Investigating Outsourcing

September 10, 2014  3:18 PM

Scotland’s independence will open new market to outsourcing

KarlFl40 Profile: KarlFl40

Imagine all the new IT contracts up for grabs when an independent Scotland starts putting together its public bodies.

Scotland shares over 200 institutions as part of the UK, which might have to be split if more than 50% of votes say ‘yes’ to independence.

In April I interviewed Steria’s UK head John Torrie about its merger with Sopra. He told me at the time the deal could also help Steria expand into Scotland, where Sopra has a bigger business.  So suppliers see the opportunity.

A few weeks ago I didn’t think there was any chance that Scotland’s electorate would vote for independence. But today I feel like it is almost inevitable.

I don’t pretend to be an expert in economics and I am normally one for countries working together and unifying. I think the European Union is a good thing for example.

But there is something about the Scottish independence debate that has made me change my stance. Not on Europe, but on it being better for the Scottish that Scotland is in the UK

I think if I was voting in the referendum today I would vote yes even if it is not the best thing. This would be driven by mistrust of Westminister.

Scotland has a population a little over 5 million out of a total in the UK of over 64 million. It accounts for about a third of the land area. OK you might say half of the land is uninhabitable, but this is not the case if you are a wind turbine or a wave power generator.

Imagine 5 million people, passionate about their country, working together for the common good. Rather than 64 million people all moving in different directions.

The desperation of the main UK party leaders, and Nick Clegg, to stop the “Yes” campaign snowball through the offer of more devolved powers is just reminding people that it was the PM that denied voters that option on the ballot paper.

And the visit of the party leaders to Scotland will probably just turn more people turn away from the ‘no’ campaign. Three of the London establishment coming to tell the Scottish that they love them, that won’t work. Being half Scottish myself with relatives north of the border I have a good feel for how many will see this.

David Cameron’s declarations of love for Scotland are certainly not returned with only one Conservative MP in Scotland.

The UK electoral system, first past the post, leads to what is often known as an elective dictatorship where most people are stuck with a government they did not vote for. This is the case in Scotland.

Whatever happens at least it will be the Scots that decide rather than a government in London that hardly any of them voted for.

September 1, 2014  1:30 PM

What’s all the worry about? The cloud is more secure

KarlFl40 Profile: KarlFl40

In the on-premise versus in the cloud debate it is always the subject of security that swings people in favour of on-premise.

People feel safer if their software is on their own premises, but does that mean it is safer. Everybody is connected to the internet so bricks and mortar is no protection.

You could argue that if it is on your own premises you have better control of physical security.

Anyway the point of this post is to highlight research from  analyst firm Pierre Audoin Consultants (PAC), which states that: “Cloud [is] more secure than on-premise IT”

“Rapid development in cloud-based security, including physical security within the data centres, means that, for many firms, it is more effective and cost efficient to locate IT systems in the cloud than on on-premise equipment. CIOs and CISOs should consider the cloud for many of their IT systems, while for SMEs and local government PAC recommends that it should be the default architecture,” said PAC.

“Security is often regarded as an inhibitor to cloud adoption,” said Duncan Brown, research director for cyber-security at PAC and the report’s author. “But today’s cloud-based security capability embeds state-of-the-art cyber and physical security that most company would find prohibitively expensive if implemented on-premise.”

With the outsourcing industry being transformed by cloud computing IT service providers can differentiate through adding value in areas such as security.

PAC said cloud service providers (CSPs) were initially slow to understand the importance of security and associated privacy issues. If this is the case they must have been meeting potential clients with ear muffs on.

“…in the last year PAC has noted a broad shift in CSPs’ marketing, positioning and product development strategies driven by two major trends. Firstly, security in the cloud is now a much more reliable and viable alternative to in-house security. Secondly, leading US-based CSPs are investing in their European credentials. Meanwhile non-US CSPs, particularly those headquartered in Europe, are making a virtue out of having datacentres based in Europe.

There are good reasons to take a cloud-based approach to security. Cyber security is highly complex, requiring deep technical skills. It is therefore expensive, the cost being exacerbated by a global shortage of skilled professionals.”

Also read: Allaying the AWS security concerns: How the cloud became more secure than on-premise.

August 28, 2014  10:50 AM

Are banks building an IT services community to support their digital drive?

KarlFl40 Profile: KarlFl40

The big banks are throwing money and advice at small IT firms in the digital financial services start-up sector.

While there is a strong argument that investing in start-ups in the digital sector is savvy investment, with just one Facebook enough to pay huge dividends, the benefit for banks in driving the sector is probably more related to technology strategy than investments.
Every other month a bank seems to throw its weight behind a so called fintech IT start-up incubator. They provide capital and other resources such as premises and mentoring. They usually take a stake in the companies they support.

Banks cannot spend money developing digital services. These projects do not guarantee success and are often experimental. It is much better to have suppliers do this work for you.
It is even better if these small developers do it with the knowledge that if they get it right banks will buy it. And because banks are advising and funding these companies surely they will develop what the banks need.

I wrote an article yesterday about this, which you can read here.

There could be numerous benefits from banks such as investing in the future Facebooks and having access to digital know-how and products.

Banks are increasingly outsourcing work as internal resources are tied up with maintaining legacy systems.  Banks don’t want to spend a fortune building up digital teams that create hit and miss services, but want third parties to do it.

This could be the perfect way to build a trusted digital IT services community that can cater to the digital needs of banks in the future.

August 8, 2014  2:45 PM

Large IT suppliers are using small suppliers to buy their drinks

KarlFl40 Profile: KarlFl40

Large IT service providers are hanging around off licenses to get small IT suppliers to buy their cans of larger.

Well sort of.

The UK government has set lots of targets for departments to get them to spend certain amounts of money on SMEs which inevitable means less for the big suppliers.

In a reverse in roles it is no longer the young looking adolescents asking their bearded mates or Dave’s uncle to go in the off license on their behalf, but the big established IT suppliers getting the public sector contracts by talking SME suppliers into working with them as a foil.

So according to analyst company TechMarketView the big boys are trying to use the small players to get the business.

“As these ‘newer entrants’ make their mark, the larger SITS suppliers are trying to reassert themselves. Notably they are playing the ‘working with larger suppliers can bring significant benefits’ card.”

Hear is an article I wrote about the TechMarketView public sector IT services sector report.

August 6, 2014  3:55 PM

Controversial immigration loophole under legal spotlight

KarlFl40 Profile: KarlFl40

A court case that I covered this week could bring the immigration strategies of overseas businesses into the spotlight.

Intra Company Transfers are used by multi-national businesses to bring staff to the UK from non-EU countries.

The IT industry is the biggest user of this method of bringing in staff, which is seen by many as a loophole in immigration rules.

Indian IT service providers bring thousands of staff from India to the UK every year to work on IT services contracts. These workers cost less than their equivalents in the UK band it allows the Indian suppliers to do business at a lower cost.

But there are rules. These include a minimum pay threshold designed to stop cheap labour being brought in an to allow UK workers to compete, as well as the rule that states a person can’t be brought in if there is a UK alternative.

The case in question involves a UK man claiming he was discriminated against by Indian IT services giant Tata Consultancy Services (TCS). Court papers reveal that he has evidence that TCS is breaking the ICT rules when bringing in staff.

IT professionals in the UK campaign against the use of ICTs because it makes it difficult to get work.

In this case the claims do not involve IT staff but admin staff and some managers. He claims to have evidence of over 1000 workers that are in the UK despite not meeting ICT rules.
 According to freedom of information requests from website BackTheMac, which campaigns against abuse of the ICT rules, there are 35,565 ICTs in the UK from India out of a total of about 60,000. IT workers account for a large proportion of the ICT numbers.

In its latest figures, TCS revealed it has 276,195 global staff with 92.3% being Indian.
TCS has a bit over 4000 British staff but has over 10,000 UK-based staff.

Although the case is not about the alleged breach of ICT rules it will put them under the spotlight. TCS strongly denies the claims and the evidence, said to be on a TCS database, is not in the public domain.

This will be an interesting case to watch. Last year another Indian firm, Infosys, had to pay a $34m fine to US authorities in relation to breaking visa rules.

July 29, 2014  11:10 AM

Can social media giants move money around better than banks?

KarlFl40 Profile: KarlFl40

I have written quite a lot about the new competitors in financial services. Large internet companies as well as social media giants are looking into how they can provide transactional financial services.

In the past I don’t think people could see beyond traditional players for these services but the finance sector is so dependent on IT today and some IT based companies have better technology. Add to this the distrust of banks and the desire of regulators to increase competition and you have a real opportunity for alternative financial services firms.

A recent report that gamers in Japan can buy titles on Nintendo’s eShop by tapping their contactless payment cards against their Wii U controllers. Whatever next?

In the guest blog post below Tony Virdi, head of UK banking and financial services at IT services firm Cognizant, gives his view on the changing landscape of payments.

The changing face of payments

By Tony Virdi
“Over the years, we have transitioned from bartering to tender and cash, moving into cheque and card payments, with many countries now also embracing online and mobile payments. In fact, the value of goods and services purchased with a mobile device is expected to almost triple from £4.8bn in 2013 to £14.2bn in 2018, according Centre for Economic and Business Research. Indeed, this fast-paced evolution has even extended into social network payments with the recent announcement that Facebook is seeking regulatory approval in the UK to offer mobile payments through its platform. And just this month, Denmark announced two cashless initiatives: the ability to pay with mobile phones in shops nationwide and the agreement to run a pilot in which only mobile payments are allowed and shops could refuse to accept cash payments.

In order to keep up with alternative payment providers, those players in the payments ecosystem who do not look to the future, risk stagnating as consumers increasingly seek alternative, more convenient and immediate ways of making payments. But what are the market conditions changing the payments landscape and which are the current priorities of payment providers and processors?

In a recent report published in conjunction with the Financial Services Club and VocaLink, we explored the state of the world’s largest payment infrastructures and how market conditions are changing the game. Overwhelmingly, the evolution of technology and in particular, the rise of online and digital channels is having significant impact. As cheque payments are moving towards possible extinction, organisations now notice the importance of mobile and smartphone usage, social networking and collaboration. In addition, security concerns around cloud computing seem to be lessening – according to our research, security has been replaced as the top priority by mobile, with 79% of respondents. As a result, the cloud is used by many of the most forward-thinking organisations who are already putting these observations into practice.

While these mobile, digital and social changes are mostly impacting the front end of retail payments, there is also an important role to be played in the back-end integration of new payment channels. Co-operation is  now key and this involves all parties from banks, merchants and card issuers to payment processors, mobile operators and handset manufacturers working together to develop a multi-channel payments process that is user-friendly.

In addition, the report highlights that regulatory change remains at top on the agenda and is currently the biggest focus for the world’s largest payment processing infrastructures. Over 50% of banks consider this a priority as Basel III, the Banking Union, the Bank Reform Bill, Dodd-Frank and more are all hitting the banks hard this year. This is also true for the wider industry. The spotlight on payments resilience, the implications of ring-fencing on bank payment systems and the potential for account number portability are all pertinent issues in this market. But, in a global and digital world, the future lies in innovation. Those organisations that use analytics and customer insight will be the winners.

Analytics technology allows organisations including merchants, card issuers, banks and technology and service providers to understand the spending and payments habits of consumers. Such valuable insight ensures that any new channels rolled out match customers’ habits accordingly.  Following such a process will enable organisations to innovate and become more competitive, which is critical given the rise in alternative players entering the market. Most recently, Holvi, PayPal, Amazon Payments, e-Wallet/smartphone services and Square have emerged, along with the arrival of Facebook and Apple into the e-money business.

Customer insights can be gleaned by gathering data from various different sources to create a 360 degree view of the customer. Real-time insights about each customer are based on advanced statistical analysis and machine learning techniques on very large datasets of granular payment data. It is this granular data that enables organisations to better understand their customers and tailor their communications and processes in a more personalised way, rather than relying on old segmentation methods. As each customer’s response, feedback or behaviour is processed, it is analysed to provide inputs about campaign effectiveness, brand loyalty, changing spending habits and profit/loss.

There is a huge opportunity for the payments ecosystem to adapt and evolve in line with the digital transformation that is changing the rest of the world. Such change helps organisations to run differently and be able to compete with new players. But for this to work, those involved in the industry must build strong partnerships, based on analytics and evidence that a payments channel is of interest to the consumers. At the same time, all payments providers must ensure that the customer experience is enhanced without compromising on security requirements and regulations that protect our money in the first place.”

July 18, 2014  10:44 AM

New world order of the cloud services

KarlFl40 Profile: KarlFl40

Cloud computing is having a massive impact on the supplier landscape.

The concept of pure cloud computing would reduce the relationship between a business and supplier to something like the relationship I have with Thames Water. Get a bill once a year, pay monthly and only contact them when something goes wrong.

It’s all about pipes after all.

But suppliers are trying to address this and creating relationships with customers to help them reach outcomes and ensure they have a good ride. Could be a role for a service integrator?

In this guest blog post Mark Hennessy, senior director at ServiceSource, explains how changes in the cloud landscape will affect the way many vendors do business

Life After Vendor Lock-In

By Mark Hennessy, ‎
“There are times when being a cloud vendor in the present day can feel a little like you’re immersed in some dystopian depiction of the near future, as imagined by a low-budget science fiction film. Speak to many modern service providers and many could justifiably claim to find themselves wandering, nomad-like, in a desert wasteland of uncertainty, trying to rebuild some kind of order in the wake of a grand battle. The battle in question? The end-user’s fight against the oppression and tyranny of cloud vendor lock-in, of course – the immediate aftermath of which has left many questioning the established, accepted order of doing things.

Although it might be something of an exaggeration to say that the fight against becoming locked in to a single cloud vendor has had far-reaching consequences for the future of society at large, there’s no doubt it’s a battle that the vendors have, emphatically, lost. Years ago, things were much simpler. Cloud services were seen as the next ‘big thing’, and were approached with caution, which meant that vendors could lock end-users into long, watertight SLAs and charge them a premium for the privilege. Vendors, naturally, built their business models around this reality, and could sleep safe in the knowledge that their customers would not be leaving them any time soon.

There’s no doubt that recent changes to the way cloud services are consumed have changed this forever. Where once, end-users would be reliant on vendors to provide cloud expertise, the rise of a proliferation of consumer-focused Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) solutions has altered the cloud landscape significantly. The ease of use of modern cloud solutions has negated the niche role of the cloud vendor and, as a result, today’s end-users increasingly see cloud solutions as a disposable commodity and frequently between suppliers and vendors at the drop of a hat.

What all of this means is, of course, that, with the vendor lock-in battle now lost, service providers are finding that the way their businesses are set up is fast becoming outdated. Gone are the days when they could lock their customers into SLAs for any significant period of time with no questions asked. The upshot of this is that many vendors are being forced to completely re-evaluate their business models and look for alternatives that will allow ensure that they are not left behind in the brave new world of on-demand cloud services.

Indeed, many have found that, instead of trying to tie customers into long-term, restrictive contracts, the future of cloud computing is one that is based on a subscription model, which aims to secure recurring revenue as a direct result of building a relationship. Where previously, many service providers will have secured a contract and not spoken to their customers again until the time came to renew, many are waking up to the fact that this is no longer an option. In this new subscription model, there are two things that can guarantee recurring revenue: the quality of your product or service and/or the quality of your relationship with your customer.

Where once cloud vendors saw themselves as mere suppliers of services for their customers, many are now having to adapt, in order to become suppliers of outcomes for their customers.

New considerations they have to take on board include whether or not their customers are getting value, and whether or not they are happy with their current level of service. It’s this increased focus on managing the customer lifecycle that will change the way vendors operate, and which will prompt them to explore new tools that can give them the edge when it comes to providing added value for customers. In particular for the subscription and SaaS businesses, effective customer engagement requires a deep contextual understanding of the ever-changing dynamics underpinning the relationship. Businesses need precise, accurate and timely data to provide insight on where the customer stands in the overall lifecycle for customer success to engage at the right time.

A good example of this is an increased focus on analytics tools, which can show how customers engage with services, predict customer churn and give service providers an early warning sign that their customer is dissatisfied. On the other hand, analytics tools can also demonstrate where customers are most satisfied and can even provide them with information that can help them to up-sell to existing customers.

Perhaps the principle message we should take from all of this is that there’s a reason that vendors have been forced to re-evaluate the way they operate only after end-users revolted against the idea of being locked-in. It’s no coincidence that the new world order of cloud services revolves, not around one side holding the balance of power, but in encouraging stronger, deeper relationships between organisations. If, for service providers, there truly is life after vendor lock-in, and a way through the wasteland that has ensued, then it seems this is the best way forward!”

July 16, 2014  3:19 PM

Is Malaysia a safe option for a South East Asian business services hub?

KarlFl40 Profile: KarlFl40

About three years ago I met up with Vijayaratnam Tharumartnam who is a director at the Malaysian IT Initiative (MSC), an organisation supporting Malaysia in attracting foreign investment.

I met him again earlier this month for an update.

With more and more multi-national businesses investing in global service delivery capabilities South East Asia is a region where a presence is essential.

There are options in the region with countries like China and the Philippines already supporting companies from Europe and the US with IT and business services.

And the MSC is going out of its way to attract business investment. In 1996 the Malaysian government kicked of the IT initiative as part of its economic transformation. Malaysia wants to be a high income nation by 2020 and IT services have a significant role to play. The nation already has quite a strong telco sector but wants its IT sector to grow.

It is already been successful and has moved from largely providing back-office services to moving up the IT services value chain.

Businesses like GlaxoSmithKline, Shell, BP, HSBC, Prudential Services, RBS, British American Tobacco and BT have operations there.

Since its creation MSC has created about 140,000 jobs.

Tharumartnam told me that Malaysia is a safe place to invest compared to China, which he described as a “muddy road.” He said Malaysia is politically stable and does not suffer from natural disasters.

If that is not enough the country does not ask questions about the funding of investors, has relaxed visa rules so companies can bring staff in as they like, it also offers five years tax free and allows the business to 100% own their Malaysia operations.

Tharumartnam says that the Malaysian IR T sector has gone from being an industry worth nothing in 1998 to one with revenues of $10bn today.

Although a great deal of the IT sector is owned by multi-nationals from Western countries the expertise gained within Malaysia has led to the creation of local service providers.

Here is what some of the multinationals are doing in Malaysia


-BP Business Service Centre Asia
Established 2009
Operates a BPO and IT Outsourcing operations
Global Players in MSC Malaysia
-BP Business Solutions
Established 2004
Research and development of software and IT systems for the healthcare industry.


-HSBC Global Resourcing UK Limited
Established 2007
A knowledge process outsourcing centre that provisions of management and operational support for HSBC Group Service Centres worldwide.
Global Players in MSC Malaysia

-HSBC Electronic Data Processing (Malaysia)
Established 2002
A Group Service Centre (GSC) for HSBC Group which operate as a financial services processing centre, service centre, call centre and also as a contingency centre for other GSCs of HSBC Group around the world

-HSBC Software Development (Malaysia)
Established 2009
Global Players in MSC Malaysia
Information Technology Outsourcing (ITO) in software development, software deployment , software support as well as consultancy and project management


-Prudential Services Asia
Established 2003

Regional IT processing centre, regional data centre, regional shared services centre and regional customer call centre for Prudential Group in Asia.

July 11, 2014  3:15 PM

Bank branches to become the place to complain about online services

KarlFl40 Profile: KarlFl40

Interesting move from Barclays to retrain 6,500 cashiers to enable them to help customers manage their finances rather than just processing transactions.

In reaction to the explosion in digital services in the banking sector Barclays is redirecting its in-branch human resources away from transaction processing to customer services such as helping people manage their money. More and more people do the transactional side of banking online today and Barclays is reacting to that.

Earlier this week the British Banking Association published a study that revealed that almost £1bn in transactions are processed a day in the UK from customers using online and mobile banking.

A couple of things spring to mind here.

The first, probably the most interesting, is that perhaps banks have finished years of job cuts. Have we reached the tipping point with banks down to the bare bones in terms of people. Barclays is retraining staff to do new roles amid digitisation, not cutting them and replacing them. This is interesting because with more and more businesses digitising and automating processes there is a fear that there will be no jobs for people to do in the future. This Barclays move puts some evidence behind claims from corporates that jobs will change and not disappear. However banks like Barclays have cut thousands of jobs so the 6,500 cashiers is small fry.

The second thing I think of, which is probably just the cynic in me, is this will mean that branches are full of salespeople. I have been in my bank lots of times to speak to personal advisors and they always seen to recommend more stuff from them.

So it looks like branches will just become the go-to place to complain when the online banking system or mobile app crash. And as we all know, thanks to Twitter, this happens pretty frequently these days.

July 10, 2014  11:06 AM

London Stock Exchange outsources to outsource

KarlFl40 Profile: KarlFl40

IT outsourcing has moved way beyond just cutting the cost of internal IT and now finds itself as an important mechanism for businesses to generate new business lines.

Gone are the days that a business looking to move into a new area has to build its own IT to support it. It can work with an expert. They call them partnerships these days more often than not.

I wrote an article yesterday about how the London Stock Exchange is offering finance firms a platform based reconciliation service. The exchange offers finance firms its UnaVista reconciliation platform as a service.

Now in an effort to increase its customer base for this it is working with Indian IT service provider Wipro. Wipro has the infrastructure and expertise delivering software to customers globally via platforms so the partnership makes sense. It gives the stock exchange global reach.

The multi-tenanted platform is aimed at finance firms but could potentially go wider in the future. The combination of the exchange’s good trusted brand and Wipro’s reliable and secure infrastructuremight be attractive to customers.

So this is an example of an IT services firm supporting businesses in generating new revenue streams, rather than just cutting costs. This is how most services firms sell themselves these days.

It is also likely to increase as service providers invest in global delivery services and the infrastructures to support them.

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