Industry news

Beverage manufacturer Britvic has awarded international IT services provider Atos Origin a new five-year contract worth around £15m.

The deal announced covers IT hosting services for Britvic’s centrally located UK systems including all its SAP, Siebel and associated applications for the back office functions. It follows a three-year contract awarded in 2008 for applications management.

For this new contract Atos Origin and Britvic have agreed a commercial model where the fee is based upon the transactions delivered. This provides Britvic with more flexibility to better plan and budget for services in line with its business processes.

Following the recent acquisition of Fruité Enterpises in France, Britvic needs flexible, cost-efficient IT systems that can support business operations and ensure product delivery to customers.

The agreement will help Britvic to better address critical business challenges, such as enabling the supply chain to prepare for the international growth and to ensure that it can continue to respond fast to peaks in demand for its products.

Atos Origin provides support from both the UK and its Indian delivery centres in Mumbai.

According to reports, Fujitsu UK & Ireland has landed three new private sector deals worth a total of £200m, in an announcement which many hope will signal a change in the fortunes of the UK IT industry.

The announcement comes after 30 months of extremely depressed sales in the private sector, with Fujitsu CEO Roger Gilbert explaining that the deals were done as part of a ‘flurry of activity’ in the last quarter, much of which was driven by mergers and acquisitions, as well as by demergers and ‘disaggregations.’

Gilbert, who confirmed that the three contracts, were for a desktop management programme, a global support and logistics programme, and mix of back office and shop floor systems for a major retailer, also said that the level of orders from the private sector had trebled in the first quarter of 2010.

The news comes in the same week that Fujitsu announced that it was restructuring its product lines in order to compete more vigorously as a global supplier of cloud-based and managed services.

Gilbert insisted that although the firm had yet to engage the government in detail to discuss their needs, he felt that the new approach, combined with new initiatives designed to give a quicker payback, such as sharing desktop architectures, consolidating network assets, could present the public sector with substantial savings.

Fujitsu was expected to announce its first-quarter 2010 results on 29 July, to reflect the new structure.

Media reports suggest that accounting software provider Sage is among the interested parties bidding for Italian management software manufacturer from private equity firm Bain Capital in a deal that could reach up €650m.

The move is in line with Sage’s build-up strategy –in 2006 the company invested £617.5m in acquisitions including the £307m purchase of Emdeon Practice Services.

The group has a strong position in the traditional off-the-shelf software and is trying to build upt its software as a service (SaaS) capabilities.

But while the Newcastle-based firm may have fallen behind competitors in the SaaS space, it has worked to raise cash and reduce its debt which it is reported to have falledn from £558m in Q1 last year to £280m as at June this year.

Other interested bidders in the auction include private equity firms HgCapital and Cinven.

This is not the first time Sage goes head to head with a private equity firm for an acquisition. Four years ago it lost a bid against HgCapital for Norwegian software group Visma.

The commercial outsourcing market in Europe, the Middle East and Africa (EMEA) has yet to exhibit signs of recovery following the sharp downturn in demand in mid-2008, according to the latest figures published by data and advisory firm TPI in their Q2 2010 Index.

Reduced outsourcing activity in the UK and Germany in the first half of 2010 has caused an overall decline from the same period last year.

In the first half of 2010, the Nordics accounted for almost 17% of global total contract value (TCV), making it the second-largest outsourcing market in the world behind the US. The impact of the decline in these traditionally strong markets was offset somewhat by a number of large contract signings in the Nordic region and France.

“So far this year the Nordics ranked as the second largest outsourcing market in the world – mostly owed to a few significant restructuring deals," noted Duncan Aitchison, partner and president of TPI, EMEA. "Germany dipped a little this year but is still reasonably strong and has the greatest potential for sustained growth. In comparison, growth in the Nordic region is likely to be less consistent.”

He added, “The UK is without a doubt the market that has suffered the most, certainly in Europe but the case could be made globally. For a long time the two big markets were the US and the UK, with the UK knocking a 20%+ of the global market –reaching close to 30% in 2008. We have witness it step down, halving from 2008-2009 and again from 2009 to the first half of 2010.”

One of the latest additions to the EMEA TPI Index is the reporting on public sector outsourcing trends in the region , which has shown that public sector contracts awarded in EMEA in the first half of 2010 stood at over €9bn, with the UK Public Sector accounting for 86% of EMEA public sector expenditure.

Between 2005 and 2009, the UK public sector accounted for 57% of all outsourcing, compared to the commercial sector’s 43% share. In the first half of 2010, there was a notable shift as the commercial sector share fell to just 25% of the UK market. With a 75% share of UK outsourcing spending and an increased appetite to explore outsourcing options, the public sector has become an increasingly important target for service providers to help balance the reduced opportunities in the commercial sector.

Nevertheless, Aitchinson admits that activity is not likely to increase significantly, as few contracts have been launched. “So far this year there has been little to no news of contracts in the works. The first six months were dominated by talk about the election, and now the coalition government is setting up the agenda.”

The overall picture for the remainder of 2010 is not a rosy one, given the number of uncertainties that prevail at the macroeconomic context.

Leading global IT services provider HCL Technologies Ltd, has announced a 24.1% global revenue increase in its results for both the year and the quarter ended June 30 2010.

Indian firm HCL was ranked number one in both Tier 1 Traditional IT Infrastructure Outsourcing (ITO) and Remote Infrastructure Management Outsourcing (RIMO) earlier this year in Datamonitor's 2009-10 Black Book of Outsourcing, a feat that has been attributed to the strength of the company's client relationships and reputation for consistently providing results that deliver measurable value.

HCL's results show that its global revenues have increased by 24.1% to $2.7b, while year on year revenues have increased by 21.5% to $738 m, thanks to a number of significant contract wins. During the last financial year alone, HCL won contracts within its key vertical and horizontal service lines in Europe, including Equitable Life, GlaxoSmithKline, Royal Mail, Sky Italia, St Gobain and News International.

“Over the last year we have developed facilities, invested in local operations and increased headcount in the region and with it our ability to service European clients locally. This is a continuation of our European growth strategy of making strong investments during the downturn, to be best positioned to accelerate our business forward in the European market.” commented Rajeev Sawhney, President for HCL Europe.

“This commitment to Europe has enabled us to welcome new clients to HCL, as well as extend current relationships. This growth exemplifies the cornerstone of our core philosophy on Employees First, Customers Second and in our success of gaining momentum in the region."

Car manufacturer General Motors (GM) has renewed two contracts with global consulting, technology and outsourcing services provider Capgemini, to provide application outsourcing services for GM’s global sales & marketing and dealer.

The combined value of the five-year agreements is approximately $250m (€190m).

Under the new contracts, Capgemini will provide global application sustain and development services as well as help desk support for GM’s global sales & marketing and dealer systems located in 38 countries, as well as hosting services for test and development servers.

Capgemini started delivering services to GM under the new agreements from July 2010, one year ahead of the end of the previous contract term. The original contracts between GM and Capgemini were effective June 2006.

Budgets cuts are partially responsible for the wave of woes afflicting housing maintenance provider Connaught, which is under increasing pressure from lenders as it could soon breach the terms of its loans.

Connaught Plc is set to breach the terms of its loans and desperately needs more cash, the social housing services company said on Monday as government cuts eat into its livelihood.

The covenant that is believed to have been breached is that net debt must be less than 3x EBITDA, while the company’s debt is set to exceed £200m and it has begun talks about securing additional funding from banks.

An announcement on an agreement with banks could be made within the next week. Despite fears over losing contracts, Connaught's plight is also thought to have been aided by securing a couple of new contracts in the past fortnight.

But the company is also being probed by the Financial Services Authority (FSA) after a director sold shares in the firm before a profit warning last month.

Peter Jones, managing director of Connaught's northern business, made £264,953 by selling shares on 21 May and 23 June, just ahead of an announcement by the group of a shortfall in its revenue. He has since been suspended pending an investigation.

Connaught confirmed that it had received requests for information from the FSA, though the City watchdog has not yet launched a formal investigation of the firm.

The news caused a further two-thirds to be wiped off the group's share price, which has now lost 90% of its value since June's profit warning.

The UK’s national postal service Royal Mail Group Ltd (RMG), has signed a six-year IT contract with consulting, technology and outsourcing services provider Capgemini UK, a subsidiary of Capgemini group.

The agreement aims to transform its business and consumer online services, help to reduce its annual website IT costs and support expansion and diversification into a wide range of new web-based business opportunities without the delays and expense of traditional IT.

The cloud computing a technology which will be deployed will enable IT-on-demand to be piped into an organisation as a ‘smart utility’ on a money-saving pay-as-you-go basis.

The new technology can be quickly and easily reconfigured to support RMG in launching new business ventures and bringing new services to market as quickly as possible.

Areas seen as strong candidates for expansion and diversification at RMG include services for personal and small or medium business customers, and high-quality, innovative parcel delivery services to meet the needs of the UK’s boom in online shopping.

British business process outsourcing (BPO) firm Xchanging Plc is expanding its back office operations at Shimoga in central Karnataka to a 2,000 seat facility.

The centre will be located on a six-acre space in the new special economic zone (SEZ) at Shimoga.

The London-based BPO firm has been operating at Shimoga, about 270 km from this tech hub, from rented premises since 2008, employing about 300 people from the region.

The £750m back office firm also operates from Bangalore, Chennai and Gurgaon.

Consulting, technology and outsourcing service provider Capgemini has appointed Aloke Paskar as head of the capital markets sector for North America and the UK.

In his new role, Paskar will be responsible for overseeing business operations and client relationships, as well as sales and delivery.

Prior to taking on this position, Paskar served as vice president of India and China operations for Capgemini Financial Services.

Paskar brings to Capgemini over 20 years of global experience in the financial services industry, including co-founding capital markets IT services company, TechSpan.

He joined Capgemini in 2005 as North America delivery head for the company’s Rightshore operating model, which aims to get the right balance of the best talent from multiple locations working as one team to create and deliver the optimum solution for business needs.

In 2008, he joined Capgemini’s financial services business unit as head of Asia Pacific before becoming the head of operations for India and China.

Paskar’s appointment comes on the heels of Capgemini’s announcement of its acquisition of Strategic Systems Solutions (SSS), a global IT services and business process outsourcing firm (BPO) focused on the financial services industry.