Industry news

The government has received a mixed response to cost-cutting demands from its top IT suppliers, but is on track to make hundreds of millions of initial savings.

In July government Minister Francis Maude conducted the first of a series of meetings with the CEOs of the government's top IT suppliers (see panel below) to discuss ways of cutting costs. He later met them individually.

Reports this week said the government is to make £800m savings as a result of the talks. Although the Cabinet Office said this figure did not come from the government - which has not completed the negotiation process - it said it would soon announce a figure.

"The savings will run into the hundreds of millions but it is too early to say," said a Cabinet Office spokeswoman.

A source close to the negotiations between the government and its main IT suppliers has revealed a mixed response from suppliers.

He said suppliers offering IT standardisation to remove costs, and asking the government to make it easier to deal with them, are getting a positive response. But some suppliers are offering price reductions in return for contract extensions. These are going down less well, he added.

"Those that talk in the language of standardisation and the removal of hurdles dealing with government are going down better," he said. "Suppliers offering small savings like price reductions are the ones that have gone down badly."

If suppliers are to meet tough government targets for cuts in contract costs, there will need to be a sea change. Standardisation of technology across departments will give suppliers confidence to invest in cost-cutting technology, in the knowledge they can win multiple clients across the public sector.

To make this work, government would have to endorse a central figure to authorise departments to invest in chosen technologies, rather than the current federated decision-making that goes on across government. Currently each department or organisation will demand different contracts and services when most processes are actually the same. This figure could be someone like government CIO John Suffolk or former government CIO and Accenture UK managing director Ian Watmore, who is now chief operating officer of the efficiency and reform group.

The CIO is ideally positioned to set out a government-wide IT standardisation strategy and drive its adoption. But the role needs to be given more authority to enforce change.

Lee Ayling, managing director at sourcing consultancy Equaterra, said the government needs to do things differently if is to make real savings. "The key thing is about the sustainability of taking costs out. If you just reduce prices costs will creep in down the line."

He said standardisation and more centralised decision making are the way forward. "I am constantly surprised when advising different government departments because they buy different IT when there is so much commonality," he added.

But he warned that attempts to centralise decision-making in the past have been ineffective.

If the government cannot put in place control from the centre, it will struggle to get departments to buy in. For example, a recent Audit Commission report revealed that, despite the availability of shared services platforms and cloud computing, only about 25% of chief constables believe any more savings can be made in the back office.

The report said that police forces need to do more. "A lack of ambition for back-office savings is a barrier to achieving value for money," it said.

Each police authority traditionally has its own back-office processes such as HR and payroll. This means there is significant overlap across police authorities. There are 23,100 staff involved with the back office at the 40-plus police forces in England and Wales.

Suppliers such as Capgemini and Steria have created platforms to enable different police authorities to share back-office functions. Cleveland Police Authority recently became the first customer of Steria's shared service for police forces. It promises £50m savings over 10 years for Cleveland Police alone. As more authorities join the savings will get bigger.

Sam Kingston UK head at T-Systems said if there is no central control and standardisation "the technology map could be a mile wide and an inch thick," will causes cost and management problems.

Source: ComputerWeekly.com

Councils have saved £230m by using the latest technology to better manage services, according to a report from the Local Government Association.

Town halls are using mobile, web-mapping and satellite technology to make refuse collection more efficient, tell people at bus stops where the next bus is and when it will arrive, and keep them informed about roadworks and planning applications.

Recent innovations also include iPhone applications that allow citizens to point their phone at a pub, restaurant or take-away and receive its hygiene rating.

There are also apps that enable citizens to send photographs of fly-tipping and vandalism, enabling councils to deal with it quickly.

Councillor David Parsons, chairman of the Local Government Association’s Improvement Board, said in the report: “Whether it’s bin men working more efficiently, fewer phone calls to inquiry centres or reducing parking ticket machine maintenance costs, making the most of modern technology and data sharing has resulted in huge cash savings across the country.

“It is estimated such technology and information sharing could potentially save councils up to £372m by 2014/15,” he said.

Examples of applications cited by the LGA as delivering cost savings and softer benefits include:

• A free iPod app from Derbyshire Dales, Telford and Wrekin and Huntingdonshire District and Merton councils that checks an eatery’s food hygiene rating, from zero to five stars, as ruled by council environmental health officers.

• Gloucestershire County Council released an iPhone app last year that allows car owners to chose when and where they want to park and to pay for a ticket remotely. The new, solar-powered pay machines also alert staff if there’s a fault, reducing maintenance costs.

• Lancashire County Council launched an app for people to send it photographs of bus shelter vandalism, while Lewisham Council has a similar program relating to fly-tipping that runs on iPhone, BlackBerry, Windows Phone and Android.

• Bus users in Blackburn can now receive up-to-the minute information on the whereabouts of buses following the launch of a pilot project by Blackburn with Darwen Council. The system, which runs on solar power and utilises satellite technology, gives out real time information, on screen and audio, on a specific service at various bus stops.

• South Tyneside Council used location-based information to create the 'My South Tyneside' web page. It includes a property search facility for finding schools, libraries and other local facilities, and an email alert about local news, community events, how residents can get involved and changes like planning applications and road works.

• Daventry District Council used location-based technology to improve refuse collection routes through better planning. This resulted in £223,000 savings from reduced mileage, less overtime, smaller vehicles and fewer rounds.

• Nottingham City Council, working with the local NHS, police, districts and the county council has created an online Local Information System providing access to comprehensive, up-to-date information related to local neighbourhoods, which staff both inside and outside the participating organisations can use to quickly find information they require. The council estimates that it saves up to £460,000 a year.

Source: Computing.co.uk

IBM could see its permanent workforce of 399,000 staff shrink by three-quarters over the next seven years.

The company would then re-hire the workers as contractors for specific projects as and when necessary, a concept dubbed "crowd sourcing", according to a report by Personnel Today.

Tim Ringo, head of IBM Human Capital Management, is quoted as saying that by 2017, there will potentially be just 100,000 people working full time on a permanent basis at the firm.

“I think crowd sourcing is really important, where you would have a core set of employees but the vast majority are sub-contracted out," he added.

Managed IT services supplier Calyx Group has been placed into administration after struggling to pay its debts.

Geoff Rowley and Phil Armstrong, joint administrators for the group and partners at restructuring firm FRP Advisory LLP, said that Calyx Group was carrying a debt on its balance sheet “in excess” of its annual turnover of around £75 million.

“The group went into administration after it was unable to repay a secured creditor,” said Rowley.

Meanwhile, Calyx Goup’s Irish divisions have also been placed into receivership, under the responsibility of Tom Kavanagh of Irish insolvency firm KavanaghFennell.

According to a statement from FRP Advisory, the administrators are looking for a buyer of the business, but as yet, no redundancies have been made.

“We’re hopeful of finding a trade buyer,” said Rowley. “While we undertake this exercise, the business will continue to run as normal, with no interruption to customer service.”

Calyx Group has more than 500 employees in the UK, Northern Ireland and Ireland.

The company has provided managed IT services to customers including Royal Holloway, University of London, Barclays, Hays Recruitment and retailer Matalan.

NextiraOne, has signed a contract to deliver two new state-of-the-art Data Centres for the market-leading yogurt manufacturer, Müller Dairy. The project has been designed with clear environmental considerations in mind, and includes carbon-reducing technologies for cooling and power supply in two new dedicated facilities.

NextiraOne’s Intelligent Business Services Division designed, planned, project managed and implemented the complete overhaul of two Data Centre environments for Müller Dairy, at its UK headquarters and dairy in Market Drayton, Shropshire. The new Data Centre infrastructure has extended existing facilities which have remained operational throughout the project.

The works included the construction of new walls, raised modular floors and suspended ceilings, general power and lighting, the installation of new fire detection and suppression systems, APC InfraStruXure In-Row cooling solutions, server and network racks and structured cabling, all of which support Müllers Local Area Network, (LAN), Wide Area Network (WAN) and Network Storage equipment in each room. To assure business continuity, each room will be supported by a centralised Uninterruptible Power Supply (UPS) and generator back-up system. The system also includes an APC InfraStruXure Central Management server, which monitors environmental conditions within the Data Centres and can provide usage trends and early warning of conditions that could lead to system failure.

The aim of the new Data Centres is to maintain and improve system availability as Müller Dairy’s demands on its ICT continue to grow. Once the installation is complete NextiraOne will provide ongoing support and maintenance under a five-year Operational Support Agreement (OSA), including a single number support line to the NextiraOne Welcome Centre that handles all fault logging and manages the fault to its successful conclusion, telephone support and hardware support where required and also scheduling of preventative maintenance visits.

Under the contract NextiraOne’s Intelligent Building Services Division has carried out a phased implementation, extending and refurbishing one room at a time, so that the business-critical operations of the dairy could continue throughout. All the business processes, including the manufacturing of 5 million pots of yogurt per day and the handling of customer calls and enquiries through the company’s Contact Centre are controlled through the company’s ICT services, housed in the existing Data Centres.

One of the key factors built into the design is the ability to support Müller Dairy’s strategic aim of reducing its carbon footprint. NextiraOne has incorporated new energy-efficient technologies into the Data Centres, including energy efficient cooling systems that reduce power consumption by directly cooling IT equipment, instead of the room. The installation of a highly efficient centralised UPS system, which utilises Isolated Gate Bipolar Technology (IGBT), will also reduce power consumption, whilst improving business continuity.

NextiraOne won the contract because it was able to provide a solution that was fit for purpose whilst also demonstrating that its carbon reduction aspirations matched those of Müller Dairy. The company has a dedicated Intelligent Building Services Division which has a positive target of delivering carbon reduction solutions to its customers. NextiraOne is also a member of the 2degrees Network, a collaborative problem-solving and innovation service for sustainable business that helps organisations respond to the opportunities and challenges of climate change and the transition to a low carbon, resource-constrained economy.

“NextiraOne has the expertise in building Data Centre projects and we were impressed with the environmental awareness they are bringing to the project - entirely in keeping with our own carbon reduction strategy,” commented Stephen Kane, Head of IT at Müller Dairy UK.

Steven Skakel, Managing Director UK & Ireland at NextiraOne, said: “Müller Dairy has a very clear approach to its environmental responsibilities and we are delighted that it recognised our own commitment to carbon reduction in choosing NextiraOne to build its new Data Centres. Our Intelligent Building Services Division is at the leading edge in terms of delivering carbon-reducing solutions and the new technologies in power supply and In-Row cooling equipment that make a dramatic difference to a company’s ability to reduce costs and carbon.”

New findings from a report by the market research and strategic consulting firm Pierre Audoin Consultants (PAC) demonstrates that sales from IT outsourcing services will have increased by approximately EUR 4.5 billion in the DACH region in 2010 compared to 2005. Over the same period, the share in overall IT spending - an important indicator of the maturity of the outsourcing market - has risen from 9 to 13 percent.

According to the PAC report, which focused on sourcing trends and supplier positioning in Germany, Austria and Switzerland, established players in this market segment have not all been benefiting to the same extent from the positive trend. A comparison of the years 2005 and 2009 shows that most of the established providers have lost market share, partly to individual competitors, but mostly to a large number of “newcomers“.

A services market segment like outsourcing, which is heavily dependent on economies of scale, is normally dominated by a few large providers. The top 5, for instance, account for nearly 45 percent of the market in Germany; in Austria, they hold almost 70 percent. The remainder of the market is highly fragmented, with the number of outsourcing providers approaching 100 in the DACH region alone.

In the overall DACH region, IBM ranks first, closely followed by T-Systems (excluding captive group revenue). HP, Siemens SIS (also excluding captive revenue) and Atos Origin follow by some margin.

The positioning in the individual countries varies, though. In the Swiss market, IBM leads with a market share of nearly 19 percent, followed by Swisscom IT Services, HP and T-Systems. Accenture and CSC rank 5th and 6th. In Austria, on the other hand, Siemens SIS - with a market share of 23 percent - is clearly ahead of its major competitors, IBM, Raiffeisen Informatik, HP, and T-Systems.

In Germany - by far the biggest market - T-Systems still ranks first, with a market share of almost 13 percent, albeit very closely followed by IBM. HP, Siemens SIS, Atos Origin and Fujitsu are the challengers with the largest sales volumes.

It is remarkable that Infosys, an Indian player, has made it into the top 20 outsourcing providers in the DACH region. In Switzerland, the company even ranks 7th.

A few outsourcing giants clearly dominate the market. However, the evolution of the market shares of the leading suppliers since 2005 shows that this dominance has actually been dwindling.

HP, for instance, has gained quite some share in all markets after taking over EDS. When looking at HP’s performance from a pro-forma perspective (i.e. 2005 figures including EDS), though, HP has distinctly lost shares in some markets.

IBM has maintained its positioning in Austria and Germany since 2005, while slightly losing market share in Switzerland.

T-Systems has lost market share to competitors in all three countries. Siemens SIS has gained some share in Switzerland as well as in Austria over the period considered; in its home market, however, Germany’s second “local hero“ has also lost some share.

Swisscom IT Services has improved its position in its home market, Switzerland. Raiffeisen Informatik has also slightly gained market share in Austria.

Atos Origin has expanded its share in the Swiss outsourcing market while losing ground in Germany and Austria. CSC, too, has gained ground in Switzerland while seeing its share slightly fall in Germany.

Capgemini’s market position has remained largely unchanged over the period in question.

In many cases, companies starting from a rather low revenue base, but constantly generating growth above market average, have gained market share. These include, for instance, Accenture, Computacenter or Wincor Nixdorf in Germany. Fujitsu has also gained further ground particularly in Germany; even from a pro-forma perspective - including TDS and Fujitsu Services - the supplier has expanded its market share.

The big players have also lost quite some share to the growing number of “new” suppliers. Above all, some Indian providers have established themselves in the outsourcing area. In Switzerland alone, as many as four India-based players (Infosys, TCS, Mahindra Satyam and Wipro) are among the top 20 outsourcing providers.

Moreover, the challengers include niche suppliers specializing in one or a few services, industries or regions. There is also a large number of service providers that are normally not considered as outsourcing players, but that offer various kinds of operational services. They include the growing number of hard- and software companies offering their products “as a Service’’, as well as “e-business’’ players such as Google and Amazon; in addition, there are telecom operators with an expanding IT services business, systems suppliers pushing into the managed-services market, and highly specialized BPO providers.

“The market will continue to be dominated by a few “outsourcing giants” and we even expect individual providers to strengthen their positioning as a result of ongoing consolidation“, says PAC analyst Karsten Leclerque. “On the other hand, the progressing diversification of the services available on the market will increase the share of the market that a rising number of suppliers will carve up among themselves. The cake has been growing, but the individual slices have been shrinking“.

Tata Consultancy Services (TCS) has become the second-largest insurance business process outsourcing (BPO) provider in the UK, after winning two deals worth £250 million (around Rs1,800 crore). UK-based Capita is the number one player in this space.

Diligenta, a subsidiary of TCS, had yesterday announced that it had acquired Unisys Insurance Services (UISL) from Unisys Corporation, in lieu of which the company received business worth £250 million for the next six years. With this, Diligenta won business from Phoenix Group (earlier known as Pearl Group) and Old Mutual International. Phoenix Group is an existing customer of Diligenta.

Diligenta is already in talks with a few more insurance players for similar deals. “The cycle time for deals to materialise in case of Diligenta is six months to a year, especially for similar deals. So, in the next 12-18 months, we will have something to share. But winning these deals validates our strategy,” said Phiroz Vandrevala, chairman of Diligenta and executive director at TCS.

TCS, the country’s largest information technology (IT) services provider, took almost four years to develop a platform for the insurance segment in the UK. “We did not want to do a lift and drop kind of work in this space, and we wanted to partner in transformational work. It has taken four years to develop the platform. There was skepticism around this platform, but in April this year, we went live with two million policies for Phoenix,” said Vandrevala. For TCS, the UK is an important market, contributing 15 per cent to its revenue. TCS headcount in the UK will touch 2,000.

TCS started its journey in the UK insurance space in 2005, when it acquired the life and pension operations of Pearl Group under a 12-year £486-million BPO deal.

Diligenta now has three clients — Phoenix Group (additional extension to its earlier contract), Old Mutal International, and National Employee Savings Trust (NEST). In March, TCS had bagged a 10-year £600-million contract from Personal Accounts Delivery Authority (PADA) to administer the NEST scheme, but the deal is under the UK government scanner. Vandrevala said, “So far there is no change. In October, the government will take a final call on the overall IT deals. We will come to know about this only then.”

With these new contracts and an existing £486-million deal with Phoenix Group, analysts feel that TCS’ strategy is paying off. “I think TCS took a risk when it signed the deal with the Pearl Group in 2005. But if Indian IT firms want to break into the big league, they will need to take such risks. Also, with this win, they get much more flexibility,” said Vikram Gulati, director, Quantum Step, a UK-based research and advisory firm.

With these deals, TCS is also hopeful that the UK subsidiary will break even by the end of this financial year. “The work on the new contracts starts immediately. We are hopeful that by the end of this fiscal, we will break-even,” said Vandrevala. Diligenta reported a net loss of Rs56 crore in 2009-10 on a turnover of Rs456.2 crore, against a net loss of Rs41 crore on revenues of Rs527 crore in 2008-09.

TCS shares today closed 1.59 per cent down at Rs843.55 on the Bombay Stock Exchange.

Source:http://www.bpo.biz/bpo-news-blog/2010/09/06/tcs-is-now-the-2nd-largest-insurance-bpo-provider-in-uk/

The government is to initially cut its IT and outsourcing costs by £800m following meetings with its main suppliers, according to reports.

The new government targeted IT suppliers in an attempt to squeeze costs out of existing and future contracts.

In July minister for the Cabinet Office Francis Maude met the chief executives of the government's top 19 suppliers to start "renegotiating with them across everything that they do for government to get the cost down".

Progress is being made but some supplier offerings are going down better than others.

A source close to the negotiations said the government is making progress. He said suppliers that are offering standardised services and asking the government to make it easier to deal with them are offering big savings. "These suggestions are going very well." But he said suppliers that are just cutting prices and asking for extensions are not.

One attendee at the original meeting told Computer Weekly the government asked for immediate savings this year and ongoing cost reductions. He added that no numbers were mentioned.

A Cabinet Office spokeswoman said the £800m figure has not come from the government. She said the government has not yet completed the process. "It will run into hundreds of millions of pounds, but it is too early to say," she said.

Source: http://www.computerweekly.com/Articles/2010/09/06/242615/Government-IT-suppliers-agree-to-intial-163800m-cost.htm

Wipro Technologies the global Consulting, System Integration and Outsourcing business of Wipro Limited (NYSE:WIT), today announced an initiative with Oracle to jointly deliver a Warranty Management and Analytics solution for the Industrial Manufacturing, Automotive and High Tech industries.

This combined solution will leverage Wipro’s deep industry expertise and Oracle’s Siebel CRM applications to help streamline the warranty management process across OEMs and their suppliers, dealer service providers, and contract manufacturers to help reduce warranty expenses and fraudulent claims.

“Around 4 percent of warranty claims are fraudulent, making it one of the biggest challenges that the industry is facing today,” said John Barcus, Vice President, Manufacturing Industry Business Unit, Oracle. “We believe there is an immense opportunity to reduce these losses and an effective product warranty management solution is pivotal in helping reduce fraud-related losses. Wipro’s strong domain expertise in the Manufacturing, High Tech and Automobile industries and experience in development and deployment of Siebel CRM applications makes it a powerful partner for this solution.”

“Wipro is excited to work with Oracle in developing the Warranty Management solution to help our customers manage their claims more efficiently and accurately,” said N. S. Bala, Senior Vice President, Manufacturing Industry SBU, Wipro Technologies. “We believe that a streamlined warranty process and analytics will allow customers to better predict their warranty exposure and better manage their warranty reserves. The solution will be hosted for demonstration at Wipro’s state-of-the-art Oracle Lab, OZONE allowing our clients to see the solution before their own infrastructure is up and running.”

Wipro is a leading Oracle services provider, rated by independent industry analysts as a leader in Oracle services, Wipro provides services from rack to stack across Oracle product suite.

Source:http://pr.watblog.com/2010/09/wipro-joins-with-oracle-to-deliver-domain-solution-for-industrial-manufacturing-automotive-and-high-tech-industries/

It seems analyst were right as to who would win the bidding war over global provider of utility storage 3PAR. But with $115bn annual revenue –compared with Dell's $53bn - this should come as no surprise.

Indeed, given HP’s size and global presence, it is also likely to obtain a return on investment than Dell would have been able to get.

The definitive agreement HP and 3PAR have entered into sees HP purchase 3PAR, for $2.35bn. The transaction has been approved by the boards of directors of both companies.

The decision comes after a couple of weeks of intense bidding where the price of 3Par shares escalated from $18 (when Dell made its original offer on 16 August) to $33 per share which HP will pay in cash.

HP’s cash tender offer commenced on 27 August 2010 and it is scheduled to expire at 12:00 midnight, New York City time on 24 September 2010, subject to customary tender offer conditions being satisfied.

The merger will speed up HP’s Converged Infrastructure strategy and drive growth in key storage markets and strengthen its storage, server and networking product offering.

The final closing of the acquisition is expected to occur by the end of the calendar year. As for the termination of the previous agreement with Dell, 3PAR paid Dell the required $72m fee.