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President Obama, who last year said U.S. companies should create jobs in Buffalo not Bangalore, appears to have had a change of heart on outsourcing's effects on the economy.

Speaking Monday at a press conference in New Delhi, Obama said the view that outsourcing costs U.S. jobs while enriching India is nothing more than a "stereotype."

The president, at the podium with Indian prime minister Manmohan Singh, said the notion India is stealing IT and other jobs from the U.S. is outdated. "I think both countries are operating on some stereotypes that have outlived their usefulness," Obama said.

"In every discussion I've had with Indian businesses, what I've seen is that our countries are matched up in a way that allows for enormous win-win potential," said the president.

Outsourcing, where U.S. companies send programming and other tech work to low-cost countries like India, has drawn considerable flak from worker groups. Obama looked to cash in on that sentiment in his presidential campaign, when he promised to make it more difficult—through adjustments to the tax code and other measures—for U.S. companies to send work abroad.

Last year, as president, Obama slammed tax laws that, in his view, made it easier for businesses to "create a job in Bangalore, India than if you create one in Buffalo, New York."

Obama seems to have altered his view. "We're very proud of our high-tech industries and we think we make some of the best products in the world, and we want to sell them to a growing Indian market," Obama said during Monday's press conference. "But it turns out some of those same technologies are ones that will allow Indian entrepreneurs to grow and thrive and create jobs right here in India," Obama said.

While the president's reversal on outsourcing may anger some worker groups that supported him during his run to the White House, many businesses may welcome the fact Obama has flip-flopped on the issue. A significant number of U.S. companies, from General Electric to Boeing and IBM, rely on ongoing access to Indian IT and engineering talent as they look to build products that are globally competitive.

Indian prime minister Singh also defended offshoring during the press conference. "Our outsourcing industry I believe has helped improve the productive capacity and productivity of American industry," said Singh.

Obama is in the midst of a ten-day tour of Asia that will also see him make stops in Indonesia, Japan, and South Korea.

Source: http://www.informationweek.in/IT_ITES/10-11-09/Obama_flip_flops_on_outsourcing.aspx

According to Nemertes’ 2010/11 “Communications and Computing Benchmark,” nearly 97% of organisations are currently using or planning to use some form of outsourcing, documenting a solid increase from 2009 when the figure was 85%. Currently, 73% of research participants use managed services (the largest component of outsourcing), up from 65% in 2008. In fact, managed services have seen a tremendous run since 2006, when only 27% of organisations used managed services.

Outsourcing consists of a range of options on a continuum from managed services to hosted services to Software as a Service (SaaS). Managed services typically include outsourcing management of a specific application, technology or function, often including maintenance. Usually, managed services consist of managing onsite equipment at the customer premise, though with a service such as business continuity/disaster recovery (BC/DR), onsite equipment is at a provider facility. Hosted services deliver applications via either the Internet or dedicated network using MPLS, Carrier Ethernet, or leased line. SaaS is similar to hosted services with the same delivery model. However, SaaS is intrinsically multi-tenant, on-demand, with pay-as-you-go pricing. In comparison, hosted services are often not multi-tenant, on-demand, and typically have multi-year pricing.

Several factors drive the adoption of managed services. The top reason IT staffs outsource is to save money, a driver 69.5% of organizations cited. The greatest savings results from reducing the staff and perhaps 24 x 7 facilities to house them. Providers take advantage of economies of scale to offer management and maintenance services at rates lower than it costs organizations to provide the services internally. A lack of staffing skills is the next-greatest driver: About 30% of organizations indicate a lack of internal skills as a primary managed-services driver, and about 25% of organizations identify lack of staff as a primary driver. IT leaders often decide against employing staff to manage systems they view as commodities and use those headcounts for more strategic functions.

These drivers directly reflect plans to adopt managed and even hosted services in 2011. The top managed services are for functions seen largely as commodities in IT: Network/router management and IP Telephony. IT leaders who continue to grasp internal control of network/router and IPT management should closely evaluate the cost of outsourcing versus internal management.

Source: http://www.networkworld.com/community/blog/outsourcing-remains-strong

New figures released by the tax-collection agency through freedom of information show its spending was dominated by two outsourced deals — Aspire for IT and Mapeley Steps, a PFI contract for the management of HMRC's property, which cost £333m in 2009-10. Overall, HM Revenue and Customs (HMRC) spent £1.75bn on suppliers in the last financial year.

The Aspire contract, which started in 2003 and will run until 2017, dominates the agency's spending with IT suppliers. The next largest is Specialist Computer Holdings, which received £20m in the last financial year, followed by BT, which received £15.2m.

Other IT vendors listed include Detica, which received £9.2m; Fujitsu (£7.2m); Airwave (£2.9m); Cable & Wireless (£2m); and Vodafone (£1.9m). Capgemini is listed as receiving £2m in its own right, outside the deal with Aspire.

"The figures do show again the reliance on key prime contractors by central government organisations," commented Chris Pennell, principal analyst at Kable. However, he added that it has been shrinking in terms of spending for some time. "This trend is unlikely to change given that there are some outside HMRC that view the deal as being ripe for breaking up. Other suppliers who already have a foothold into HMRC will be watching the changing landscape with interest."

Source: http://www.zdnet.co.uk/news/it-at-work/2010/11/09/hmrc-spends-765m-on-it-outsourcing-deal-40090795/

Questor says Buy

In the short-term they will be pressed to deliver savings, and those savings will – not matter how much they protest – eat into profits.

However, in the long-term they are likely to be some of the biggest winners as the Government turns to the cutthroat corporate world to solve the lackadaisical attitude of many public sector workers.

At present just 11 of Britain's 110-odd prisons are contracted to private-sector operators, four of which are run by G4S, four by Serco and three by Kalyx. The Government is currently tendering for offers on a further four, and it seems likely that more will switch to private management.

An increasing number of hospitals, schools, custody suites probation services and police stations are also likely to fall under the day-to-day management of outsourcers.

G4S, which secures Heathrow Airport and GCHQ, claims it can achieve 20pc efficiency savings almost as soon as its handed the keys. For a Government which is trying to save £81bn by 2015, outsourcing has got be a big part of the solution.

Analysts at Panmure Gordon agree: "We believe the volume of opportunities should increase over the medium term on the back of [G4S signing the memorandum of understanding with the Government over making cost savings], with the company stating there is no reason to suggest margins should be under significant pressure from here."

G4S is a cheap way to play the growing outsourcing trend, not just here but around the world. The company, which began life in Copenhagen in 1901, now operates in 120 countries. G4S's latest scalp was a move into Brazil this summer, which has got the company's management very excited. It wasn't the beaches that piqued their interest but the prospect of helping lock up all the sports fans heading there for the 2014 World Cup and 2016 Olympics.

The shares are trading on a price to earnings ratio of about 12.4, falling to 11.5 next year, and currently yield 3pc and a dividend of 7.67p.

G4S is a defensive stock likely to look good in the better times as well as the bad times. Buy.

Councillors have voted to recommend pressing ahead with plans to outsource services in Bournemouth.

After a marathon six-hour discussion, the council’s scrutiny panel discussed the controversial move to go into partnership with private contractor Mouchel on Monday night and it will now be put before the full council on Wednesday.

The panel also recommended that written assurances should be received on the company’s financial position.

Chair of the panel, Cllr Beverley Dunlop described it as “a hugely significant issue.”

Although councillors believe the partnership will improve efficiency and deliver big savings, unions have warned frontline services could be slashed to pay for rising costs in bureaucracy.

A report by the Association for Public Services Excellence (APSE) also says moves to transfer jobs to Mouchel could spark a legal challenge.

The £150 million deal would outsource revenues, benefits, ICT and facilities management services.

But trade union Unison last night presented a council scrutiny committee with APSE’s report, which it commissioned and which claims the deal could end up costing money rather than saving it.

The report says the council’s own senior financial officer has concluded the deal would “cost more than it has budgeted for”.

It adds: “It will therefore require savings in other budgets to close the affordability gap, potentially meaning cuts in front line services to pay for more expensive back office services.”

It says the council could end up putting more money into the deal in an effort to fill a black hole in the finances.

“To act on this basis would be to effectively abandon the sort of strategic control that councillors are elected to exercise,” it says.

The report also claims the deal could be challenged in the courts because it has been substantially altered since Mouchel was selected as bidder.

It says “the regulations allow only ‘fine tuning and clarification’ and there is a strong possibility that discussions between the parties have gone beyond this”.

Mouchel has insisted it already has “a number of successful long-term strategic partnerships” with other councils.

Council leader Cllr Peter Charon said on his blog ahead of the decision that there was a “compelling” business case for the change.

“I believe that it offers the chance to dramatically improve and deliver four key services for less money, will give us the capacity to save 40 per cent of our revenue budget over the next 10 years and make a significant economic contribution to the wider Bournemouth economy,” he said.

Arguments heat up as debate rages over contract

LAST night’s Town Hall scrutiny panel meeting developed into a heated affair, with several councillors voicing concern over entering into a 10-year outsourcing deal with Mouchel, writes Julie Magee.

Bournemouth’s Unison branch secretary David Higgins, who represents 2,000 staff from social workers to home carers, was applauded following his plea for in-house managers to be allowed to achieve the required savings.

He said: “I know that our managers could do a good job. If you work with the staff and unions we can do it with less pain, instead of tying this authority into a contract where we will always be the weaker partner.”

But the council’s environment and economy executive director Tony Williams described the £150 million deal to outsource four departments as “a ground-breaking opportunity” which would create up to 650 new jobs.

He added: “It is probably the greatest investment opportunity in the last decade. The more efficiency savings we achieve the less cuts we will have to make.”

Cllr Richard Smith said: “If this was such a good deal we would not be rushed into a situation of trying to make quick decisions on the hoof” while Cllr Anne Rey told the meeting: “We have certain managers who can make fabulous savings. This is flawed and a slap in the face for our Town Hall staff.”

Cllr Ben Grower pointed out that Mouchel had recently made 2,000 of its own staff redundant, and asked: “Why should we share Mr Williams’ confidence? His confidence is not shared by the majority of people in this town.”

Cllr Claire Smith expressed concern about Mouchel’s financial position after its share price plunged more than 30 per cent last week.

She was told that Mouchel had suffered from a loss of business in the Middle East and from “very significant pressures on council budgets”. But the business’s underlying performance was profitable following “prudence measures” and it was highly unlikely Mouchel would go bust.

Members of the press and public were excluded while the final business case for an outsourcing partnership between the council and Mouchel was discussed behind closed doors.

Source: http://www.bournemouthecho.co.uk/news/8625139.Councillors_back_Bournemouth_s_controversial_outsourcing_plan/

The Public Sector Network (PSN), a secure private network for the public sector, has ‘huge potential’ to provide savings through shared infrastructure and services, Socitm has said.

In its ‘Public sector network: case studies of a major shared service’, the local council IT managers’ association said that IT leaders of all local public services should be therefore preparing now for connecting locally or regionally to the PSN in order to exploit these benefits. It also makes recommendations on what factors organisations should consider when establishing a business case for the PSN.

“From this point, no individual network procurements in any local public service should now happen unless they are clearly part of existing or planned PSNs,” said Jos Creese, Socitm president.

Socitm said in the report that the PSN infrastructure is critical to delivering the government’s ICT strategy, and will enable major savings by providing a platform for shared services.

The PSN can support a wide range of integrated network services, including data, telephony, video conferencing, file transfer, messaging, and a secure access tool to enable the deployment of cloud computing when required.

Among its recommendations, Socitm said that local government could avoid the costs of duplicate connections to the Government Connect Secure Extranet (GCSX) by aggregating multiple organisations’ individual connections into one.

It also suggests that public sector organisations that share a site or are within close proximity with each other could join connections to the GCSX into one. Furthermore, public bodies could aggregate purchase of a large network for voice and data in order to achieve economies of scale.”

“PSN addresses some of the issues that have inhibited use of the previous, centrally designed, ‘one size fits all’ solutions like the GCSX,” said Creese.

He added: “The PSN concept is a ‘network of networks’ where regions or sub-regions will commission networks designed to meet their local needs.”

Socitm’s report, which is available here, also provides case studies, including best practice techniques and common pitfalls, about public networks that are already in operation in Hampshire and Kent, and developing ones in Cambridgeshire, Essex, North Yorkshire, London, Dorset and Yorkshire and Humber.

In September, Socitm and the Local Government Association (LGA) reached an agreement with the Cabinet Office to relax some of the security standards requirements for local authorities to connect to the government’s network.

Source: http://www.computerworlduk.com/news/public-sector/3247834/socitm-urges-cios-to-get-ready-for-the-public-sector-network/

IT decisions makers do not understand the true cost of providing a service from a datacentre because they lack accurate metrics, according to analysts.

Datacentres are today the engine rooms of corporate IT and the increased take-up of virtualisation and cloud computing is giving the datacentre increased prominence.

UK company Romonet has launched software, known as Prognose, that uses modelling to work out the costs of having a service delivered from a datacentre.

Very little is known about the cost of delivering cloud-based IT and, as a result, businesses find it difficult to decide what to keep in -house and what to put in the cloud.

Virtualisation

Roy Illsley, principal analyst at Ovum, said, "Virtualisation is hitting the market today. With this move to cloud-based IT, people do not know how to decide what to move to the cloud, what to keep internal, and what to outsource or co-locate.

"There'll be a big mash-up and it needs managing. Predictive modelling enables companies to analyse and compare scenarios and say whether the move makes sense or not. Such level of knowledge and information is a great basis to make decisions, based on better assessments."

CIOs can make decisions on what to put in the cloud quicker and based on accurate information, according to Romonet.

According to analyst firm Quocirca, "The IT department and facilities management have been left with a highly complex environment, where a mix of applications and hardware platforms is being maintained in sub-optimal facilities at a high cost to the business.

"Consistently, research by Quocirca and other analyst companies has shown that about 70% of an organisation's IT budget is spent purely on 'keeping the lights on', that is in dealing with the day-to-day issues of maintaining existing systems, leaving only 30% of the budget to be spent on new investments."

Service costs

Suppliers will benefit from the increased understanding of costs because it will enable them to price their services appropriately. This will become more important as businesses turn to pay-as-you-go services.

Zahl Limbuwala, CEO at Romonet, said he set the company up in 2006 to attempt to develop software that could answer the question: how much does it cost to deliver a service?

Until now it is impossible to predict how much a service costs in terms of things like energy consumption and carbon production.

Romonet already boasts Thomson Reuters, Dell, and engineering firms Arup and Hurleypalmerflatt as users of the Prognose software.

Thomson Reuters is using the software in its own business, Dell is using it to help customers and the two engineering firms are using it to help them build datacentres.

Robert Thorogood, CTO at hurleypalmerflatt, said complex spreadsheets were previously used to work out the power efficiency of datacentres they were building. "We found that using Prognose to establish Power Usage Effectiveness and energy usage takes far less time than the traditional method. We've been able to use this time to give our clients far more understanding about what's going on in their datacentres".

Clive Longbottom, analyst at Quocirca, said there are products on the market that help users work out the cost of services but they are limited. "Most tools used historical data but the Romonet has a predictive side."

He said the software has a database of "real world performance of different parts of the datacentre such as how a cooling system works".

Source: http://www.computerweekly.com/Articles/2010/11/08/243790/IT-cloud-decisions-use-flawed-metrics.htm

Newport City Council has used Oracle-based CRM software to radically improve the service of its contact centre, resulting in higher call volumes with less staff.

"We've been able to keep the centre at the equivalent of 27 full-time staff this way instead of the 34 we think we'd have had to otherwise," its principal consultant in its Information Systems and Communications service, Phil Cox, told PublicTechnology.net.

"This has also let us improve processes within the whole contact centre service," he added.

Cox and his team worked with supplier Fujitsu to deploy Oracle TeleService Release 12, which integrates all the council's CRM applications by fully automating the entire request process. This replaced an older Oracle CRM system which he characterises as, "Under powered, obsolete and lacking the functionality the contact centre required to perform its duties effectively. We needed a modern, fully-supported application to act as our CRM platform."

Now, all contacts - telephone, email or the web - are automatically routed to agents who have instant access to a comprehensive knowledge database of services, he added.

As a result, average call-handling times have decreased, the number of service request types has been slimmed from 140 to 80 so as to shorten the call-handling process, and by lowering the number of steps in the address-change process from 49 to 12 has greatly simplified the whole citizen contact procedure, further accelerating service delivery.

"We now plan to use the additional functionality here when we open a new face-to-face multi-agency contact centre in spring 2011," he added.

Newport is the eighth largest unitary authority in Wales, responsible for administrating all areas of local government within the region and has a yearly budget of £228m. Its 7,000 employees provide education, highways, strategic housing, leisure, planning and social services to a population of approximately 137,000 residents.

Source: http://www.publictechnology.net/sector/local-gov/newport-city-council-improves-call-centre-response-oracle-crm

Bill Gates, founder of Microsoft, has been named the 10th most powerful man in the world, ahead of the likes of Rupert Murdoch, Hillary Clinton and Steve Jobs.

Gates, who stepped down from his day-to-day role at Microsoft to concentrate on the philanthropic exploits of his Bill and Melinda Gates Foundation, is praised by Forbes for his work in coaxing 40 of the world’s richest people to pledge the majority of their wealth to charities and good causes.

Gates is ranked seven places higher than Steve Jobs, Apple’s chief executive, who is recognised by Forbes for his “insane” creativity and ability to “transform multi-billion dollar industry every few years” with his latest must-have devices, such as the iPhone and iPad.

Larry Page and Sergey Brin, co-founders of Google, appear jointly at number 22 in the list, while, despite the burgeoning popularity of Facebook, Mark Zuckerberg, the social network’s founder, is ranked 18 places lower, at 40 on the Forbes Powerful People List for 2010.

Robin Li, the chief executive of Chinese search engine Baidu, is a notable entry at number 46, while Amazon’s Jeff Bezos appears at number 66.

And the growing influence of news site WikiLeaks is marked by the inclusion of Julian Assange, the site’s controversial editor-in-chief and “genius provocateur”, at number 68 on the list.

“Governments and corporations with dirty laundry should be afraid, very afraid,” notes Forbes.

Source: http://www.telegraph.co.uk/technology/bill-gates/8112593/Bill-Gates-named-most-powerful-man-in-technology-by-Forbes.html

Serco, one of government's biggest contractor firms, has admitted that two of its largest suppliers gave in to aggressive pressure for rebates within days of receiving its demand for the return of past payments.

Media coverage shamed the outsourcing firm into apologising over the rebate demands. Serco said it had already abandoned the aggressive strategy but not before two unnamed suppliers had wired through some of the requested 2.5% of Serco's annual spend with their businesses, it emerged today.

Serco, which is trying to draw a line under the affair, said the payments, which it described as "relatively small", had been returned to the two firms, which it refused to name. It has also issued a public statement, saying: "We deeply regret this action and apologise unreservedly to [our suppliers] for the concern that this has caused."

The episode underlines the difficulty facing government contractors, which are under pressure to cut the amount they charge without passing on cutbacks to the smaller suppliers that ministers hope will drive the economic recovery.

This weekend Royal Mail became the latest business to have its tough negotiations with suppliers aired in public after details of a presentation outlining its "radical cost-cutting programme" were leaked. Delivering a presentation to an audience of 150 suppliers two days before the Serco news broke, Kath Harmeston, Royal Mail's procurement director, set out plans for "a 20% minimum target reduction per key supplier".

Careful not to be seen leaning too heavily on small businesses, Royal Mail said: "We are striving to get the best value for money throughout the business ... But we are absolutely not imposing a blanket cut on suppliers' bills."

The Serco demand, sent by the finance director, Andrew Jenner, to its 193 suppliers, said: "Like the government, we are looking to determine who our real partners are that we can rely upon. Your response will no doubt indicate your commitment to our partnership but will also be something I will seriously consider in our working relationship as Serco continues to grow."

The episode was embarrassing for the group because the language used by Jenner appeared to clash with assurances given to Cabinet Office minister, Francis Maude, that agreed profit margin cuts would not be passed on to suppliers. In the ensuing public spat, Serco's finance director and chief executive Chris Hyman were called in by Maude to explain themselves.

The affair wiped almost 8% from Serco's share price in two days as investors grew concerned about damage to its relationship with government and its ability to protect margins in supplier negotiations.

Source: http://www.guardian.co.uk/business/2010/nov/07/serco-admits-suppliers-gave-in-rebate-demand