Industry news

Oracle has finalised a deal to acquire Skywire Software, a leading provider of insurance and business applications. The deal will see Oracle acquire 1,450 new insurance customers to add to its existing cache of over 1,000.

Skywire Software's insurance software assists insurers in managing the life cycle of an insurance policy, including insurance policy creation, rating, insurance agent/broker management and information exchange solutions.

With this and the impending acquisition of AdminServer, another insurance software provider, Oracle plans to create the most complete software suite for the insurance enterprise.

Patrick Brandt, Skywire Software President and CEO, said: "Insurers look to software to speed policy implementation, accelerate new business acquisition, reduce costs and manage regulatory risk. The combination of Skywire Software's best-in-class insurance and document automation software applications with Oracle's solutions will drive innovation and leadership to ensure our customers' continued success."

The acquisition is expected go through in the second half of 2008. Until the deal closes, each company will continue to operate independently. The value of the deal was not available.

Atos Origin, the international IT services company, has announced plans to establish a new 'Competency Center' in Beijing to offer its portfolio of technical automation solutions to the civil nuclear industry and the oil & gas markets in the region.

Atos says the move reflects the growing demand from customers in China for expertise in IT services and the importance of the Asia Pacific and Chinese energy markets to the IT sector.

This ‘Energy and Utility Competency Centre’ will be launched in July 2008 to become fully operational by January 2009. This will provide domestic and global energy companies and nuclear operators with advanced technologies to meet the needs of China’s fast growing energy market.

Philippe Germond, CEO of Atos Origin, said: “This decision is a new step forward for Atos Origin to position the group as a worldwide provider of distinctive industry solutions. Atos Origin’s Digital Control System is widely recognized as a state-of-the-art reference by the most prominent nuclear operators in the world. Our solution is already implemented in three nuclear power plants in China and we are happy to reinforce our presence in this major market and to bring this expertise to the rest of the Asia Pacific region”.

Former CEO of Logica, Martin Read, has been hired by the government to cut public spending in the IT sector – at a time when some public sector IT projects either seem out of control, mired in controversy and recriminations – or both. p>Read will report to Alistair Darling in the Treasury, where his role includes standardising business processes and cross-departmental compatibility, and improving procurement. Significantly, he will be able to abandon failed projects.

he Information Commissioner has this week established that few Whitehall departments have any real idea of their legal responsibilities under the Data Protection Act, and fewer still have any idea of how to manage IT systems securely.

His findings were made public this week as two government departments face enforcement action under the Act: HM Revenue and Customs, and the Ministry of Defence. Both departments have been in the spotlight this year for serious breaches of data security, along with the Home Office and the NHS.

The Independent Police Complaints Commission (IPCC) and Poynter review found that there was a lack of meaningful systems, no understanding of the importance of data security and a “muddle through” culture at HMRC when it lost 25 million benefits records in internal post.

HMRC was described as having “an organisational design which was unnecessarily complex and crucially, did not clearly focus on management accountability”.

The MoD’s loss of 600,000 personnel details was slammed in a report by Sir Edmund Burton, who also blamed poor management. The MOD’S Chief of the General Staff has ordered an inquiry to investigate whether there are grounds disciplinary action.

Information Commissioner Richard Thomas, said: “The reports that have been published today show deplorable failures at both HMRC and MoD. Information security and other aspects of data protection must be taken a great deal more seriously by those in charge of organisations.

“It is beyond doubt that both Departments have breached Data Protection requirements and we intend to use the powers currently available to us to serve formal Enforcement Notices on them.”

• See Editor's Blog for more on this week's public sector IT and data meltdown.

BBVA, one of the top 15 banks in the world, has partnered with Infosys Technologies and Finacle to implement a new universal banking solution.

The system, to be implemented across BBVA, will cover core banking, CRM, treasury and wealth management.

Francisco Gonzalez, Chairman and CEO of BBVA, said: “Our aim is to transform BBVA to a winning player in the global banking industry of the 21st century. We need to think different approaches to customers, and IT is a key element in our innovative business model. BBVA is strongly committed to its innovation and transformation plan, and the partnership with Infosys and Finacle is a big step in that way. We like to work with the best partners and Infosys is a very strong global partner”.

The Australian Competition and Consumer Commission (ACCC), the Australian equivalent of the UK’s competition commission, has awarded Getronics an outsourcing contract worth £2 million.

Under the terms of the agreement, an initial three year contract, Getronics will provide the ACCC with desktop, server and network support as well as database administration for the watchdog’s 700 strong workforce.

The contract will be serviced by Getronics Australia staff onsite at ACCC and will commence on 1 July 2008.

Getronics Australia managing director, Paul Timmins, said: “To be providing IT support to such an eminent body will energise my team and we look forward to a long and prosperous partnership with the ACCC”.

The abuse and exploitation of child workers in the textiles and clothing industry could be virtually eliminated if a voluntary international textile testing certification process was adopted in the UK and across Europe, says one of the world's leading textile testing laboratories.

Manchester, UK, based Shirley Technologies (STL) is a member of the 'Made in Green' Group which tests and audits textiles and production processes for dangerous substances, and evidence of human rights abuse in the production chain.

Those products passing the tests and audit are awarded a 'Made in Green' (www.madeingreen.com) label, which can be stitched into clothing or textiles and indicates the product has been produced in respect of social responsibility, ecological and environmental guidelines.

Discussing recent news coverage about clothing chains such as Primark, most notably in the recent BBC Panorama programme about it, STL's Phil Whitaker sais: "The programme was interesting in that it showed up the problems in auditing and tracking supplier chains in the textile industry. The advantage of 'Made in Green' is that it tests the product range, audits the processing in the factory, audits the environmental impact and ensures compliance with social responsibility guidelines all at once," said Phil Whitaker of STL.

"Obviously, we are not party to all the detail, but we would offer the cautious observations that the social responsibility audit carried out in the factory shown in Monday night's programme appeared not to have 'cross referenced' to production processes and products. Obviously, handsewn items are going to be labour intensive and time consuming and so it seems to follow that in order to hand sew sequins or any other similar accessory on hundreds of thousands of garments in a very short time it would take a small army of people to complete on schedule."

The 'Made in Green' testing and audit process involves three elements: Oeko-Tex 100 certification which guarantees products do not contain substances harmful to health, Oeko-Tex 1000 which confirms current environmental legislation compliance, and CCRS-AITEX, which ensures compliance with corporate social responsibility guidelines including child labour.

However STL recently asked 2,000 UK shoppers did they recognise Oeko-Tex labelling (which can also be a stand-alone certification), and only six percent said they knew what it was.

Despite the worthy, voluntary initiative, the inclusion of textile labels within the manufacturing process is surely open to abuse at the manufacturing or offshore distribution end of the process – the very link in the chain where the problem originates. Given the vast global business in fake designer clothing and accessories – found on every street corner wherever there are tourists with money to spend – it would surely be routine to fake such a voluntary accreditation process, given that it is so poorly recognised and understood.

The real issue is one of simple economics: any Western superstore-style retailer able to sell in bulk apparently quality, pret-a-porter-inspired goods for the cost of a sandwich and a coffee must be sourcing the materials at next-to-zero prices from large offshore workforces. There is, after all, no such thing as a free (in any sense) shirt.

As labour costs rise on the back of high net worth industries in China, India, and elsewhere, labour arbitrage advantages become harder and harder to find at the lower-end manufacturing part of the market. In countries and regions where labour laws are decades behind those of the West – partly suppressed by European and American purchasing power – abuses within the workforce are the inevitable concomitant of low high street prices. Ethics come with a higher price tag – and it is one we must now bear.

The fallout from Fujitsu severing ties with the NHS National Programme for IT (NpfIT) continues, with the rumoured potential loss of some seven hundred jobs at Fujitsu. 1,000 Fujitsu employees work within the NHS programme.

Also at stake are £340 million in revenues. The company has until the end of this month to pay back the NHS £67 million of the £143 million it received in advance payments.

Fujitsu walked away from talks earlier this month, prompting the NHS to terminate the 10-year, £846 million deal as the South's technology service provider. Contract renegotiation terms had proved unacceptable to the Japanese company, which pressed the NHS for a return to the original deal.

Trade union Unite, which has been a highly vocal critic of several troubled outsourcing deals this year, has urged the Government to take action to prevent a haemorrhage of skilled workers from the programme.

“Government must act to ensure that the knowledge and skills gained in working for Fujitsu are retained, whoever the provider or providers are in the future, and ensure that the skilled staff can help the project continue to a successful conclusion in the interests of patients, the NHS and the health of the nation,” said Unite national officer for IT workers, Peter Skyte.

Last week the Public Accounts Committee (PAC) sat at Westminster to hear of central Whitehall mismanagement and local NHS tensions – a story that calls into question the viability of a central IT scheme imposed on local Trusts that have differing needs, skills and funding challenges.

Fujitsu executives told MPs that constant local modifications coupled with the withholding of funds forced the outsourcer's hand. The changing terms of the contract would have been unaffordable, claimed Peter Hutchinson, UK public services group director at Fujitsu Services, who said there had been over 600 such alterations.

"We withdrew from the re-set negotiations. We were still perfectly willing and able to deliver to the original contract," he said. “There was a limit beyond which we could not go,” he added, referring to the company's employees, investors and pensioners.

In turn, the termination of the deal has left the NHS with a "gaping hole", said the PAC chairman Edward Leigh. NHS COO Gordon Hextall said that BT was in the running to take over the eight former Fujitsu sites in the South of England.

• All hospitals in England and Wales were supposed to have had patient record systems installed by the end of 2006, but only 34 out of 169 have received their systems so far and, of these, 21 are reportedly outdated.

• See this week's Editor's Blog for more on public sector IT in crisis.

This week finds the Government's IT programmes and data security policies seemingly on the point of meltdown. A week is a long time in politics, as we all know, but is one year enough time to clear up decades of mess and mismanagement?

I ask as former CEO of Logica, Martin Read, is hired by the Government to cut public spending in the IT sector, at a time when some public sector IT projects either seem out of control, mired in controversy and recriminations – or both.

In his 12-month tenure, Read will report to the Treasury, in a role that includes standardising business processes and cross-departmental compatibility, and improving procurement. Significantly, he will be able to abandon failed projects. However, it's unclear if he will be able to prevent misconceived ones, such as the national ID card scheme, from starting.

With the Government under pressure to tighten its spending on, and control of, large-scale technology projects, Read's own appointment may itself be subject to controversy and potential recriminations. First, it will accelerate and deepen Whitehall's relationship with the private sector – conceivably touching upon the Government's involvement with venture capitalists in the funding of innovative start-ups (reported in Editor's Blog earlier this year).

“The private sector has made significant strides forward in this area in recent years, and my work will examine the scope for the public sector to benefit from this experience,” Read said in a statement.

But is the private sector the answer to Whitehall's ills? Ask Fujitsu. Last week the Public Accounts Committee (PAC) sat at Westminster to hear about the conract debacle that led Fujitsu to walk away from discussions with the NHS – a story that calls into question the viability of the National Programme for IT.

Fujitsu executives told MPs that constant local modifications coupled with the withholding of funds forced the outsourcer's hand. The changing terms of the contract would have been unaffordable, claimed Peter Hutchinson, UK public services group director at Fujitsu Services, who said there had been over 600 such alterations.

Away from the NHS specifically, the second problem with Read's appointment is organisational and personal: his remit clashes with that of Government CIO John Suffolk – at a time when Whitehall needs a firm hand on the tiller, not management fudge and infighting.

Add to this the further question: is he the right man for the job? New Logica CEO Andy Green, who took charge in January this year, has said he wants to reduce costs and minimise job duplication, suggesting he inherited an inefficient organisation – and one that Green is having to give a new focus to.

Now, while Read's appointment is belated evidence that Downing Street acknowledges the problem, the priority is surely a cultural, bureaucratic, and managerial one. Escalating budgets are the natural concomitant of that.

Put simply: we have a slow-moving, Victorian, centralised bureaucracy with a 21st century veneer of modernity. That Whitehall is attempting to force-feed poorly conceived, complex, fast-moving technology projects to local areas that have differing needs and financial strictures.

Allied to this is a problem that the idealistic Tony Blair created: the belief that Modern governments need Modern solutions. In other words, see everything as a technology problem (rather than a people one or a data one), and get specifying.

You only have to take a step back to see the bigger picture: also in the news this week are stories that local authorities have been warned against the widespread practice of using technologies installed to prevent serious crime to snoop on citizens going about their daily business.

It's a sad fact that if people can misuse IT systems in the public sector, they will and at the highest level, because the cost imperative of saving money mandates it strategically.

CC TV cameras are one abused technology, but a more insidious one is the local authority use of Citizen Relationship Management technologies (public-sector CRM) to withdraw essential services from antisocial or slow-paying residents.

The private sector isn't immune either: witness our story this week that one third of IT managers use Administrator access privileges to snoop on confidential data.

However, the cultural mismatch between people and technology usage is a real problem in the public sector in particular, because it is in the employ of the people. For example, the Information Commissioner has this week established that few Whitehall departments have any real idea of their legal responsibilities under the Data Protection Act, and fewer still have any idea of how to manage IT systems securely.

His findings were made public this week as two government departments face enforcement action under the Act: HM Revenue and Customs, and the Ministry of Defence. Both departments have been in the spotlight this year for serious breaches of data security, along with the Home Office and the NHS.

The Independent Police Complaints Commission (IPCC) and Poynter review found that there was a lack of meaningful systems, no understanding of the importance of data security and a "muddle through" culture at HMRC when it lost 25 million benefits records in internal post.

HMRC was described as having "an organisational design which was unnecessarily complex and crucially, did not clearly focus on management accountability".

The MoD's loss of 600,000 personnel details was slammed in a report by Sir Edmund Burton, who also blamed poor management. The MOD'S Chief of the General Staff has ordered an inquiry to investigate whether there are grounds disciplinary action.

Information Commissioner Richard Thomas, said: "The reports that have been published today show deplorable failures at both HMRC and MoD. Information security and other aspects of data protection must be taken a great deal more seriously by those in charge of organisations.

"It is beyond doubt that both Departments have breached Data Protection requirements and we intend to use the powers currently available to us to serve formal Enforcement Notices on them."

These are the three issues that Government really needs to consider, Mr. Read: people, people, and people.

No future, massive public-sector IT programmes should even be considered unless someone has put people at the 'coal face' first, followed by management and culture.

But the first questions to ask are: what is this project really for? Who will use it? And how? If no one has an honest answer to those, then abandon that project before you've called in the consultants and reached for the chequebook.

Driven by market capitalisation growth in emerging economies, the wealth of the world’s high net worth individuals (HNWIs) increased 9.4 percent to US$40.7 trillion in 2007, according to the 12th annual World Wealth Report, released today by Merrill Lynch (NYSE: MER) and Capgemini.

India led the world in HNWI population growth at 22.7 percent, driven by market capitalisation growth of 118 percent and real GDP growth of 7.9 percent. Although India’s real GDP growth decelerated from 9.4 percent in 2006, current levels are considered more stable and sustainable. India’s two largest exchanges – the Bombay Stock Exchange and the National Stock Exchange – ranked among the world’s top 12 exchanges by end of 2007, boosted by initial public offering markets and heightened international interest.

China experienced the second largest expansion of their HNWI population, advancing 20.3 percent – an increase fueled by market capitalisation growth of 291 percent and real GDP growth of 11.4 percent. Significant price increases and strong IPO activity propelled the Shanghai Exchange to become the sixth largest exchange in the world in terms of market capitalisation.

But while market capitalisation and real GDP growth rates were higher in China than India, the HNWI population of India grew faster in 2007. The Report suggests that as market capitalisation and real GDP in China were spread over a larger population, there were smaller per capita gains in China. In 2006, India had a larger market capitalisation growth than gross national income, significantly impacting HNWI population growth in India. In addition, China is currently experiencing explosive growth in its “mass affluent” population, which has yet to break the HNWI threshold of US$1 million.

Brazil enjoyed the third-highest HNWI growth rate in 2007, with a 19.1 percent increase, spurred by a wave of robust market capitalisation growth of 93 percent and real GDP growth of 5.1 percent. Net private capital flows to Latin America doubled in 2007, contributing to the Brazilian Stock Exchange’s fourth place ranking among the world’s largest IPO markets and 7.2 percent market share gain. This, according to the Report, lent support to the establishment and global integration of the Brazilian financial system.

Russia was home to one of the world’s 10 fastest-growing HNWI populations, despite growth deceleration from 15.5 percent in 2006 to 14.4 percent in 2007. Solid gains of 37.6 percent in market capitalisation and 7.4 percent in real GDP represented the growing international interest in the country as a global player, suggesting that the ongoing development of Russia’s external relationships will likely improve the economy’s fundamentals.

Green investing has become widely popular across the globe in recent years, offering investors lucrative returns and an opportunity to become actively involved in social responsibility. An array of vehicles through which to back green initiatives drove robust growth in green sectors in 2007, such as mutual funds, ETFs and other pooled products, or alternative investments. The total investment in clean technology, for example, increased to US$117 billion in 2007, up 41 percent from 2005, with notable strength in wind and solar.

The Middle East and Europe were the most environmentally attuned HNWI and Ultra-HNWI populations, with participation ranging from around 17 percent to 21 percent in 2007. In comparison, only 5 percent of HNWIs and 7 percent of Ultra-HNWIs in North America allocated part of their portfolio holdings to green investing. North America was also the only region in which social responsibility was the primary driver of HNWIs’ green investing. Among HNWIs worldwide, approximately half pointed to financial returns as the primary reason for their allocation to green investing.

Impressive growth of emerging economies was boosted by thriving exports and heightened domestic demand. The largest regional growth of the HNWI population occurred in the Middle East, Eastern Europe, and Latin America, with increases of 15.6 percent, 14.3 percent, and 12.2 percent, respectively. Gains in commodity exports, paired with growing international acceptance of emerging financial centres as significant global players, contributed to the growth rates of emerging economies.

The BRIC nations (Brazil, Russia, India and China) continued to play pivotal roles in the global economy in 2007, driven by impressive economic gains and robust market capitalisation growth.

“This year’s Report found that the number of high net worth individuals, and the amount of wealth they control, continued to increase in 2007, with the greatest wealth being created in the emerging markets of India, China, and Brazil,” said Nick Tucker. “While trends indicate opportunities exist for wealth management firms to tap into new growth markets, success will go to those that recognise their existing service, delivery and technology strategies must be adapted and tailored to meet the particular needs of these growth markets.”

With a significant portion of HNWI wealth invested in stock markets, market capitalisation performance is an important determinant of HNWI wealth generation. While traditional United States, European, and Asian stock market indexes experienced moderate growth, many emerging markets extended winning streaks of robust gains. Various Dow Jones Market Indexes, for example, had moderate returns in 2007, averaging 6.8 percent, far below the 17.3 percent average in 2006, and compared to 2006, market gains in 2007 failed to have as positive an impact on HNWI wealth generation.

Most major European and Asian indexes were contained to low single-digit growth; the world’s worst performer, the Nikkei 225, contracted 11.1 percent, while Europe’s best performer, the German DAX, was the only major traditional index to outpace its 2006 performance and sustain double-digit growth.

Fueled mostly by organic price increases, the Shanghai and the Shenzhen Stock Exchanges grew at 303 percent and 244 percent, respectively. India’s Bombay Exchange and National Stock Exchange had respective growth rates of 122 percent and 115 percent.

“The divide between market capitalisation growth in mature and emerging economies was significantly more pronounced in 2007 than in previous years,” said Chris Gant, Head of Wealth Management, Capgemini Financial Services UK. “Despite slowdowns in the growth of traditional stock exchanges and significant market volatility, several emerging market exchanges experienced robust gains in 2007, further accelerating global wealth.”

Emerging markets made significant contributions to record-level worldwide IPO activity in 2007. More than 1,300 IPOs raised about US$300 billion during the year—and emerging markets captured 7 of the top 10 issues. The BRIC nations exhibited particular strength in the area, accounting for 39 percent of global IPO volume in 2007, up from 32 percent in 2006.

Net private capital flows to emerging markets also increased in 2007. China attracted the largest absolute amount of private capital in 2007 at a country level, drawing in about US$55 billion. Emerging Europe was the most popular regional destination, attracting US$276 billion. Emerging Asia experienced a 20 percent drop in private capital flows, reflecting, in part, that equity flows helped policymakers accumulate foreign exchange reserves, which reached roughly US$1 trillion in China alone. Private capital flows to Latin America, however, more than doubled to US$106 billion in 2007.

Overall, hedge funds performed well in 2007 with average gains reaching 12.6 percent, down only slightly from 2006. Hedge fund returns outperformed traditional stock indexes in 2007, boosted by 20.3 percent average gains in emerging markets. In recent years, an increasing proportion of hedge fund assets have come from institutional investors, versus wealthy clients, shifting the main driver of the industry’s growth.

Fueled largely by the growth of capital-intensive sectors, venture capitalist fundraising and investing in 2007 reached their highest levels since 2001. New opportunities in life sciences and clean technologies expanded market opportunities and the renewable energy sector hosted a record IPO issuance last year led by the US$6.5 billion IPO of a Spanish utilities group and the US$1.2 billion IPO of a Brazilian sugar and ethanol producer. Total investment in clean technology increased 35 percent, boosted by numerous clean technology benchmark indexes gaining more than 50 percent for the year.

Effects from the downturn in the United States economy weighed on other mature economies – as evident by slowed GDP growth and weak equity market performances in parts of Europe and Asia – and were fueled by three main factors: a cooling housing market, tightened credit availability, and greater volatility and price declines in equity markets. This chain of events impacted both consumers and institutions, impeding their ability to maintain liquidity and operate businesses.

In line with housing market downturns, REIT indexes incurred significant losses globally – in marked contrast to robust gains in 2006. Worldwide equity market performances proved the divergence between mature and emerging markets – the MSCI Global Indexes recorded 0.1 percent and 3.2 percent contractions in Europe and the United States, respectively, in the second half of the year, versus gains of 10.4 percent and 6.3 percent in the first half. The Emerging Market MSCI Global Indexes excelled – led by Latin America in the beginning of the year and the BRIC nations in the second half. Equity market losses in mature economies reverberated throughout international credit markets in the second half of 2007. The economic slowdown in the United States drove a severe depreciation of the U.S. dollar against most major currencies worldwide – the dollar fell 10.5 percent, 15.8 percent, and 17 percent, respectively, relative to the euro, the Canadian dollar, and the Brazilian real.

Since the close of 2007, economic indicators in the United States have deteriorated further; notably: slowing consumer spending, cooling housing markets and softening labor market conditions. A flurry of developments in international credit and equity markets, all stemming from the United States’ economic slowdown, shaped the opening months of 2008. Early on, greater downside risks to growth in the United States, along with the far-reaching implications of tightening international credit markets, weighed heavily on equity markets around the globe. By mid-January, losses incurred in virtually all geographic markets exceeded 10 percent.[3] However, mature markets have stabilised somewhat, bringing average 2008 losses down to roughly 4 percent, and emerging markets have actually reclaimed and exceeded incurred losses, generating an average net gain by mid-April.[4]

The diverging macroeconomic environments at either end of 2007 helped define HNWIs’ asset allocation strategies. Building on the optimism of 2006, the early months of 2007 showed HNWIs betting heavily on riskier asset classes. But as the year wore on, and financial market turmoil and economic uncertainty intensified, HNWIs began to retrench, shifting their investments to safer, less volatile asset classes.

The Report found that cash/deposits and fixed income securities accounted for 44 percent of HNWI financial assets, up 9 percentage points from 2006. Fixed income securities saw a 6 percentage point increase in asset allocation, accounting for 27 percent of holdings, up from 21 percent in 2006.

Globally, HNWIs continued to decrease their holdings in North America and showed greater interest in domestic market investments, preferring more familiar ground amid heightened levels of economic uncertainty.

Despite heightened uncertainty regarding the near-term global outlook, still-strong fundamentals in emerging markets are likely to sustain high levels of growth. The balance between emerging market strength and mature market recovery will likely persist through 2008, with the short-term outlook subject to variability given that aspects of potential risk may still be unknown.

By and large, the global economy has two distinctive obstacles to overcome: inhibitors to growth in mature markets and high risks of inflation in emerging markets. How well these challenges are met will shape global HNWI growth prospects going forward. Given 2007 performances and taking into consideration recent developments in world markets, the Report suggests that global HNWI wealth will grow to US$59.1 trillion by 2012, advancing at a rate of 7.7 percent per year.