Industry news

IBM announced enterprise additions to its Project Big Green this week, a week after HP announced its Sustainability Laboratory. Both vendors have a history of interest in this area, but HP has achieved a higher profile for its efforts.

The HP announcement included long-term datacentre issues while IBM concentrated on new product releases to help in this area. However, there were large areas of agreement and overlap in the two presentations, and both said that energy use has become a high-level concern for enterprises, which will grow in importance.

Both see an immediate opportunity for savings in energy use with a strong financial investment case through monitoring and intelligent control systems. IBM talks of the payback period from investments in this area being less than two years. Both back these claims with case studies, although at this early stage these are thin on the ground at present. The environmental payback period may be longer where this involves hardware replacement.

• Both initiatives contrast with recent research published on sourcingfocus.com, which suggested that many clients – in fact, a majority of organisations – are not able to make their datacentre usage more efficient or environmentally friendly as they lack either the skills or the will to tackle the issue, to deactivate so-called ghost servers, or even to make use of the energy efficiency controls on servers within the datacentre.

• The issue is a pressing one, as IT systems usage worldwide now matches the carbon footprint of the global airline industry – each contributing roughly two percent of the world's greenhouse gas emissions.

The datacentre energy problem

The demands on information processing systems are growing exponentially. For example IBM expects server usage to grow six-fold and the volume of stored data to grow 70-fold over the decade, and these figures are consistent with Ovum's research.

Technology is delivering efficiency improvements, but these tend to be linear in nature. Consequently energy use by datacentres is still rising rapidly. In the longer term we need changes in business processes, data retention practice and law, and a change in expectations. In particular the desire for richer presentation media is placing exponential demands on datacentres, such as replacing pictures with movies.

We need to question how much processing we do, and how much data we hold, and for how long. The present tendency to hold everything that it is technologically possible to hold will have to be challenged. We need systems that can store a single copy of a document and not replicate it multiple times across the organisation, without this placing complexity on users. If a practice is worth doing we will need to justify it by identifying balancing savings outside the realm of the datacentre.

HP's long-term vision

HP has demonstrated its commitment to long-term improvement in this area by designating sustainable computing as one of the five areas that HP Labs will focus on, and by including a project in its initial agenda to develop optical computing. This is an important element in its long-term objective of cutting datacentre energy use by 75%.

The replacement of copper by fibre optic cable carrying laser signals will deliver major energy savings in data centre communications, and eventually in the processor chip. It will allow much greater density of processing within a single chip. HP has set itself a target of five years for delivering on this vision, which we regard as being at the optimistic end of the spectrum.

The medium term: monitoring and intelligent control

HP claims it has achieved a 40% energy saving at a new datacentre it has recently built in Bangalore by deploying its smart cooling technology. IBM claims similar savings in the short term by deploying its current technology including its new monitoring systems. Tivoli monitoring software has been extended from processor monitoring to include all aspects of the data centre facility. It monitors kilowatts of power consumption, and not just processor utilisation. It provides connections into several important business activities to make it an attractive proposition for business:

• Green business services: for example detecting 'brownout' situations and invoking business continuity services.

• Intelligent chargeback: bringing business accountability into the picture

• Optimising asset usage

• Energy-aware provisioning, so that servers can be selected for each workload based on their ability to meet required service levels and minimise cost.

HP has shown a commendable attention to lifetime issues in its green IT agenda. This is continuing in the current announcement. It points out that the energy required to smelt bauxite into aluminium to make a server is equivalent to the energy the server will use in two years of its life. It is now embarking on a project to build up a database of lifecycle energy consumption to create a comprehensive database from which lifecycle issues can be more accurately evaluated. It promises to put the results in the public domain, and is appealing for partners to help populate this.

The immediate future

IBM is using this platform to attract attention to technical advances in some areas of its IT infrastructure products, such as improved storage products and its partnership with VMware to deliver virtualisation to its customers. Virtualisation can reduce hardware requirements by a factor of six, cutting hardware and operating costs in half. Energy costs can be reduced by between 10% and 40%. Of course this also plays to IBM's strengths in providing suitable servers for virtualised environments.

• Despite these very welcome initiatives by two large vendors, the onus rests equally on education, management and enforcement of green initiatives within customer companies to minimise the environmental impact of their data systems and assets. This would be a key area of differentiation between the newly merged HP/EDS and their main rival, IBM: not just greener products, services and policies, but a down-the-line education programme to ensure all the facilities are both understood and used.

The security division of value-added distributor Bell Micro today announced findings from a new independent research report which suggests that UK businesses are still failing to address the protection of data assets on the network from staff abuse, misuse or direct theft.

Nearly half (47%) of the respondents questioned at InfoSecurity Europe 2008 believed their companies were yet to implement real-time systems that would inform IT departments if security levels were breached.

This latest research follows similar reports in recent weeks suggesting that more than one third of IT directors say that their organisations have suffered either data loss or data theft internally – not to mention, of course, the latest in a spate of public sector security lapses, from confidential documents being left on commuter trains to laptop thefts from the Home Office and Ministry of Defence.

Most respondents in IT based roles (74%) recognise, and work to protect, against the danger of rogue connections such as customer or contractor laptops, and yet almost half (43%) were failing to enforce a policy of encrypting data on portable devices - such as personal laptops, PDAs and removable media. Worse still, 62% of respondents indicated that IT departments would be unable to detect if an employee copied data off a server onto a PC, laptop, USB stick or a disk.

This is further clear evidence of the unexpected knock-on effects of increased mobility and teleworking: consumer devices, together with business laptops, Blackberrys, mobiles and PDAs are increasingly falling into a grey area of unsupported devices, or computers that serve functions both in the office, at home, and on the journey in between.

This is the logical extension of the famous incident of the IT CEO who left his laptop unattended while speaking at a security conference – when it went missing, he realised that he had essentially allowed the entire company to be stolen by a passing stranger.

Despite the latest report, It's clear that policy, governance and good management are the only viable solutions here, rather than more technology. However, the problem for CIOs, especially those dealing with networks of outsourcing partners, is balancing the increased productivity and flexibility offered by teleworking, homeshoring and homeworking (which some studies put as high as 20-25%) with the increased security risk and potential for data or equipment loss and theft.

“What these findings show is that there is still a paramount need to increase attention to data management and protection in an organisation,” said Steve Browell, general manager of the Security Division at Bell Micro. “How data is encrypted, moved and stored must move up the business agenda, otherwise we are just leaving the gates wide open for the horse to bolt. The tools are already available but vendors, distributors and resellers alike must come together to deliver better education to customers and create a total service that can deliver true data loss prevention.”

While security remains a key investment for UK businesses, this latest research suggests that critical network security services are either yet to be broadly adopted or have been purchased but incorrectly implemented.

As companies continue to move to using multiple providers for their outsourcing services, the number of reported "megadeals" (those worth over $1bn) awarded to a single service provider has declined, according to a new report by Gartner. In 2007, 10 outsourcing megadeals were awarded, a decline from 12 in 2006.

“The decline in reported outsourcing contracts can be partially explained by the fact that outsourcing is now ‘business as usual’ for many enterprises,” said Kurt Potter, research director at Gartner. “There is more outsourcing activity, but fewer deals on average are reported and this creates the false impression that outsourcing is decreasing.”

In terms of megadeal total contact value (TCV), the total for the 10 megadeals in 2007 was $12 billion, the lowest level reported during the last eight years, with the closest level being that of $20.3 billion in 2001. Average contract value (ACV) of megadeals also continued to decrease, from an average of $2.6 billion in 2006 to $1.2 billion in 2007.

“While further TCV erosion may be driven by the irreversible trends of global delivery and IT services industrialisation as many leading-edge organisations move into their second and third generations of IT outsourcing, they may be looking at deal expansion to include wider application or business initiatives,” said Mr. Potter. “Although these opportunities are likely to evolve from a single-provider to a multiple-provider engagement, in some cases, historical ties between provider and recipient may retain the potential for megadeals.”

Of the TCV of all outsourcing deals reported in 2007, Gartner said megadeals represented 39.4 percent of the contract value and represented only 6.8 percent of the number of total contracts in 2007, down from 7.4 percent in 2006. Although deals with less than $50 million in TCV continued to increase and reached 39.5 percent of the total number of contracts, they only represented 3.3 percent of TCV for 2007.

“Many providers are pursuing smaller contract strategies as a consequence of the new market realities, new competition and natural market pressures toward commoditisation, which reduces per-unit pricing. These strategies are often in the form of pursuit of smaller contracts from larger clients, or larger contracts from smaller companies,” said Mr. Potter. “Many clients want to test providers’ contracting practices, capabilities and cultures before moving favored providers into larger contracts, or organisations are using smaller doses of outsourcing to delay larger outsourcing adventures. Many providers are forced to pursue larger contracts to meet growth expectations. Despite this pressure, providers should continue to evaluate different or at least accommodate go-to-market and product portfolio strategies for smaller clients.”

Calsoft, a growing ITO provider, has expanded its reach in the European market by opening a new delivery centre in the UK.

From the new centre, based in Hampshire, Calsoft aims to provide a range of services from product development and testing to engineering and consultancy for businesses across the UK and mainland Europe. 

Simon Ellis, Manager of the new facility, said: “Calsoft sees a positive opportunity during a global credit crunch to deliver more for less on behalf of its clients. We’re bringing a successful global model to the European market and feel confident that we can provide clients with quality solutions and access to highly skilled product development resources.”

The move should create a number of new jobs for the UK market.

The Royal Dutch Pharmaceutical Society (KNMP), an association for pharmacists in The Netherlands, has signed off on a £2m infrastructure outsourcing contract with BT.

Under the terms of the five-year agreement, KNMP will outsource its entire mission-critical ICT-infrastructure to BT, including secure hosting of KNMP’s office automation and shared storage environment, migration to Microsoft Exchange and telehousing of all its applications to BT’s data centre in Nieuwegein. BT will also handle remote and on-site desktop management, managed IP telephony and business continuity consultancy services.

British companies are falling behind their developing economy competitors when it comes to taking calculated risks, according to a new study from BT Global Services.  Ninety per cent of Indian companies view risk as a means of increasing competitive advantage, compared to just 44 per cent in the UK, who tend to shy away from risks.

The research, conducted by Datamonitor on behalf of BT Global Services, reveals an interesting gap between developing economies and the UK when it comes to making profitable business decisions based on their calculation of the risk involved.

The key to the difference in attitudes seems to be the role of risk in enabling business development.  Eighty-five per cent of Indian companies see risk management as a tool to foster innovation and creativity, whereas only 34 per cent of UK companies share that sentiment.  The research suggests that a more proactive attitude towards risk is leading to a fuller understanding of opportunities for originality and resourcefulness in India and other developing economies.

This commitment to treating risk management as core to business growth has also resulted in the overwhelming majority of Indian companies (90 per cent) appointing a manager with overall responsibility for risk.  By contrast, only 14 per cent of businesses in the UK have taken a similar step.  Where Indian firms have appointed a “risk supremo”, 94 per cent have elevated the role to board level, compared with just 63 per cent in the UK.

John Dovey, president UK corporates, BT Global Services, said: “There are some well-established FTSE100 companies working in complex environments who have to manage huge levels of risk on a daily basis. But in general, UK companies tend to see the kind of risks associated with aggressive economic growth as something to avoid, while competitors in India have had to see them as something to manage.

“By taking a pragmatic view of managing risk, Indian companies are better able to seek considerable growth by taking on and offering their customers aggressive, innovative commercial propositions.”

In a European, multi sector research study of IT decision makers, security has been ranked as the biggest IT issue. The research was carried out for infrastructure experts Siemon, and recorded 97 percent of respondents ranking security high or very high in importance. Compliance and global standardisation were also found to be at the top of the list of end user priorities.

The group of companies surveyed were all major blue chip organisations with the majority operating globally and having over 10,000 employees. The respondents were spread across various sectors with a focus on finance and IT.

Those answering the research came predominantly from IT management but the sample also included consultants, networking teams and project managers.

Commenting on the research findings, Steven Foster, EMEA managing director at Siemon said, “In today’s world of mission critical applications and reliance on data, it was little wonder security came out as the number one priority. This may partially be a factor of the financial bias in the sample population but with such a high score across all sectors it’s a clear message that for major corporations security is front of mind, followed by legislative compliance and system standardisation.”

According to Foster, the high scoring for global standardisation was least surprising as the company has seen this factor having increasing influence in major infrastructure tenders within the top tier of the corporate market: “Whilst regional market preferences continue to prevail, with the increasing demands placed on network infrastructure, we have seen global specifications shifting towards the highest performing, most robust and secure solutions such as category 6A and category 7 cabling” he said. “Many global organisations are keen to standardise their IT, working with global equipment suppliers to achieve internal standardisation – cabling is no different and is now recognised as an integral and critical part of the IT infrastructure.”

Another interesting result from the survey was that concern for environmental issues was a focus for attention. This was recorded as either a high or very high priority for over half of the respondents with 52 percent scoring this issue as a serious concern.

As a supplementary finding to the survey, over 70 percent of companies surveyed judged network cabling to be ‘very important’. “It is heartening to see cabling growing in perceived value within IT,” said Foster. “Many corporate end users are realising that whilst cabling is a relatively small part of the overall IT investment, it is the platform on which all else is built. Quality cabling systems continue to dominate the blue chip sector of the market.”

The global BPO market will reach over £230bn by 2012 according to a report released by NelsonHall today. The report, compiled on a yearly basis by the analyst firm, expects the BPO market to strengthen in supplier capability relative to the more mature IT outsourcing market.

The firm expects the current economic climate to speed up the globalization process, with organizations using offshore outsourcing to both reduce their cost bases and hasten entry into emerging growth markets. The majority of this development is forecast to take place in the financial services and telecommunication sectors.

Services such as customer management, payments and other industry-specific financial sector services, and recruitment process outsourcing are all expected to benefit from the trend. And as organizations increasingly focus on establishing themselves in the emerging economies of Asia and Latin America, they will look to locate support functions such as finance and accounting services and procurement within these geographies, leading to opportunities in the outsourcing and relocation of existing shared services centres.

The report is available to NelsonHall subscribers here NelsonHall BPO report

Siemens AG has signed off on a £63m outsourcing contract with Orange Business Services to migrate a large portion of its worldwide network to Orange.

The five year deal will see Orange migrate Siemens’ wide area network infrastructure across 70 countries across Africa, Asia, Southwest Europe and North & Latin America.

Norbert Kleinjohann, CIO of Siemens, said: "Orange Services provides us with a global, future-oriented network at an attractive price".

Intellect, the trade association for the UK Technology industry, has launched an online survey which seeks to assess key trends across the offshoring industry. The association is asking professionals who are engaged with the sector to participate in the survey.

The research will provide a valuable insight into the future of offshoring at a time when it has grown increasingly important to UK businesses. Globalisation has opened up markets across the world; by taking advantage of this offshoring has increased the opportunities available to UK enterprise, enabling them to develop innovative models of business for the 21st century. To gauge these future trends, the survey asks a number of a questions about the major issues faced by the industry including:

• Will it be the bigger players or the specialists who thrive in the future?

• Will we see an increase in public sector awareness and usage of offshoring?

• Is offshoring still politically sensitive or is it now seen as standard business practice?

The survey, based online, is open to all business and IT professionals with experience in offshoring. It will be live until 11 July 2008 and can be found at:

Intellect survey

Industry experts have welcomed the survey:

Paul Morrison, senior manager, Alsbridge, said, “Offshoring is at a crossroads with no clear view of what the future holds. There are a number of directions in which it could head, with widely varying implications for businesses in the UK and beyond. Intellect’s survey provides a canvas to capture the wide spectrum of professional opinions on offshoring’s future”.

Hilary Robertson, BPO Strategy Director, Steria said, “The survey is a valuable means to increasing our understanding of a sector which is continually growing in importance to the UK economy. I’m delighted to be able to contribute and hope that that other industry professionals will join in with this exciting project”.

As the first phase of Intellect’s offshoring research the survey’s findings will be incorporated in a whitepaper on offshore futures to be release in October 2008.