consolidate the operation and hosting of the Balancing and Settlement Code; making the services more cost effective and efficient to manage.

The five year contract places IMServ as Logica’s key partner in the operation of Central Services for wholesale electricity settlement for England, Scotland and Wales.

Steve Brown, Managing Director at IMServ, commented: “We are delighted to be forming a partnership with Logica once again to perform this crucial role for the electricity industry. Through our expertise in the collection and aggregation of electricity data and our core infrastructure we look forward to working with Logica to provide a high performing service.”

Chancellor of the Exchequer Alisatair Darling used his speech at the Labour Party Conference in Manchester this afternoon to give centre stage to the challenges of globalisation: the risks from high oil prices and the credit crunch on the one hand, and the advantages of increased employment and wealth for the UK on the other.

In a solid speech, he said the secret of navigating the “unprecedented global challenges” of this downturn was “effective regulation”, rather than either "light or heavy-handed regulation", coupled with international cooperation. One government alone cannot deal with the challenges, he said.

The Chancellor – never a darling of the unions – brushed aside criticism that he is pandering to the unions on tighter financial regulations, saying that it is clear to all but the Tories that the City needs more effective control.

This will be addressed in a new banking bill in a fortnight, he said – a bill that will be analysed to see how strict those recommendations actually are.

The Prime Minister himself has contributed to an unfettered banking culture, and the Government is unlikely to over-regulate the shrinking, less competitive banking sector that remains the engine of the service economy.

Despite a few verbless sentences that recall the Blair age, the Chancellor's speech received what can best be described as a polite standing ovation, rather than an ecstatic one: one could imagine the tottering edifice of government balanced on delegates' shoulders.

That said, it's becoming clear that the extraordinary events of the past week – US nationalisations, plus record stockmarket falls and bounces – have given the Brown government an opportunity to throw new light on its earlier, much-criticised decisions, such as the nationalisation of Northern Rock. Put in the context of recent US events, that decision now seems prescient and stabilising, rather than muddled and mishandled as it was seen at the time.

It is also an opportunity to put some clear water between Labour and the Tories: the public would support signs of the Government intervening strongly in the City – something that David Cameron would be reluctant to advocate.

BT has signed a $660 million contract amendment with HP to extend the transformation of its technology.

The contract extends the companies current agreement for the next 7.5 years, whereby HP will continue to provide IT services.

David Butcher, managing director, service introduction, BT Operate, commented, “This contract renewal offers BT competitively priced services across a number of key areas of our IT infrastructure. HP is a key partner for BT and this deal will create the platform for accelerated innovation and delivery of services for our customers.”

Francesco Serafini, senior vice president and managing director, EMEA at HP added, “HP will support the management and transformation of the BT technology environment into an increasingly agile, cost-effective infrastructure designed to deliver what their business requires.”

Singapore Airlines Cargo has chosen Tata Consultancy Services (TCS) to service its cargo revenue accounting back office processes in a five-year multi million dollar contract.

Mr. Girija Pande, regional director for TCS Asia Pacific commented, “Singapore Airlines and TCS have always enjoyed a long lasting relationship which can be termed more as a partnership in progress rather than a customer service provider relationship.”

Trans Adriatic Pipeline AG (TAP) has commissioned T-Systems to develop and operate its entire information and communication technology. The contract will run for three years and will be operated from datacentres in Switzerland.

The IT services market in the United Arab Emirates (UAE) has been growing substantially faster than expected, as demand shifts from infrastructural investment to more strategic projects, according to a recent IDC study.

IT services spending in UAE increased 41 percent year on year in 2007 to nearly US $791 million. In coming years, IDC expects spending to continue to expand rapidly, fueled by a strong economy, a maturing IT market, skilled-labour shortages, increased foreign investment, and the increasing complexity of IT and its impact on operational management across all economic sectors. This is supported by the fact that IT services providers in the region have been investing heavily to expand both their services teams and offerings.

"Organisations in the UAE are facing a myriad of challenges that are heavily impacting their investments in IT services," said Margaret Adam, research manager, IT Services, IDC MEA. "The desire to accelerate revenue growth and rapidly take advantage of the opportunities in the region, as well as compliance and regulatory pressures and a drive for cost effectiveness, all fuel growth in the UAE IT services industry."

While 2006 saw infrastructure-related services, such as hardware and software installation and support, making up the largest portion of the IT services market, the situation changed in 2007 when systems integration services took the lead, constituting 19 percent of the market. It was followed by hardware support and installation (15.7 percent) and software support and installation (12.8 percent). The combined outsourcing category comprised 18.1 percent of the IT services market in UAE last year.

"The more sophisticated service areas such as systems integration, application customisation, and outsourcing were the fastest growing in 2007," said Adam. "Year-on-year growth of around 50 percent in these categories testifies to a maturing IT services market and a shift towards more strategic IT decision making."

The top 3 players in the UAE IT services market in 2006 — MDS, Emirates Computers, and Injazat Data Systems — were also the leaders in 2007. Combined, they accounted for more than a quarter of total revenues.

On the demand side, the combined government sector, with 26.7 percent of total services spending, was the largest customer for IT services, followed by the financial sector with 16.7 percent. The third-largest sector, with an 8.6 percent market share, was the combined agriculture, construction, and mining vertical.

IDC predicts that spending on IT services in UAE will continue to grow by an annual average of 23.9 percent over the next five years to reach $2.3 billion in 2012.

IT end-user spending in India is expected to reach US $110 billion by 2012 representing a CAGR of 14.8 percent from 2007 to 2012, according to Gartner. So far in 2008, IT end user spending is on pace to reach US $64.7 billion, a 17.2 percent increase from 2007.

This prediction, supplemented by a robust gross domestic product (GDP) averaging 8.08 per cent growth from 2007 through 2012, means the Indian market continues to represent a significant growth opportunity for IT vendors.

India is poised for double-digit growth across many vertical markets, with financial services and communications organizations spending the most on IT, closely followed by services, manufacturing and government.

“Indian businesses continue to invest in IT in order to drive operational excellence and innovation,” said Naveen Mishra, senior research analyst at Gartner. “Small and midsize businesses (SMBs) will drive the growth of various IT-related industries, with the critical involvement of value added resellers, distributors and retailers. Additionally, the Indian government's pro-business policies and their own increasing use of IT will continue to build confidence among local companies seeking to invest in and use IT.”

More predictions from the report can be seen here: http://www.gartner.com/it/page.jsp?id=756314

The Western European IT services market will grow 4.8% in the next five years, to reach $249 billion by 2012, according to a recent study published by IDC.

Despite the economic downturn, higher demand for outsourcing combined with the increasing externalization of custom application developments will drive IT services spending upwards by 5% in 2008.

In a statement, the analyst firm commented on the report: “Companies looking for greater predictability of IT costs are driving demand for outsourcing services. Today, as in the early '90s, to get IT off the balance sheet and as an operating cost is a major driver for outsourcing. In addition, increasing access to cheap resources and customers' need to modernize applications has revitalized the custom application development market, leading customers to increasingly externalize the whole project instead of hiring contractors to work on internal projects. Indian pure-play service providers are winning most of this growth, and even though they still account for a small proportion of the market, their aggressive growth is pushing the custom application development market up.”

The firm was also bullish in its assessment of IT services’ performance thus far in 2008 but issued a warning in the run up to Christmas: “During the first half of 2008, we hardly noticed the effects of the downturn on the IT services market. IDC believes the impact on IT services will be more visible from early 4Q08 and for the following 18 to 24 months, until the market rebounds again around the second half of 2010. Countries such as the U.K., Ireland, and Spain are the most likely to feel the impact of the downturn, due to the deterioration of the housing market and GDP growth in those economies that created a more gloomy business sentiment across all industries, including IT.

“From a market segment perspective, we expect consulting and project engagements to be the most affected by the crisis, whereas we anticipate higher growth in outsourcing as enterprises try to reduce costs. The project-oriented segment represents around 38% of the services market, so the final impact on the overall IT services market will remain rather limited.

“IDC is taking a more conservative view of the IT services market's growth, which was lowered to 4.5% for 2009. We anticipate that many businesses will see fewer new IT initiatives started in 2009, as clients refrain from starting new projects, and large projects already launched are split into smaller parts, with go-ahead needed for each new phase. Also, small and midsize businesses across Europe will be less keen to invest in IT in the coming years, bringing bad news for IT vendors looking to unlock the SMB space.

“Even though we expect the downturn to continue until the first half of 2010, we believe the effects in the IT services market will remain relatively limited, as the market is already business-case driven and not led by over investment like in the dot-com crisis.”