Industry news

Whitbread, the UK's largest hotel and restaurant company, has signed a five year contract with Steria, the European IT enabled business services company. The contract, which will be going live in early 2009, will see Steria provide a finance and accounting (F&A) service which is delivered from its offshore locations.

Andy Pellington, Whitbread finance director, said, "This signifies an important step in Whitbread PLC's ongoing organisational review.”

John Torrie, CEO of Steria UK, commented, "We are delighted to be working with Whitbread PLC.”

TCS has reported strong consolidated financial results for the quarter ended September 30, posting a 17.69 % increase in year on year revenues to $3.1 billion in H1. Its Q2 revenues were also impressive, with a 14.74% year on year increase to $1.57 billion.

Mr Ramadorai, TCS CEO and MD, commented: “Our growth has been balanced across markets and verticals with a 9.5 per cent sequential growth in our international business during Q2 and we have improved margins significantly. New opportunities are emerging and there are signs that our services will play a significant part in the global economic recovery. Our acquisition of Citigroup Global Services will provide another driver for growth.”

TCS’s success in the BFSI sector continued to register positive growth despite unprecedented volatility and uncertainty in the global financial markets. The Manufacturing and Retail verticals grew as large transformation deals ramped up, while the Travel, Energy and Media verticals gained traction in new markets. While outsourcing services continued to enjoy strong demand across major markets, traditional application development and maintenance opportunities gained futher prominence in the current economic climate. The engineering services sector continues to experience strong demand across all markets.

Commenting on the reasons behind TCS’s good performance Mr Chandrasekaran, Chief Operating Officer, explained: “Our business model is resilient and we have demonstrated this in Q2 through volume growth, improvement in our offshore leverage, pricing, productivity as well as over 50 new client wins. We have a robust pipeline even in the current environment and our diversified market presence and full services will drive growth in the future.”

EPAM Systems, a leading Central and Eastern European ITO provider, has expanded into Sweden opening an office in Stockholm. The new office will be the first of several offices in Scandinavia providing onshore consulting and support to its Nordics clients, while enhancing EDS’s nenarshore delivery capabilities.

Karl Robb, Executive VP and President of EPAM Europe, commented: "The adoption of offshore and nearshore services is growing in Scandinavia. Adding a solid Scandinavian presence of domain consultants, technical engagement leaders, and project managers, reflects EPAM’s balanced approach to nearshore service delivery. Several members of EPAM’s senior management team have lived and worked in Sweden for many years, as have a handful of our senior nearshore delivery leaders — so EPAM knows the culture, the processes, and the language and believes that this model will provide the ideal alternative to distant Offshoring and organizations heavily biased towards onshore services.”

Telefónica, the parent company of O2 UK, has extended its finance and accounting business process outsourcing (BPO) agreement with Steria until 2014.

According to Steria, the contract extension aims to reduce costs, improve performance and drive innovation within O2's UK operations. The deal will look to secure O2 cost savings on its finance and accounting transaction processing and will be subject to external benchmarking and best practice review.

The deal builds upon an existing five year relationship between the two businesses and is due to be implemented from April next year.

CSC has been awarded part of an Enterprise Development Support Services (EDSS) contract by the Department of Education’s Office of Federal Student Aid. The indefinite-delivery contract has a top-end value of no more than US$300 million for the total life of the deal.

Under the terms of the agreement, CSC will provide the Office of Federal Student Aid with a range of IT services, including application development, software configuration management, transition planning and project management. In addition, contractors will work together by sharing information and collaborating as part of a team. Federal Student Aid’s core mission is to ensure that all eligible individuals can benefit from federally-funded or federally-guaranteed financial assistance for education beyond high school.

“CSC brings proven service-oriented architecture and Federal Student Aid-specific knowledge and capabilities to support the Department of Education efforts to administer the nation’s largest source of student aid,” said Tom Anderson, president of CSC’s North American Public Sector Civil Division. “CSC is pleased to work in this integrated, collaborative team environment to deliver innovative technology-enabled solutions for Federal Student Aid’s partners including schools, lenders, servicers and guaranty agencies to operate fairly, honestly and efficiently.”

ConvaTec, the global medical device company, has signed a US$95 million IT outsourcing contract with EDS.

Under the contract, lasting five-years, EDS will manage ConvaTec’s IT infrastructure and communications network, enabling the company to focus its business growth in the wound therapeutics, critical care and ostomy care markets.

“Our relationship with EDS supports our strategic direction within information management of using external service providers to help speed service delivery and achieve economies of scale,” said William Compton, CIO at ConvaTec. “We look forward to building our relationship with EDS as it creates and provides the technology infrastructure for ConvaTec as a newly formed stand-alone company.”

Under the agreement, EDS will also manage ConvaTec’s information storage and server environments as well as the company’s voice and data communications network that connects its employees worldwide. EDS also will manage ConvaTec’s end-user computing environment, including desktop, service desk and on-site services.

IT managers across the UK see the current economic downturn as an opportunity to demonstrate their value and innovate, according to research.

A study published today by IT services provider Getronics has highlighted that only five percent of the UK’s IT managers are expecting their departments strategy to be less aggressive during the credit crunch.

200 IT managers across the UK were surveyed for their opinions of IT, its future and their current priorities. During a time when industry is tightening budgets and looking to cut costs, almost a quarter of IT managers across the UK are optimistic, expecting their strategy to be more aggressive. Optimism is most rife in the North of England and Scotland, with nearly one third of IT managers feeling positive.

Dave Baldwin, managing director at Getronics UK and Ireland, commented: “It’s been an incredibly turbulent few weeks for British business. But there is a clear opportunity for our community to bring out new ideas. IT managers are quite right to be positive and forward-looking in their strategies, this is a time for them to rise up and shine. Technology will always evolve and companies who truly offer something original, which saves time and demonstrates instant savings, will prosper in a downturn.”

“This downturn shouldn’t be doom and gloom for anyone associated with IT,” said Charles Ward, COO at Intellect. “The current economic situation is very different to the dot com bubble bursting in late 2000. Of course, there will be short-term pressures on costs and investment proposals, but it’s clear that the smart use of IT can support businesses in this uncomfortable economic climate.”

The research also highlighted the continued priority that IT managers are giving to security. Security is considered to be of critical importance to 92 percent of respondents. This figure was higher among the publishing and professional services community and considerably lower (63 percent) within the retail sector.

“A company’s data can be its biggest asset and protecting it has never been more important,” said Baldwin. “There is going to be a bigger fight to keep customers now that the effects of the credit crunch are making both people and business cut back. Both will reassess how secure and stable they are financially, physically and virtually, and security is vital for this re-assurance. Customers need to feel that their personal details are safe in the hands of every organisation. If they don’t feel it is, they consider moving elsewhere.”

The older you get, the more likely it is you'll wake up one day and find the world turned upside down. And so it was this morning.

While the world burns, the shadow chancellor hobnobs with a Russian oligarch, and thereby falls out with fellow Bullingdon Club* carouser Nat Rothschild for – sin or sins – being indiscreet (well he did go to St Paul's rather than Eton: what more do you expect from an oik?); the Republicans accuse Obama's ascendant Democrats of rigging the election (does no one remember dimpled chads?); the pound plunges to a five-year low against the dollar, which is now underwritten by Beijing; Mervyn King has used the 'r word' in public, as has the Prime Minister – whose popularity grows by the second; a small group of tribesmen in the hills runs rings around the US war machine; and China is in a space race with India, which has this morning launched an unmanned mission to the moon... to size it up for nuclear fuel.

Just an average day, in other words, in a world where the US has more nationalised institutions than China, and no one can afford to drive to the office.

Anyone harking back to the summer, when one non-forged English pound bought you two faded, crispy dollars, or to 18 months ago, when the US seemed set to rule the world for a second century, would think that generational change has sneaked up and tapped us on the shoulder while we were facing, hand outstretched, in the opposite direction.

But the lesson of all this, of course, is that real change, like real power, is always behind the scenes; it moves unnoticed by all but the few in the know. When it reveals itself, it is because the last edifice to fall is simply the old facade – like the Berlin Wall.

So the question we should all be asking ourselves is: how prepared are we for the real 21st century, which is not going to be a high-speed, broadband re-run of the 20th after all. No, it is going to be the Eastern century, bankrolled and powered by Asia and Eastern Europe, against which the 19th and 20th century Western guard seem woefully ill-prepared (apart from the upper classes, whose blood ties and loyalties have always made geography irrelevant).

Answers on a monogrammed napkin, please.

On the subject of which, I shall be at the NOA Awards tomorrow night, replete with black tie and tux, presenting the award for Outsourcing User of the Year. Gossip, I dare say, will follow.

Toodle pip!

* Previous members include such infamous reprobates as John Profumo, Gottfried von Bismarck, Boris Johnson, Prince Felix Yussopov (co-murderer of Rasputin), and, er Davids Cameron and Dimbleby. Lock up your daughters!

The Association of Chartered Certified Accountants (ACCA), the global body for professional accountants has awarded Atos Origin an £8m contract. Under the five-year contract, Atos Origin will take over management of the IT infrastructure that supports ACCA’s 122,000 members and 325,000 students worldwide through a network of 80 offices and centres.

To deliver the contract, Atos Origin will use its global sourcing model to provide the services from its offices in the UK and service desks in Kuala Lumpur, Malaysia. Atos Origin will also lead a transformation programme to ensure that the IT infrastructure can better handle peaks in usage, for example, just before the deadline for examination entries and when the examination results are first published.

Last week IBM announced a strong set of Q3 results, with no apparent big blues from the combined chill of the credit crunch and the downturn – despite the company's exposure to the financial services sector.

Net income was up 20% to $2.8 billion, and revenues by five percent to $25.3 billion. The services and outsourcing sectors of its business seem strong, but the key lessons are the diversification, spread, and visibility of its business.

“This is a tough environment, but we were ready for it,” said IBM's chief finance officer (CFO) Mark Loughidge. “We are executing a play that we called some time ago. It has two major elements. First, we have been investing to capture opportunities in the emerging markets. You can see the benefit in our results again this quarter with double-digit revenue growth and good returns.

“Second, in the more established markets our goal has been to drive productivity. We’ve been systematically attacking our spending base, taking out infrastructure costs, reducing our cost and expense levels, and improving our efficiency.”

Because of this, IBM claims to have a more efficient structure than many of its competitors, and than it had before. “In the third quarter, when the revenue growth in the major markets slowed, we had great margin performance and hit our profit objectives,” confirmed Loughridge.

As many analysts have pointed out, IBM has also struck a balance between annuity and transaction-type businesses, with the former including its outsourcing, maintenance, and most of its software deals. As a result, the company has the two ingredients missing from many companies' balance sheets as the credit markets have dried up: long-term visibility and liquidity.

Its geographic spread has also inured it to the westerly depression of the past 12-18 months. Europe had the strongest performance, up four percent at constant currency, while the Americas was up two percent, and Asia Pacific up one percent.

“In the more established markets that we address through our major markets organization we are uniquely positioned to assist enterprise clients with high value transformational projects as they retool for efficiency and cost savings,” continued Loughridge.

“Now in the emerging markets, we’ve been investing heavily to capture opportunities to build out public and private infrastructures. Our growth markets organization grew 13% as reported and 10% at constant currency, representing 19% of IBM’s geographic revenue in the quarter.

"The BRIC countries, a subset of our growth markets, grew 19% as reported and 12% at constant currency with strong double-digit growth in Brazil, Russia and India. However, our results in China slowed to three percent growth, down four percent at constant currency.”

With the public sector and industrial components of its business doing well, Loughridge turned his attention to financial services, which just a fortnight before had seen many analysts forecasting doom and gloom for IBM's Q3 figures – the result of the short-term, muddy and alarmist thinking that stalks many a downturn and contributes to hysteria.

“I’ll remind you that about 60% of our financial services revenue is in annuity businesses,” said Loughridge. “US revenue was down one percent, slightly better than our second quarter performance. However, outside the US, where we generate over 75% of our business, revenue was up 10%, or four percent at constant currency. Globally, we had growth in banking and insurance but financial markets revenue was down at constant currency.”

Loughridge then pointed to a New York Times (Bloomberg informed) timeline of buyout and takeover activities of major financial institutions in the US and Europe since the middle of last year. The amount of revenue IBM generates from the 21 institutions listed, he said, represents only about one percent of IBM’s total revenue.

“Let me tell you what we’re seeing in the marketplace,” said a bullish Loughridge. “There are a lot of enterprises dealing with a tough environment, looking for ways to reduce costs, conserve capital, and in some cases just to survive so there’s a lot of good services opportunity out there. But frankly, there are also many deals that have very unattractive economics, and while these may be interesting to some of our competitors, they’re not to us.

"It’s not hard to drive revenue in a services business on a weak book of business. But we’ve built a strong and profitable business and we’re not going to put that at risk just to show a higher level of signings.”