Industry news

Outsourcing computer coding could be increasing the risk to companies from hackers, a Quocirca report states.

The report found that while outsourcing the coding process can reap benefits in terms of functionality and user experience, the cutting-edge development used by specialist companies often creates dangerous vulnerabilities which can be exploited by hackers.

Despite these risks, outsourcing of software development is booming, with nine out of ten companies outsourcing over 40% of requirements, while all of the companies surveyed outsourced at least some of their software development.

However, when it comes to specifying outsourced code, one in five companies did not even consider security when designing applications.

Fran Howarth, principal analyst at Quocirca and author of the report, said: "The findings indicate that not enough is being done by organisations to build security into the applications on which their businesses rely. This creates an even greater onus for organisations to thoroughly test all code generated for applications, without which they could be playing into the hands of hackers."

More businesses are expected to outsource their software needs as the economy weakens.

The software-as-a-service (SaaS) sector can expect to double its annual revenues in the UK to £2.5 billion by 2011, according to researchers at BIW Technologies.

A survey of over 300 senior IT directors and managers found that 65 per cent of respondents felt that a weakening economy would increase SaaS use, citing three reasons: the speed it can be put in place, low cost and small up-front investment.

Currently, those surveyed outsource 15 per cent of their software requirements but over 70 per cent thought this would rise to a third by 2013.

The chief executive of BIW, Colin Smith, said: "More and more companies are recognising the benefits of SaaS to enhance their business and help cut costs in this challenging economic environment. There is also an increasing acceptance that using SaaS can help companies reduce IT-related risks, manage costs and respond more nimbly to changing software needs."

Experts in the industry have also noted that SaaS can reduce a company's carbon footprint, making it especially attractive to the property and construction sector, which is responsible for almost a third of waste produced by the UK economy.

Outsourcing the headlines? That seemed to be on the cards with speculation that US television network CBS is in talks with CNN about outsourcing its reporting operations to the all-news network.

A report on NYTimes.com had said that CBS News/Sports president Sean McManus and CNN International president Jim Walton were talking about ways the two networks could combine forces. This could include CBS paying CNN to use its newsgathering resources.

According to US media scuttlebutt, the plan is about "reducing CBS’s news-gathering capacity while keeping its frontline personalities, like Katie Couric, the CBS Evening News anchor, and paying a fee to CNN to buy the cable network’s news feeds."

But CBS News denied any such talks. "We are extremely satisfied with and proud of our newsgathering operation," a CBS News spokeswoman said Monday. "No outside arrangement is being negotiated."

The spokeswoman conceded that there had been discussions around the prospect of a pool arrangement between CBS and CNN in Baghdad, but these had come to nothing.

Electrolux, one of the leading companies in global home appliances, has partnered with Fujitsu Services in a five year contract. The deal will see Fujitsu service various elements of Electrolux’s European IT infrastructure.

Fujitsu will take responsibility for PC, LAN, on-site-support, service desk as well as server management comprising around 10,000 work stations in 32 countries. Fujitsu will deliver these services in 14 languages from it centres in Portugal and Sweden.

“The idea was to find more centralised but flexible solutions for our IT infrastructure. The procurement process has been extensive and the choice of Fujitsu was, amongst other things, based on the fact that it offers easy to manage IT service,.” said Bertil Norberg, group CIO, Electrolux.

AMF Bowling, one of the biggest names in UK tenpin bowling, has signed up IMServ in a quest to boost its energy efficiency across all 33 of its bowling complexes and its head office. The deal is also expected to increase profitability whilst helping to demonstrate a heightened environmental commitment.

The energy intensive leisure industry has been hit hard by rising utility costs with AMF’s predicted gas and electricity overheads doubling from 2005 to in excess of £1.5 million for the 2006 – 2007 period. The IMServ deal has been implemented to address these figures by reducing energy usage and increase efficiency of usage.

AMF is now using an advanced energy data management system, Energy DataVision (EDV), to examine the total energy being used across the business. The tool delivers energy data rapidly, meaning that energy decisions can be made on a more frequent and relevant basis.

Lucy Fitzgerald from IMServ comments: “With accurate energy information, estimated bills can become a thing of the past. With a complete view of the energy consumed across all its complexes, AMF Bowling is now in a strong position to take action on its energy efficiency.”

Taxpayers' money is being squandered on public sector outsourcing deals where costs are ballooning up to 75 per cent more than the going market rate, reports Silicon.com.

Compass Management Consulting claims that lacklustre controls on spending over the full lifetime of government outsourcing contracts are leading to "poor value for money" because public sector organisations are lured by low upfront costs, rather than longer term savings.

The consulting group made its claims in a submission to the government's Public Services Industry Review (PSIR) that is looking at how to improve efficiency in the £40bn-a-year public outsourcing market.

Compass said that managers and systems need to be put in place to work with supplier to monitor performance and control spending once the contract gets underway, similar to the setting up of a vendor management office.

Democratic candidate Hillary Clinton has unveiled an insourcing policy aimed at ending tax incentives to US firms that outsource jobs overseas. She said a Clinton administration would instead create incentives of $7 billion a year for companies to create jobs inside the country.

''I believe our government should get out of the business of rewarding companies for shipping jobs overseas, and get back into the business of rewarding companies that create good, high-wage jobs – with good benefits – right here in America,'' Clinton told a cheering audience in Pittsburgh, during what has become an increasingly uphill campaign to win the Democratic Presidential nomination from Barack Obama.

''We reward companies like Exxon-Mobil who park $56 billion in profits overseas because they don't have to pay a dime in US taxes on those profits,' she said.'

The senator said her plan would inspire a new, local, greener manufacturing environment within the US, investing some $500 million to encourage the sector's use of clean energy.

The US is one of the top three outsourcing destinations of choice for UK CIOs.

Telecoms and services giant BT has become embroiled in a 'spyware' scandal. In 2006 the company secretly profiled the web browsing habits of 18,000 of its broadband customers using technology provided by 121Media, now known as Phorm.

BT ran the pilot without the knowledge or consent of its customers, up to 10,000 of whom might have been profiled concurrently. The aim was to deploy targeted advertising at groups visiting popular portals within areas such as finance and recruitment.

As reported in The Register, which broke the story, the Regulation of Investigatory Powers Act 2000 (RIPA) makes intercepting internet traffic without a warrant or consent an offence. It remains unclear whether the legal definition of an intercept covers the case.

It's a matter of public record that former BT Retail CTO Stratis Scleparis became group CTO at Phorm the following year.

The story comes amid increasing consumer concern about some companies' use of such technologies to track private surfing habits – and increasing government pressure for ISPs to retain surfing data. Social networking behemoth Facebook has also been in the spotlight for the data it gathers about users' wider surfing habits.

IBM has received a temporary suspension from US government work in the wake of a dispute over the award of a contract.

IBM has announced that it has been prevented from seeking new federal contracts pending the result of an investigation into a 10-year, $84 million deal awarded in 2007 to CGI Federal, a subsidiary of Canada-based CGI Group Inc, which IBM protested. The company and some of its employees have been subpoenaed to appear in front of a grand jury.

In spite of this, both Big Blue and Wall Street have shrugged off the suspension, pointing to the fact that federal contracts contribute only 1-2% of its total revenues.

IBM is cooperating with the investigation.

Healthcare organisations are increasingly looking at IT outsourcing (ITO) and business process outsourcing (BPO) to improve the efficiency and effectiveness of their back-office and support operations, according to an EquaTerra 'Perspective' paper, Emerging Outsourcing Trends in the Healthcare Industry . The report examines the various market challenges that the healthcare industry is facing, especially in the US. Essentially, then, the document concerns private care on the other side of the Atlantic.

EquaTerra estimates that, globally, 75 IT outsourcing (ITO) and BPO deals with total contract value of greater than $50 million were signed from 2004 through 2007. This represents a small percentage of the total number of outsource deals, "highlighting the relative immaturity of the healthcare outsourcing market compared to other industries, such as banking, financial services and manufacturing", says the company.

That said, the healthcare outsourcing market is expected to grow at close to 10 percent over the next five to seven years, faster than overall market growth of seven to eight percent.

The report's co-author Mark Voytek, EquaTerra’s healthcare industry lead, said: “Healthcare organisations that have not recently done so should update and reassess their strategy and action plan for use of alternative service delivery models for both back-office and core operating functions and processes.

"If successfully executed, outsourcing can play a positive and growing role in helping them address the serious challenges they are facing today. And while they should use caution when exploring and assessing emerging BPO areas, the market is expanding and rapidly maturing, and what was premature in the past could be ready for prime time today.”

The report identifies the following challenges faced by the (US) healthcare payer segment:

• Merger, acquisition and divestiture activity has placed increased demands on technical and support infrastructures, further driving the need for change.

• Many of the larger payers have remained with legacy hardware and proprietary or internally developed applications which no longer meet their needs.

• The growing complexity of offerings, as well as government and regulatory changes, have increased delivery and support requirements.

• Confidentiality and privacy issues around personal health data has caused an increase in expenses associated with the delivery of services.

Of course, the report is less relevant (at present) to the UK healthcare sector, which is driven less by the needs of insurance and private care.

The NHS has been the focus for a massive investment in outsourcing, centred on the National programme for IT (NpfIT), which has been criticised for being misconceived, insecure and massively over-budget – despite the success of some individual elements, such as the digitisation of patients' medical scans.

It may take decades for the NpfIT to deliver savings that cover its escalating costs. The introduction of a central database of patient records has also created the kind of security and privacy fears that EquaTerra's report suggests are being addressed by technology elsewhere.

The extent of private involvement in the NHS remains a focus of much controversy in the UK, given that the state-run service is regarded with envy in many parts of the world, including the US.

Nevertheless, US trends are becoming increasingly relevant to a UK government that seems keen to emulate transatlantic ideas. Based on a poll EquaTerra conducted with outsourcing service providers in the US healthcare 'payer' space, the process areas exhibiting the greatest levels of outsourcing demand included knowledge services, such as reporting, planning and analytics.

This chimes with recent Gartner analysis into global customer/citizen relationship management (CRM) trends, which suggest that analytics are one of the hot areas of that market.

It's known (and has been discussed elsewhere in the Editor's Blog) that local authorities throughout the UK are joining together through cross-border CRM schemes, mainly with the intention of sharing data about citizens – either to provide targeted and more efficient services, or to withdraw services from late-paying or antisocial people (depending on your viewpoint).

It is not a huge leap of the imagination to suppose the NHS might follow the same route, in the name of preventative rather than medicinal care.

In the US, EquaTerra sees that buyer demand is outpacing supplier maturity, which is characteristic of an outsourcing market in more of a demand pull than a supplier push mode. This, says the company, is due to the recent increase in buyer demand levels, coupled with a supplier lag in developing and expanding service offerings as a result of historically weak demand for outsourcing services in this market sector.

However, EquaTerra finds that outsourcing service providers that target healthcare – including Indian firms moving into business services – are starting to develop more targeted and compelling outsourcing offerings.

Given the close cultural fit, the entry of an Indian outsourcing player into the UK healthcare market seems to be a distinct possibility, if EquaTerra's findings do map onto the very different UK healthcare landscape.