Industry news

  • 24 Jan 2008 12:00 AM | Anonymous
    Wipro is now ranked as the second largest Indian IT services company. The company, which has a strong presence across fast-growing areas such as infrastructure management and BPO and an ambitious geographic acquisition programme, has recorded solid organic growth in the US of 7.2% quarter on quarter and 30% year on year against a stalling economy. Revenue at Wipro Infotech (its Asia-Pacific business) has advanced some 53% year on year. Recent acquisition Infocrossing has contributed revenues of some $60 million.

    To add to the positive news, Wipro has reported positive demand across all segments of its business, including the addition of 25 US clients, and has other large deals in the pipeline. The chilly US economic climate, especially in the disastrously performing finance sector, has not significantly impacted on its business to date, and a majority of clients are expected to maintain their IT budgets at or slightly above 2007 levels, says the company.

    Chairman Premji has outlined key strategic priorities for the company that emphasise account penetration; non-linear growth; large deals; talent access and employee-mix; game-changing partnerships with major players,such as Cisco, Microsoft, SAP and EMC; consulting expertise; investment in high-growth regions; and further acquisitions to bridge gaps in its service portfolio.

    Wipro recently announced a strategic alliance with Cisco to jointly deliver network-based IT solution, and this anticipates cumulative revenue of $1 billion over three years.

    Wipro confirmed last week that it is not in takeover discussions with Capgemini.

  • 24 Jan 2008 12:00 AM | Anonymous
    US presidential hopeful Hillary Clinton may be storming ahead in most of the polls, but as 'Super Tuesday' approaches there's a looming problem: her stance on outsourcing.

    In the last US Presidential Election, the issue of outsourcing – most specifically offshoring – became a major voter concern, with working class voters being inherently suspicious of US jobs going overseas, and rich areas such as the West Coast watching the high-tech brain drain towards offshore locations such as India. With neither the recent strategic tax cuts nor this week's dramatic intervention of the Federal Reserve on interest rates stabilising the economy, it's a safe bet the issue of job security will focus voters' minds.

    To date the issue has not arisen in the primaries, with subjects such as the war in Iraq clearly taking precedence. Nevertheless, the economy is in decline, perhaps already bottoming out into recession, and attention is focusing on matters closer to home, according to US analyst firm Brown-Wilson Group. "Until this week, offshore outsourcing hasn't been the emotional vote-motivator like it was in 2004,” said Doug Brown, managing partner of Brown-Wilson Group and co-author of The Black Book of Outsourcing. "Outsourcing is a reality for US companies to reach their business and financial goals and critical in today's fiscal climate. It's been four years since the heavy negative rhetoric of the presidential election used outsourcing and offshoring interchangeably, and made 'outsourcing' a dirty word.”

    In a report,Outsourcing and the 2008 Presidential Primary Vote, the group notes: “Foreign outsourcing – or offshoring – remains the 2008 target of choice for protectionists.Critics claim offshoring is sending jobs to foreigners at the expense of American workers. The fact that the rest of the world also outsources their services to the US – i.e. 'insourcing' – is a consequence of the global economy too often overlooked by critics. For instance, American companies sell three times more IT services to the rest of the world – more than $10 billion worth – than they buy. If politicians declare war on outsourcing, US producers and workers will suffer the most.”

    The return of offshoring to the political agenda will have differing levels of impact on the various candidates. A survey of over 5,000 registered voters in all fifty states from January 2-14 indicates that Mitt Romney and John McCain are the top Republican supporters of offshore outsourcing by record. McCain noted: “Every time US went protectionist, we paid a heavy price”, while Romney agreed: “It’s tempting to want to protect our markets and stay closed, but at some point it all comes crashing down and you’re hopelessly left behind”.

    Among Democrats Clinton, Barack Obama and John Edwards, only Edwards and Obama have made strong public statements, or have voting records that indicate cautious opposition to offshore outsourcing. Edwards has stated that outsourcing is "an economic reality" and "America must act to ensure that it stays strong and adapts... to ensure that the American people are better prepared to meet the challenges of the new world”, while Obama admitted: "We know that we can't put the forces of globalisation back in the bottle. We cannot bring back every job that's been lost."

    On the other hand, there is growing suspicion in some quarters of the electorate about Clinton's financial and diplomatic relationships with offshore outsourcers. This concern is most tangible in states that have seen high unemployment and foreclosures. Crucially, a number of these are also states with Super Tuesday primaries. In June, the Obama campaign released a memo accusing Clinton of pandering to the Indian-American community and noting the “tens of thousands” Clinton has received from companies that outsource jobs to India. For her part, Clinton has said: "There is no way to legislate against reality. Outsourcing will continue ... We are not against all outsourcing; we are not in favour of putting up fences."

    Of the 3,000 Democrats polled, more than half (55 percent) of voters see offshore outsourcing as unpatriotic, a significant decrease from October 2004 when 93.9 percent of voting Democrats felt offshoring was anti-American. In the Super Tuesday states, 84 percent of Democrats believe offshore outsourcing is unpatriotic. Less than 7.9 percent of Republicans viewed offshoring as unpatriotic in 2004 and 6.5 percent in 2008.

    It's difficult to know what Clinton or any other candidate can hope to achieve by engaging with the outsourcing issue as there is widespread ignorance among the electorate about (a) what it actually means and (b) what any President could or could not do about it. This ignorance is strongest among voters in Alabama, Michigan, Georgia, Tennessee, Missouri, Ohio, Texas, North Carolina, Wisconsin, Kentucky and Nevada.

    Beyond that, America has been the engine of the world economy for the past couple of decades, and there is little that increased isolationism and protectionism will do to help it combat those giant economies in waiting, China and India, both major offshoring locations of choice. So far, the further east you travel, the less likely you are to catch the economic cold that is beginning to take hold in Europe.

    In 47 out of 50 states, more than half of all registered voters in each state incorrectly assumed that the US President could unilaterally ban offshore outsourcing. Among Democrat voters in Super Tuesday states, the percentage dramatically increases to over 85 percent, who also said that this misconception would guide their candidate selection.

    Brown-Wilson Group argues: “The argument is often made that it doesn’t matter if we vote for a president who is for or against anything issue-wise, because Congress ultimately represents the people and balances out the President's opinion or powers regarding imposing or approving anything. It does matter what the future President thinks or does in regards to economic issues like outsourcing. The President directs the foreign policy of this country and indeed both appoints individuals and works with individuals who make decisions regarding this and related federal issues.

    “One of the President's responsibilities is Foreign Policy. However, it is a mistake to think that outsourcing is a federal issue. The US Constitution does not mention outsourcing at all. Other than Congress enacting legislation that indirectly affects outsourcing (via tariffs or some other means), there isn't anything that they can do that is permitted by the US Constitution, least of all the President.

    "Though many of the candidates claim to be in favour of free trade, their rhetoric and voting records vary. Issues of fair trade, enforcement of labour standards, and trade policy towards African and Latin American economies will likely remain in the forefront of legislative debate as the presidential campaigns pick up steam.”

  • 24 Jan 2008 12:00 AM | Anonymous
    It's a harsh reality that in economically uncertain times, outsourcing and offshoring can swiftly become a dirty words, and we can expect that both will be in the cross-hairs of US presidential candidates in the coming weeks, as they shoot for the patriotic vote and talk up the need to protect both skilled and unskilled American jobs.

    Anti-outsourcing sentiments are really expressions of fear about the lack of job security. When any economy slows down, trust becomes central to all working people's lives – witness recent protests in the capital by the British police, which at least made good the government's promise to put more constables on the street – 22,000 of them – but perhaps not in the way Whitehall intended. That protest was not about money, but about the claimed breach of trust over a mediated wage settlement. The disastrous PR implications for the government are being keenly felt, and the issue is unlikely to go away.

    This is a good time to remember that such issues are as much a problem for our industry as for any other, even as we become a critical focal point for national and international debate about job security at home. Outsourcing creates local jobs, while offshoring shifts jobs overseas; but it is the latter that grabs the headlines. As the sub-prime economic cold spreads, virus-like, in both the news and the stock markets, then both outsourcing deals and outsourcing providers are being watched more closely than ever before.

    First, take Capita, famously the scapegoat for all the outsourcing world's ills in the eyes of Private Eye. On Monday this week, the union Unite (formerly Amicus) accused the company of breaking promises to staff on the Capita site in Belfast. Capita’s announcement of a further 41 job cuts was criticised by Unite as a further sign that promises to secure more contracts and maintain the Belfast site as a centre of excellence are not being kept.

    In a union statement, Graham Goddard, Unite deputy general secretary, said: "Unite members are concerned that Capita have failed in their promise to secure the long-term future of their life and pensions operation. The announcement of 41 job losses today represents another blow for Capita staff in Belfast, who face growing uncertainty as the company have failed to deliver on Chief Executive Paul Pindar's original commitment to the workforce of ‘opportunity and business expansion’. It would appear that Belfast was simply a stepping stone into a new market for Capita.”

    The statement continued: "Unite will strongly oppose any compulsory redundancies and urge Capita to come back to the negotiating table. We are calling on Capita to honour their assurances to their workforce."

    The 116 staff in the life and pensions department in Belfast must now reapply for the remaining 75 roles.

    Things are equally uncomfortable on the other side of the fence, as Shell has recently discovered. The announcement that it was outsourcing more than 3,000 IT jobs was firmly rebuffed, again by Unite, but also – rather unexpectedly, perhaps – by NOA chairman Martyn Hart, who lambasted the oil giant for devaluing IT workers within the company by offering redundancy packages that were a distant poor relation of those offered to oil workers.

    Hart said of the announcement (as we previously reported) : “What is of interest here is how Shell seems to treat its IT workers, in comparison to their oil rig workers. Shaving 75 per cent off their redundancy package looks like a fiscal kick in the teeth. And it’s not just a monetary issue. This action could undermine the importance of IT’s role within the company. IT is fundamental to the functioning of all organisations and Shell – and other companies – would do well to remember that,” he said.

    Shell is one of several companies that has attracted its own coterie of bloggers and industry watchers, not all of whom have the company's best interests at heart, as readers of website http://royaldutchshellplc.com know only too well. This site is not connected to Shell, but reports on its every move, and takes feeds from hundreds of news sources concerning big oil's political, environmental, and economic manoeuvres in every part of the world.

    As an industry we must learn one lesson well, and learn it fast. If recession strikes, this will be the first economic downturn to be reported at Internet speed. Every time a UK, US, or European job heads east, it will be commented on worldwide in a matter of seconds. We must understand that we no longer exist solely in the world of business, but also in the Blogsphere. Not only will people be watching the outsourcing world for symptoms of the wider economic health of the country, but they will be talking about us, and it will be the negative stories that stick; not the mega-deals and the contract wins.

  • 24 Jan 2008 12:00 AM | Anonymous

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    The site highlights the very best of the outsourcing industry. sourcingfocus includes: all of the breaking industry news; industry insight in the form of an editor’s blog, industry research, regular features from leading industry commentators, weekly outsourcing round-ups and one-off features from both suppliers and end users; new technologies such as podcasts and videos to deliver the message to a new generation of outsourcing practitioners; an outsourcing forum for professionals to discuss industry issues share best practice solutions and profile building opportunities for vendors.

  • 22 Jan 2008 12:00 AM | Anonymous

    A study by Pierre Audoin Consultants (PAC) has today found that India’s largest IT services suppliers (Wipro, TCS, Infosys, HCL and Satyam) will double their UK market share over the next four years if they keep up their current growth.

    The survey found that the market share of these companies will reach seven per cent by 2011 as more and more UK companies are committing to large (£100m+) contracts with Indian service providers.

  • 22 Jan 2008 12:00 AM | Anonymous

    The new product incorporates all of the functionality of INSideOUT but is a complete redevelopment of the software. The new software is web-based, utilizes a .Net framework, and incorporates Web 2.0 technology. CGI’s insurance vision and commitment to investing in its insurance solutions, resulted in the development of new release of the software. Midwest Family will be the initial client to test the scope and functionality of the new product.

    Midwest Family, established in 1891, is a multiple line property/casualty insurer actively writing Personal and Commercial Lines in seven Midwestern states including: Minnesota, Wisconsin, Illinois, Iowa, Nebraska, North Dakota, and South Dakota.

    “The .NET release of INSideOUT gives Midwest Family a competitive advantage with our agents in terms of agent/company interfacing. It gives our agents the benefit of electronically submitting policies for all Personal and Commercial lines of business. In addition, agents will have the advantage of uploading and downloading all new business transactions, endorsements, quotes, and issuance for all lines of business. Real time feedback for new business and endorsement quoting will result in a more service-oriented approach for Midwest Family agents,” said Ron Boyd, President and CEO, Midwest Family Mutual Insurance Company. “The combination of improved functionality and technology will position us as leaders in our market space.”

    “For over a decade, CGI and Midwest Family have worked together to develop and enhance INSideOUT,” said Paul Raymond, Senior Vice-President, New England and Insurance Services, CGI. “The .NET release of INSideOUT is the logical progression in our investment for this market-leading solution. We are proud to be recognized as Midwest Family’s strategic technology partner, and enable Midwest to be our premier beta site for our new product.”

  • 21 Jan 2008 12:00 AM | Anonymous

    Unite has accused IT services company Capita of breaking their promises to staff on their Capita site in Belfast.

    Capita’s announcement to cut a further 41 jobs has been criticised by Unite, formerly Amicus, as a further sign that promises to secure more contracts and maintain the Belfast site as a centre of excellence are not being kept.

    Graham Goddard, Unite Deputy General Secretary, said: "Unite members are concerned that Capita have failed in their promise to secure the long term future of their life and pensions operation. The announcement of 41 job losses today represents another blow for Capita staff in Belfast who face growing uncertainty as the company have failed to deliver on Chief Executive Paul Pindar's original commitment to the workforce of ‘opportunity and business expansion’. It would appear that Belfast was simply a stepping stone into a new market for Capita.”

    The 116 staff in the life and pensions department in Belfast must now reapply for the remaining 75 roles.

  • 21 Jan 2008 12:00 AM | Anonymous
    Defence secretary Des Brown's appearance in the House of Commons today was a grim, if instructive affair, and only served to reinforce everything I said a couple of weeks ago on this blog: security is first and foremost about people, policies, management and enforcement. Technology comes a long way behind.

    Security is always about the weakest part of the chain – data's interface with everyday employees – and rarely about defence-grade encryption protocols and sexy multibillion-dollar IT programmes. Indeed, those are the things most likely to neglect the little guy.

    Mr Brown admitted that there has not been just one incidence of an MoD laptop going stray with people's personal details on it, but three since 2005. The Tories countered that, in fact, there have been literally hundreds of laptop thefts from armed services employees, many of which computers may also have contained sensitive information. The government has admitted to 69 laptops and seven PCs being stolen in the past year, and has issued a staff ban on the movement of data.

    All told, that is a staggering illustration of how everyday occurrences are where the real risk lies, and not in shadowy bunkers in some far-off corner of the 'Axis of Evil'. We're talking about the Axis of People: careless people; people who don't follow security guidelines; people who are lazy; people who are the victims of opportunistic criminals... everyday human beings, in other words.

    These are the people who, in the real world, have access to databases, and they are rarely technology buffs or experts in data protection and privacy laws. They are too busy doing their own jobs – such as managing the front desk in a busy doctor's surgery, or working in the back office of a local town hall.

    Familiar opposition cries of systemic incompetence in Whitehall miss the main point – most average employees are not security or privacy experts – but amply illustrate another: that senior management gets the blame for the little guy not being considered.

    However, the defence secretary unwittingly raised some other questions that must call into question the government's competence to manage future large-scale technology and data programmes on behalf of the public, such as the NHS IT system and the proposed national ID card. First, he said that none of the data on the laptops was encrypted; and second, that he had no idea why.

    But the major admission was number three: he had no idea why so many employees needed access to such large databases – the implication being that the real weakness in the MoD's security policies was people using the system. Exactly, minister.

    Mr. Brown, should future large-scale projects go ahead without just such a radical rethink of what security and privacy mean in the real world (that security is always, always, always, about people, and especially the little guy, and no amount of money and technology can alter that) then these upcoming schemes risk data loss and theft on an unprecedented scale, even in the wake of the loss of 25 million families' details in the Child Benefit scandal.

    Minister, if the weakness in security is, indeed, lots of people accessing the data, then you have effectively lost your own argument in favour of systems designed to do exactly that: facilitate the widespread sharing of sensitive public data across the NHS, and across all internal and external security services affecting the UK. A staff ban on the movement of data is not a blueprint for the data-sharing future across public services promised by Whitehall.

    The further issue for us in the outsourcing community, though, is that all of these MoD computers were managed by an overarching IT function on behalf of the three armed services. The lessons here? No security policy will stand up to real-world tests if a third party neglects its basic obligations. If those third parties are located offshore – as some schemes undoubtably will be in future, and have been in the past – then your security policy is not just concerned with rules and their enforcement, but also of remote management of the third party, and robust HR policies. What more risks are we prepared to take?

    • With Gordon Brown recently striking a cautionary note on the ID cards scheme, the time has come for a much more realistic appraisal of the advantages and disadvantages. Any compulsory scheme must be put before Parliament; this year, the collective mood of the Commons may have darkened.

    Moreover, as I've said before on this blog, the real question to ask of any large IT schemes is the simple one: why? ID cards will do nothing to prevent home-grown terrorism, as we are always promised, and little to prevent everyday identity theft or fraud. The only possible impetus must be a commercial one for the government: the turning of private data into a public, tradeable commodity.

  • 18 Jan 2008 12:00 AM | Anonymous
    It was interesting for outsourcing professionals to witness two very different approaches to the economic winter that both the US and UK economies may be entering, and one demonstrates the growing influence of a dynamic outsourcing industry. This week, the UK was battered with two pieces of bad news: first, a month-on-month fall in retail figures from November to December 2007 (December being retailing's golden month), and second, news that energy bills may soar by as much as 15%, even for those on green tariffs.

    Even with the risk of rising UK inflation restricting the UK's room for manoeuvre in terms of interest rates, some economists still predict a soft landing for the UK economy, as long as property prices not go into freefall; a necessary economic correction, then, rather than successive quarters of negative growth (recession). Nevertheless, we remain at risk of talking ourselves into recession: a new form of economics brought about by the network effect of news being valued by the speed at which it moves.

    Many economic pundits believe the US has already entered recession; we will not know until the summer, as recessions are only visible in hindsight. However, the gloom is obviously all too visible in the White House, as President Bush stood before the American media this morning, US time, and announced a typically interventionist economic rescue package of tax incentives for US businesses and citizens, designed to inject some adrenaline into flatlining consumer spending. He asked that the package be swiftly approved, and urged that it must be temporary but instantly effective, while also somehow avoiding future tax increases in the long term.

    This would be the economic equivalent of the notorious scene in the movie Pulp Fiction, where John Travolta plunges a syringe into Uma Thurman's heart and instantly wakes her from an overdose-induced coma, restoring her to life.

    Meanwhile, on the other side of the globe, Prime Minister Gordon Brown had headed east for high-level talks in China. Barely minutes after the American announcement, Brown faced the international media and, effectively, pinned the UK's future prosperity onto the booming Chinese economy. Britain was raising the relationship between London and Beijing to a higher level, he said, and predicted that Chinese investment in the UK would create thousands of new jobs.

    This may be the case, but it also paves the way for a much deeper outsourcing relationship in the other direction. The main obstacle – apart from any political fallout from China's human rights record, not that the US has much to crow about post-Guantanamo – is the lack of a rigid intellectual property (IP) culture and supporting structure for IP-based businesses.

    It is a rumour rarely acknowledged that many technology businesses have privately tolerated piracy in the East, as it has established a burgeoning market for their products there. However, such an under-the-counter approach, if it exists, will not work for long. In this month's The Big Questions feature, Tim Wright, Partner at international legal practice Pillsbury Winthrop Shaw Pittman, concurs: "China will continue to grow, although the lack of an intellectual property protection framework is still a concern."

    It seems that Prime Minister Brown is far more bullish than that, and has accepted the massive growth and future global influence of China is something that the UK must be part of. And the next stop for the Prime Minister on his eastern sojourn? The current BPO destination of choice, India. Outsourcing, it seems, is now central to the UK economy, and will be of critical importance in the future.

  • 18 Jan 2008 12:00 AM | Anonymous
    Leading analyst firm IDC has revealed its predictions for the IT industry as a whole for 2008, with not a single mention of the 'r' word (recession). Analysts at the market data giant see the major outsourcing destinations of choice becoming increasingly central to the entire technology industry as the hotbed of future sales growth. IDC believes 2008 will see increased investments in popular destinations, such as India and China, along with the introduction of a raft of new online product and service offerings, especially in packaged solutions for smaller enterprises.

    Analysts predict that global economic uncertainties will dampen IT spending growth in the US and elsewhere. As a result, worldwide IT market growth will between five and six percent, down from 6.9% in 2007. However, the implication of IDC's findings is that the vast majority of this growth will be in overseas markets. IDC expects vednors to concentrate on fast-growth, emerging markets, and to look east to Russia, India and China, but also Brazil – all locations where IT spending growth will remain strong.

    The company's most interesting conclusion makes for challenging reading for all in the outsourcing industry, as it refers to the growth in software as a service (SaaS). IDC believes that to profitably reach the emerging, hyper-growth markets, suppliers must move as many services and products to the Internet, as this will mean lower distribution costs and easier and faster customer adoption. While the SaaS industry to date has seen a long tail wagging a much larger industry dog, with ambitious companies such as Salesforce.com and Netsuite grabbing the headlines and moving from small clients upwards into the enterprise, giants such as SAP and Oracle (Larry Ellison being a major investor in both of the SaaS leading lights) are now having to follow the model as well, in their case shifting focus downwards towards smaller and smaller enterprises.

    IDC also predicts that the internet is compelling suppliers to create customer- and industry-specific solutions, and to build communities around these. Smaller enterprises require simplicity and out-of-the-box utility, says IDC, which means IT suppliers will be working with partners to prepackage solutions, rather than expecting customers or partners to put the pieces together. Clearly there are opportunities for both traditional outsourcing providers, and for the emerging breed of web-based companies who will begin to redefine our industry.

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