Industry news

These are strange times for the IT sector. The ICT skills which its people boast are in constant demand. Vast IT workforces sit in regional skill centre hubs around the world. At the same time, the demand for skilled IT people ‘on the ground’ has seen huge recruitment surges in numerous countries. Behind all this though, there lurks the growing, nagging suspicion that a very real skills shortage may be starting to open up.

A number of factors lead me to think this. Rapid globalisation has heightened the need for specialists who can work with, and connect, any number of different systems globally. The flow of mathematics, engineering and computer science graduates into the sector has started to slow down. And people who had left the sector are having to be tempted back into employment to work on the older systems which newer graduates are not being taught how to use.

Unless all relevant parties come together to address this looming skills shortage, I believe that the industry could have a significant problem on its hands over the next few years. This is no trifling HR issue; this is a very real Board level concern which should be acted on now.

The reduction in the inflow of graduates into the industry is a worrying development. For sure, our industry may have had its peak — in terms of career attractiveness — at the turn of the century. Thousands of young graduates poured into the industry as the millennium bug and the dot com boom made ICT skills attractive and profitable. Several years on though and the industry may be paying for that peak as many of the ICT skills which it made popular now appear commoditised. I’d suggest that many parents in mature economies may even be counseling their children against a career in the industry because the profession appears so commoditised; thousands of people with the same skills and with the constant threat of offshoring hanging over their heads.

This is misleading. While the perception may be of a commoditised industry, the reality is far from it. For sure, the more straightforward, back office ICT skills are being outsourced and offshored on a regular basis but the front end, high value skills such as systems architecture are not. These are the skills which are increasingly in demand yet they are tarred with the same 'commoditised' brush. The net result is a generation of graduates left unconvinced that ICT is for them; at a time when the industry is crying out for their abilities. Yet for those people able to offer high level, strategic advice and exhibit the combination of business and ICT skills now required, premium salaries are on offer — but I wonder whether this message is getting through.

If the industry is worried about people coming in, then it is becoming just as concerned about the people leaving. The skill base which those people represent is not being replaced. However, the IT systems which they trained with remain in place — but with an ever dwindling pool of professionals able to work with them.

Progress and technology wait for no man and I predict a very real explosion in the new kinds of ICT skills required as businesses embrace yet more new technologies. The lucky few who have those high-end skills may find themselves very much in demand around the world. With that in mind, it’s worth noting that those countries with rather more open-minded immigration policies may really be the ones to benefit here, enabling the rapid delivery of IT professionals to where they are needed the most.

I would suggest it is now beholden of all relevant bodies — companies, trade associations, governments etc — to come together and address this skills issue. Together, they should be actively lobbying to get more young people into the industry. Otherwise, all IT users face a double whammy — having insufficient people with tomorrow’s ICT skills coming into the industry while other vital skills are lost as older employees leave the workforce. Boards which promptly take the initiative in this area may be able to benefit from an aggressive talent management programme which adds real value to their business. Whatever happens though, after several years of feeling like we were on ‘easy street’ with so many people desperate to come and work in the industry, it’s time for an urgent reassessment of where we stand.

The purchase of Citigroup Global Services by TCS, the captive BPO delivery arm of the Citigroup bank, is likely to be the first of many, according to Tony Rawlinson, MD of Financial Services at EquaTerra. In a statement Rawlinson hailed the acquisition as a ‘fantastic move’ and predicted that the purchase will be replicated by other banks and service providers.

“In one fell stroke, this makes TCS a strong player in the banking BPO market with an acquisition on attractive commercial terms”, he said.

“Even before the credit crunch and then the global market meltdown, there was a definite trend developing in this area” he explained “Banks were asking themselves ‘are we in banking or running back office captives?’. They weren’t helped by the fact that they were looking to cut their costs due to losses sustained through investment in the sub-prime market. At the same time, service providers have matured enough to be able to take on the types of services which the financial services sector were looking to offload quickly. Although there will be a limited window of opportunity for offloading captives, I suspect we will see a few more sizeable deals like the Citigroup / TCS one done”, he explained.

In the same statement Rawlinson highlighted other likely trends for the industry, such as the shift in power from banks to service providers in terms of what services are actually outsourced. He also expects service providers to develop “utility” services across multiple banks using their scale to develop common platforms that can be leveraged by numerous banks.

While Rawlinson highlights the trend towards banks selling their captive operations, he adds “others will elect to keep certain process sets depending on their view of competitive advantage”.

Just weeks after HP announced plans to make 24,600 staff redundant over the next three years, the company has confirmed that 3,000 of these will be ex-EDS jobs from the UK market.

The job cuts, one of the biggest UK IT job losses in recent history, form part of a worldwide cutback that will see HP drop approximately 9,300 staff across the EMEA region.

The company previously described this as a ‘redeployment of staff’ and has provided no new statement about the losses.

Harman International Industries and Wipro Technologies, the global IT services company is launching a joint embedded engineering centre in India. The new Harman India Development Centre will operate from Wipro’s existing Bangalore and Chennai facilities, complementing an earlier agreement which outsourced Harman’s global IT infrastructure services to Wipro.

Beginning with about 250 employee resources through this engagement, Harman plans to grow its resource footprint in India to more than 1000 person-years by 2011, significantly strengthening its global engineering capabilities.

The India development centre will broaden and optimize Harman’s engineering footprint for developing audio and infotainment solutions across the automotive, consumer, and professional markets. Wipro will also bring a wide range of capabilities to Harman’s solutions. Services delivered from the centre will include both software development and related hardware engineering for Harman’s portfolio.

“This new venture in India is an important milestone for enriching our portfolio of cutting-edge engineering solutions,” said Dinesh C. Paliwal, Harman’s Chairman and CEO. “Wipro’s proven development and project management expertise will complement our company’s core audio and infotainment skills to deliver innovative customer solutions and make us more competitive. This expanded capability and capacity will also position Harman to better serve large emerging market opportunities in Asia.”

The Harman India Development Centre was formally commissioned in Bangalore on September 2 in ceremonies joined by Dinesh C. Paliwal and Suresh Vaswani from Harman and Wipro respectively.

ACS has extended its relationship with United Technologies (UTC), a provider of technology and support to the building and aerospace industries, with a finance and accounting contract valued at US$41 million for the next three years.

The extended contract, for the next three years, will see ACS continue to provide domestic finance and accounting (F&A) services, including accounts payable, travel and expense reporting, payroll and related accounting functions to UTC

Anupam Tantri, Assistant Controller for Shared Business Services at UTC, commented:

"ACS has supported UTC's F&A operations for more than three years, enabling UTC to focus on key business areas and objectives, including systems and process enhancements."

TCS has signaled its intention to buy Citigroup’s BPO arm, Citigroup Global Services with an offer of US$505 million offer for the India-based captive. In addition to the sale, TCS will also take over outsourcing services for Citi and its affiliates to the value of US$2.5 billion over a period of nine years.

The agreement builds upon the existing relationship between Citi and TCS whereby TCS provides application development, infrastructure support, help desk and other process outsourcing services to Citi.

Don Callahan, Chief Administrative Officer, Citi said: “This is a great transaction that benefits all parties – Citi, our customers, our employees and TCS. Our customers require access to increasingly complex processing solutions and this relationship will achieve a ‘best in class’ technology model that capitalises on both CGSL’s expertise in financial services and TCS’s expertise in process optimisation. TCS will offer CGSL stronger growth potential and superior continued services to Citi clients around the world. This transaction is expected to help reduce operating expenses related to business processing and will allow us to focus on our core financial services competencies.”

The acquisition will broaden TCS’s portfolio of end-to-end IT and BPO services in the global Banking and Financial Services (BFS) sector. TCS’s claims that its enhanced scale and expertise will provide service improvements to Citi and Citi’s customers.

The parties expect to close the transaction in the fourth quarter of 2008.

T-Systems, a provider of IT outsourcing and development services has announced an innovative new project launch for TUI Travel. Delivered in partnership with Tiscali, customers of TUI Travel are now able to experience the sights and sounds of a potential holiday destination using a new WiSH application (web in shops service), which enables video streaming to the desktops of over 1000 travel agents across the UK.

TUI Travel commissioned T-Systems because it wanted to develop an in-store travel experience unique from its competitors allowing them to view their holiday destinations properly before booking. Tiscali’s involvement was necessary to ensure the necessary amount of bandwidth could be achieved to deliver destination videos to TUI’s customers.

Dominic Taylor, Service Manager for T-Systems in the UK, commented, “This really was a key strategic implementation for TUI Travel and the success of the project would define whether WiSH should or could be considered for roll out to other European countries. Tiscali was involved from an early stage, once it became clear that BT wasn’t flexible enough to provide a solution to meet the requirements of the WiSH project.”

The initial rollout to over 600 Thomson / Lunn Poly stores was completed in just four months and the roll out to 360 First Choice stores took less than three months.

Cotswold District Council has signed a five-year ITC support contract with Steria. The contract, worth £2m, aims to improve the effectiveness and overall efficiency of the ICT support services for the council's 500 staff.

Under the terms of the contract, Steria will provide a wide range of ICT support services, ranging from desktop and server support to application development and business continuity. The partnership aims to reduce the council's overall ICT spend by 15% helping to free up funds for investment in front line services.

Mike Brown, Cotswold District Council's ICT Services Manager says "Steria has a strong pedigree in handling local government and public sector transformation initiatives. Its experience will prove invaluable to us as we implement a service improvement roadmap to continually identify new ways to exploit ICT for business benefit. This will ensure that ICT is providing effective support for the council and that we in turn deliver the best possible services to our customers."

The programme will be deployed by a combination of three onsite service delivery staff at the council's main offices in Cirencester, supported by other Steria consultants as required.

Management consultancy Accenture plans to cut 300 to 400 jobs, many of which are predicted to be in IT. The company is currently carrying out a consultation process to determine exactly where the jobs will be lost.

In a statement the company said the cuts were to "balance the skills of our workforce" rather than a response to the credit crisis.

A spokesperson for the firm said, "Managing supply and demand of our resources remains a top priority. We are taking steps in the UK to balance the skills of our workforce against client needs.

"Given this, we expect a workforce reduction of approximately 300-400 people in certain skill sets where we have excess capacity.”

Convergys, a leading provider of outsourcing customer and HR management, announced plans to acquire the privately-held Ceon Corporation, a company specialising in the development of product lifecycle management and fulfilment software for communications service providers.

The deal is expected to deliver various synergies for Convergys along with a number of new BPO services that it will offer under the name of ‘Convergys Enterprise Product Management Solutions’. Convergys hopes the acquisition will aid the management of its clients’ product lifecycle, shorten time to market for new service offerings, improve quality and reduce the overall costs associated with managing a large product portfolio.

“As service providers launch new convergent services to differentiate themselves from their competitors, their product management requirements become increasingly complex,” commented Bob Lento, president of Information Management for Convergys. “Ceon’s product management assets are at the heart of our strategy to help our clients more effectively manage new and advanced value-added services, introduce these services quickly, and evolve these new offers at market speed.”

The deal, which was first heard of in January this year, is expected to be complete at the beginning of 2009.