Industry news

European businesses plan to spend around a third of their IT budgets on cloud software over the next 18 months, according to new research.

The study by software firm VMware looked at IT leaders involved in the purchase process for cloud systems across seven countries, as well as the UK. It found that 31% of IT budgets are allocated to cloud software, an increase of 5% since the last study in 2010.

Chief cloud technologist at VMware EMEA, Joe Baguley said: “Cloud is no longer just about cost cutting and peripheral applications. We’re seeing a significant shift in the way enterprises think about their IT infrastructures, and cloud is at the absolute heart of that."

Advancing the company’s Converged Cloud portfolio, HP Cloud Services deliver an open-source-based public cloud infrastructure with business-oriented features that enable developers, independent software vendors (ISVs) and enterprises of all sizes to build the next generation of web applications.

Starting today, HP’s first publicly available beta services, HP Cloud Compute, HP Cloud Object Storage and HP Cloud Content Delivery Network, will be offered through a pay-as-you-go model.

"Whether you are an independent developer, ISV or the CIO of a major organization, the priority is to design your applications for today’s cloud economy,” said Zorawar ‘Biri’ Singh, senior vice president and general manager, Cloud Services, HP. “We will continue to build, integrate and deploy developer-focused features, designed to support a world-class cloud that enables our customers and partners to run and operate web services at scale, on a global basis.”

Google has increased spending in order to compete against Amazon in offering cloud services. Google will be playing catch up against Amazon Web Services with its high user-base in over 190 countries since its beginnings six years ago.

Google has placed focus on cloud-services as a means to move revenue away from dependence on online advertising which currently contributes 96 percent of Googles income. Google has recently increased the numbers of marketing, customer support and engineering roles as it looks to promote its web services.

Adam Selipsky, vice president of Amazon Web Services, said: “We’ve actually maintained and, in many cases, extended that early lead.” Amit Singh, vice president of enterprise at Mountain View, California-based Google, admitted that “We missed it,” in gaining an early lead.

Indian IT company Infosys has moved to create 100 apprenticeships within the UK in partnerships with the National Apprenticeship Scheme (NAS) in a five year scheme.

Infosys employs 150,000 people globally in a industry that has seen criticism for the employment of lower cost Indian workers in IT services at the expense of UK employees.

The apprenticeship will be created in marketing and human resources and comes on the back of a similar scheme earlier this year from Wipro which offered IT training internships to UK students.

French outsourcing firm Atos, tendered £24 million worth of contracts from the Department for Work and Pensions in 2011 it has been revealed in Parliament.

The sum comes from four contracts last year including online identity checking service, a bereavement declaration service, occupational health services and medical services.

Atos will continue to tend the contracts in the coming years with contyatcts such as online identity service worth £47 million set to continue up until 2014.

UK IT salaries have risen by 4.3 percent on average over the last year, according to IT recruitment firm ReThink, almost double the national average of 2.3 percent.

According to the Office of National Statistics the average wage in the IT industry has risen from £38,500 in 2010 to £40,140 in 2011. ReThink surveyed IT directors and discovered that 54 percent of directors had increased staff pay last year.

Director at ReThink, Michael Bennett, said: "Salaries for many IT staff have actually fallen in real terms over the last year. However when compared with the average UK worker IT staff salaries are still ahead of the game.”

Sainsbury’s looks to increase efficiency while investing in support for growing online platforms. The companies online services currently represent the fastest growing online UK grocery business.

The supermarket chain currently makes around £800 million in annual turnover from its online platform. This year the company invested £163 million, up from £121 million last year.

Sainsbury, commented: “we have recently introduced new warehouse technology, which enables colleagues to work more efficiently, help improve product availability and reduce waste.”

The National Outsourcing Association (NOA) has entered into a strategic alliance with the National Business Awards (NBA) in a campaign to find the UK’s Business Enabler of the year.

The award is designed to highlight outsourcing organisations in public, private and third sectors that have made a significant contribution to economic and business growth within the UK.

Martyn Hart, Chairman of the NOA and a Shortlist Judge for the Business Enabler of the Year award said: “The Business Enabler of the Year award highlights the important contribution of the outsourcing industry to the British economy, and demonstrates how outsourcing has evolved to enable enterprise.

The rise of web based software has seen a race for the market share of cloud technology. At the forefront sits Amazon, who have capitalised on their early lead in creating a set of easy to use online programs, however the market place is fiercely competitive and Google moving to end Amazon's lead.

Behind Amazon lies Google which is playing catch up after failing to invest early in the new market, beginning development a full two years behind Amazon. Google entered the cloud market in 2008 but only began competitively marketing in 2011.

The cloud market has rapidly grown, with value expectations of $10.5 billion by 2014 from $3.7 billion in 2011, according to Gartner. Research commissioned by VMware indicates the European enterprises intend to spend nearly one-third of their IT budgets on web-based computing over the next 18 months. Microsoft, IBM and HP have all entered into the Cloud market beside Google, while Amazon have continued to maintain a strong lead with the biggest share of the cloud market.

Amazon has taken the early lead with its portfolio of web based tools including mobile applications, server renting and data storage at a highly competitive price. Amazon Web Services has attracted many companies as users and is currently used within 190 companies. Amazon’s business is rapidly approaching $1 billion in revenue.

Google boosts cloud spending to contest with Amazon

Google have been quick to recognise there mistake and reverse its position as the company ramps up employment of engineers and marketing staff as it rolls out web-based new features. Google has already begun to narrow the gap as cloud customer numbers have so far increased by over 10 percent each month of this year.

Google despite focusing heavily on their web-based services have a long way to go in order to end Amazon’s dominance of the market. Amazon’s services are set to expand yet further with Forrester research pointing to 44 percent of companies looking to employ the service in 2012. Google on the other hand saw a 23 percent reduction of their App Engine software in 2011 from 2010.

Google’s web based services have failed to provide the same levels of flexibility and support delivered by Amazon software which has proven to be so appealing to businesses, with Google offering fewer languages or the ability to deploy customer servers. In predicting increased spending on cloud computing VMware said that organisations looked to greater flexibility that cloud services could provide.

While Google have the requisite systems and technology to provide quality cloud software they have failed to attract users away from the long established, flexible and user friendly services provided by Amazon.

Statistics have been released this week, highlighting the number of local councils that have significantly downsized their in house IT departments. In some instances the reductions were incredibly substantial. West Sussex County Council recorded a 90% reduction in IT employees between 2008-09 and January 2012 and the trend looks set to continue. Public sector intelligence specialists Kable predict that spending on IT staff within local government is set to fall further, with research suggesting costs will drop 7% over four years, from £785m in 2012-13 to £739m in 2016-17.

While the outsourcing of local government IT may seem like a move likely to induce socio-economic ramifications, there are several benefits of ITO that should not be overlooked. Cost-cutting will be the core goal of any outsourcing contract, and within the public sector it is important to note that any financial efficiencies gained can be reinvested in other areas that will benefit most.

Neither should it be assumed that this cost-cutting will derive from laying off workers to source cheaper labour. Often it is the case that when a public sector outsourcing contract is negotiated, it is a priority to keep current staff in work. For instance, in the West Sussex County Council case, the number of IT council employees fell from 138 to 12 over a four year period. However the majority of staff involved were part of TUPE transfers that took place in 2010 and 2011, with the employees that once worked for the council transferred to suppliers, providing them with the background knowledge required for the projects.

Inviting private companies to tender for public sector contracts can also attract innovation and productivity improvements, leading to financial rewards. Suppliers are likely to use innovation as a USP in a competitive tender process, and an outsourcer is inherently more likely to provide innovation than an in house department. This is due to a number of reasons. Providing a financial incentive for innovation in the contract is best practice, something which an in house IT department is unlikely to have and therefore less likely to possess the motivation for implementation.

When innovation is a priority for a local government the financial clout required to implement the changes may mean that an outsourcer is also required. The vendor is likely to have the finances up front to implement large innovative changes, whereas local government have to deal with budgetary restraints. The investment can then be paid back over a longer period of time.

It soon becomes apparent that outsourcers have the capability to make real innovative changes and implement them in order to save money for the public sector. They have the capability and resources to think outside the box and create efficiencies that otherwise may not have been realised. While many may assume that outsourcing takes money out of the public sector, the long term benefits of outsourcing mean that local authorities can save considerable amounts and reinvest in the areas that really require it.