Investigating Outsourcing


June 11, 2014  4:20 PM

Indian tier two IT supplier MindTree is coming of age

KarlFl40 Profile: KarlFl40
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I first met with an Indian IT supplier called Mindtree in 2010. At the time I was trying to find out more about some of the smaller IT service providers in India.

One of its founders was a man called Ashok Soota, who was one of the pioneers of the Indian offshore IT services model. He was president of Wipro in the 1980s and 1990s. He told me the story of how the western IT services firms let their guards down and allowed Indian companies to get into the market. You can read the interview here.

I have covered Mindtree in the blog and on Computer Weekly quite a few times considering its size. It is interesting to see how the company has grown despite recession and how it has used its small size to enable it to change with the market and demand.

Back in 2010 when I first met the company it was 10 years old and had a turnover of about $270m.

The company was formed in August 1999 as the result of a collaboration between executives of Indian service provider Wipro, US consultancy Cambridge Technology Partners and Lucent.

This diverse group of people combined the low costs of India with the high end consultancy of Cambridge Technology Partners and the technology expertise of Lucent.

At the time its UK business accounted for about 10% of its business with 80 of these are in the UK, with 720 in India that are dedicated to UK customers. The then head of UK, Tridip Saha told me about how the company would only work with customers of its size or smaller and would focus on a few service lines. This way it could compete with much bigger suppliers in certain areas.

In 2010 the company was awarded a prestigious contract as part of the Indian ID project which plans to give 1.2 billion Indians biometric ID. Read more about it here.

At the end of last year I met the company’s UK and Europe head Mark Wilsdon when he joined the company. After having time to get his feet under the desk I this week met him again after an update.

The company has new exceeded the $0.5bn revenue mark and has 400 staff in Europe including half of these in the UK. It has about 200 customers worldwide with an estimated 30% of these in Europe.

Its focus now is on about 20 service lines where it will invest in resources and build up expertise. At the same time in the UK it concentrates on four verticals: retail consumer goods and manufacturing; banking and finance; travel and tourism; and high tech and media.
The company is expanding its global footprint including an extra 16 delivery centres globally on top of the four it has now, by 2020.  These will be in regions where the company has clients and will be set up with clients.

For example with support from the IDA Ireland, which attracts investment from business, it is building a delivery centre with up to 10 people initially rising to up to 75. This centre will initially deliver services to Irish customers, it will also target prospect in Ireland, and hopes to win more customers. The company has also moved to new, I presume more swanky, offices in London and seems set for growth.

The growth of smaller IT services firms is a reflection on how businesses are changing how they buy IT services. CIOs want specialists in certain areas that can provide flexible services. These tier two firms can change direction easier than the services giants.

June 10, 2014  10:39 AM

Two thirds of BPO engagements do not include innovation and transformation

KarlFl40 Profile: KarlFl40
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BPO is lagging behind when it comes to digitalisation. Two thirds of engagements are still about moving a business process to an external supplier that can do it for less, with no transformation or innovation.

In this guest blog Accenture’s CTO Operations, Liv Sandbaek, explains the problems and suggests some remedies for businesses looking to transform their BPO relationships..

Embracing Digital Operations for Competitive Advantage

By Liv Sandbaek, group technology officer, Accenture Operations

“These days, retail companies are becoming health care providers, industrial companies are becoming customer service companies, media and entertainment companies are becoming logistics companies, and the list goes on. Digital technologies are changing how companies create products, interact with customers, and manage operations and workforces; in the process, they’re responsible for transforming whole industries and markets.

But while everyone else is rapidly embracing digital, many business process outsourcing (BPO) buyers and providers are still running on an analog path. Accenture-sponsored research from HfS Research reveals that two-thirds of today’s BPO engagements are still of the “lift and shift” variety: simply moving existing processes to external providers to reduce cost –technological innovation and digital business transformation not included.

So what’s holding organizations back from moving to a digital operations environment? Often the business services engagement is set up merely as a transactional partnership and the team is focused on contractual obligations and service level agreements, instead of on leveraging technology innovations.

On the brighter side, our study found that those who are getting it right–those who are embracing technologies such as automation, analytics and cloud computing–have an infinitely better chance of achieving greater value. Digital platforms improve the speed and quality of process execution by automating mundane processes like data entry, which in turn eliminates human error and delays. Systems become highly robust and standardized, enabling processing in the cloud, optimizing analytics and embracing mobility for rapid implementation. This frees up staff to concentrate on the creative and value-generating aspects of their jobs. By collecting and mining data, moreover, service providers can present a clearer picture of the client’s business performance, allowing the engagement to be re-shaped and sharpened to focus on driving real business outcomes.

Companies looking to build high performance digital operations must address four key components:

1.    Build for flexibility and resilience. The digital services platform must be dynamic, accessible, easy to use and continuously available in the cloud. It must possess the ability to respond to changing customers, evolving technology and real-time market developments. New innovations in hyperscale systems provide opportunities to adapt business process services to take advantage of increased processing capabilities at lower costs. Because more processes are becoming interconnected and automated, service providers must focus on building secure, scalable, agile and easy-to-deploy systems.

2.    Leverage analytics for real-time insights. Advanced analytics can move a business from a reactive to a proactive state by more accurately predicting what’s coming next. Data must go from being siloed and unmanaged to becoming more integrated across the enterprise. Big Data techniques can, for example, enable business services providers and their customers to sift through terabytes of operational and customer data for insights that could drive both greater efficiency and innovations to grow revenue. Predictive analytics that are integrated into day-to-day operations can drive decision-making, predicting events such as machine failure based on environmental factors, enabling an organization to schedule maintenance before a failure occurs. Adding mobility to the equation will also increase workforce productivity.

3.    Connect the digital workforce. Technology significantly impacts the nature of business services work and enables far greater performance and productivity. Giving workers access to collaboration tools and social media turns them into connected knowledge workers and enables collaboration across the extended enterprise workforce. Automation removes the need for mundane clerical work, helping to clear the way for employees to make higher-level contributions in a more efficient way.

4.    Participate in the digital innovation ecosystem. Technology is moving too fast for a company to think it can do it all without some outside help. It’s important to broaden this outlook beyond just the corporate world by establishing relationships with a larger ecosystem of research institutions, universities and government agencies that can provide a competitive edge. These relationships also enable a more “modular” approach to business services solutions. Although there will continue to be large enterprise software systems to support core functions such as manufacturing or finance, given the push for greater operational agility, we expect to see a shift to simpler, more modular apps that are both low-cost and easy to deploy.

We’re living in a digital world, and it’s ever evolving. Business services providers and buyers have a tremendous opportunity to turn a cost cutting operational practice into a major value driver by moving from analog to digital. It’s an opportunity that they must seize, or risk the fate of the 8-track and other analog technology: obsolescence.”


June 9, 2014  1:12 PM

BG Srinivas is leaving Infosys

KarlFl40 Profile: KarlFl40
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I wouldn’t normally do a blog about a senior IT executive leaving a company, but I am making an exception for BG Srinivas, who resigned his post of president of Infosys recently.

BG has been a good friend of this blog and contributed articles to it during his visits to the World Economic Forum in Davos, Switzerland.

He has posted for this blog from Davos since 2010.

I was expecting him to be the next CEO at Infosys as his name has been heavily linked to the soon to be vacant post.

But he has now resigned and will start working for Hong Kong-based telecommunications, media, IT solutions and property development company PCCW as group managing director starting next month.

S. D. Shibulal, Chief Executive Officer and Managing Director at Infosys said, “During his tenure at Infosys, BG Srinivas played a pivotal role in building the Enterprise Solutions Unit, strengthening our business in Europe and driving growth in key business verticals. I would like to wish him the very best.”

Srinivas said, “I thank Infosys for the wonderful opportunity given to me. My tenure at Infosys has been one of my most rewarding experiences, and I am proud to have contributed to the best growth story in the industry. I wish the Board and Infosys the best of success in the future.”

Here are BG’s blog posts from Davos.

2010:

Infosys European head blogs from Davos

Infosys European head blogs from Davos – part 2

Infosys European head blogs from Davos – part 3

Infosys European head blogs from Davos – part 4

2011
Why Infosys is attending the World Economic Forum in Davos

Infosys feels a sense of urgency at the WEF in Davos

Russian president sends a message to terrorists at World Economic Forum in Davos

Optimism in Davos as World Economic Forum kicks off, says Infosys

Infosys signs off at World Economic Forum in Davos

2013

News from Davos is less stressed with no crisis – BG Srinivas at Infosys reports

2014

Infosys leader reports from Davos

Here is a post BG did for this blog about the failed NHS IT project.

NHS IT project is dead, but why do large IT projects fail? Part 23


June 3, 2014  1:42 PM

Cyber-criminals have the financial strength flexibility to beat enterprise IT security

KarlFl40 Profile: KarlFl40
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IT security teams within businesses face the prospect of protecting their systems against cyber-criminals that spend more on devising their attacks than they spend on securing them.

Even the biggest businesses in the world, such as banks, have budgets and budgeting processes that are not designed to fight ever more sophisticated cyber-attack.

The GameOver Zeus Trojan is the latest malware to cause shockwaves to businesses and consumers alike.

One senior IT security executive within a large global bank told Computer Weekly that the targets are so juicy that organised crime will keep on trying to hack-in. “I expect they have bigger budgets for security attacks than the defenders have to spend on security protection. The bad guys can spend millions on planning attacks and we have to go through ridiculous budget processes to justify the basic defences. Only going to end one way eventually….”

He said big banks are attacked on an almost daily basis but the attacks are not reported to the public. “I am not sure why GameOver Zeus is being talked about in public. Although it is quite serious it is still quite small.”

He added that it could be an attempt to get consumers to upgrade their systems. “A lot of the public do not keep their security up to date so this could have been publicised to raise consumer awareness.”


May 20, 2014  11:48 AM

What went wrong with Ticketmaster for Glasgow 2014 online ticket sales?

KarlFl40 Profile: KarlFl40
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I have been following the Glasgow 2014 Commonwealth Games ticketing website debacle. Last Tuesday the ticket site, run by Ticketmaster UK, went down after huge demand caused unacceptable waiting times for customers.

These days anything like that becomes the talk of Twitter very quickly and event organisers are quick to act on it, even if that just means taking the site down and apologising.

Well the good news is the site is back up again after loads of testing. But neither Ticketmaster or Glasgow 2014 have given any details of what the actual problem was.
I asked a coupe, of IT industry executives that know lots about the technology required to support ticketing at major events.

Both people I spoke to said it is a poor indictment on Ticketmaster. Let’s not forget the Olympics 2012 tickets resale site went down for 11 days in January 2012.

LOCOG suspended the resale site just hours after it opened on Friday 6 January 2012, as hundreds-of-thousands of people logged on to purchase unwanted tickets. At one stage there 250,000 people chasing just a couple of tickets, which caused issues around notification.

My sources tell me the problem can only be related to the software used by Ticketmaster or the network access.

“When you are running ticketing for events of this size you have to make sure your infrastructure and software are aligned for peaks and troughs,” said one source. He added that there are companies out there that are doing this well such as Amazon and Facebook.
He said in this case the problem “smells of software” because a network access problem would have manifest its way differently.

I suppose because there is such high demand for events like the Commonwealth Games and the Olympics it does not harm organisers financially because the tickets will be sold anyway. But it does serve as a good warning to businesses to ensure they plan their infrastructures and applications in conjunction when making offers. If you have competition the customers will head straight there.


May 6, 2014  2:06 PM

Ukraine IT industry isolated from political tension and ready to fuel economic growth

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I had an interesting meeting with Torben Majgaard, CEO at Ukraine based IT services firm Ciklum. He is a central figure in a movement within the Ukrainian IT that wants the IT sector to support Ukraine’s growth when all the current political troubles are over.

I should start by saying that he believes the situation in Ukraine is being blown out of proportion. He says the Ukrainian government in Kiev makes it sound worse than it is to help it secure foreign support, the Russian are doing the same to justify their actions, and the newspapers just want a good story (I will allow him that swipe). These are his views from the interview and not my comment on the situation.

He says that there are isolated incidents where people are making decisions to fight but that bystanders are safe.

Ciklum is an interesting company. It provides customers, including those in the UK, with services to help them recruit IT skills in Ukraine and get the most out of them.
The company has about 2,500 software engineers working for different corporate global customers.

Ciklum finds the staff its customers need from within Ukraine and Belarus. They then deliver software services to customers for Ciklum’s bases in the two countries.

Interestingly is the fact that the customer pays the worker and Ciklum just gets a fixed fee for the worker. It is therefore in Ciklum’s benefit the more staff it can connect with customers. Quality control is also in Ciklum’s interest.

Central and Eastern Europe are becoming increasingly popular destination for IT outsourcing from the UK. The near proximity and cultural closeness of countries such as Ukraine, Poland, Romania and Moldova make the ever popular agile software development techniques more manageable than in India or China, according to many I speak to.

Torben said that in the Ukraine for example the software engineers will understand the business challenge the customer has ands address this with technology rather than the approach he says is in India where a worker expects to be told what to develop and does not challenge this.

Another interesting aspect of Ciklum’s approach is its use of existing customers to help new customers get up and running. He says that if he has a new prospect they will link it with an existing customer with similar requirements to meet them and discuss what is required.
Ciklum also assists the customers in getting the most out of their IT staff through its productivity consultants. All this for a fixed fee.

The customer is responsible for the pay of the staff and taxes on the pay. He says a highly skilled software engineer in Ukraine will command a monthly salary of $4000 (£2355), before tax.

The other interesting story is Majgaard’s role in the movement known as the Brain Basket. This Ukraine IT industry group  wants IT to be the fuel to grow the Ukraine once the troubles are over. Brain Basket wants to make IT a major driver in creating a strong economy. It will co-ordinate efforts to train 100,000 people and generate $10bn annual revenues by 2020. By boosting education and creating new jobs. Bread Basket was recently praised by Richard Branson.

Interestingly he said it is not just young students that the movement wants to get into the IT sector but older citizens that currently work in different sectors but could be moved to IT.

Majgaard said IT is perfect for Ukraine because it has the resources internally to grow IT. “Ukraine does not have many opportunities for the future but one it does have is in the IT business.”

“There is a lack of infrastructure to support many industries and there is fear at the moment, but when the trouble is over everyone will be using the Ukraine again.”

Read more about Ukraine and central European IT:
Agile software development demand could put nearshore IT in the spotlight
Report on Central and Eastern European nearshoring


May 2, 2014  10:40 AM

Ten questions to ask a cloud supplier before moving your IT

KarlFl40 Profile: KarlFl40
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Cloud computing has been hijacked by the IT suppliers. Let’s face it people have been accessing applications via web browsers for a long time.

OK strictly speaking the cloud is multitenant, pay as you go blah blah blah… But many of the services being sold as cloud services don’t meet the strictly speaking criteria.

Last week I met up with Izak Oosthuizen, an IT consultant at  IT services company Exec Sys . It was interesting to hear some horror stories about clients he has had to help out following disastrous moves into the cloud.

He told me about companies ending up using software without licenses without realising and others finding out that their emails had not been archived.

I asked him to provide me of a list of questions businesses should ask customers before jumping into the cloud.

This is what he came up with.

10 key questions to ask a cloud provider, by Izak Oosthuizen

“UK organisations now face a vast number of cloud options – private, public and hybrid, which is great if you know what to look for, but can spell disaster if you don’t.  These are the questions to ask a cloud provider to make the best choice – and avoid the pitfalls

1.    Data location – Where is my data stored, do I have access to it when a system is down and what application will be affected? It’s also essential that your provider can prove it offers full UK data protection.

2.    Backups – Will I have a local copy of all data and insight into where it’s stored? This knowledge will help avoid issues such as the Western Digital outage in April where users had no access to its personal cloud services for nearly a week.

3.    Cloud anti-spam – Will I have full transparency, with alerts, on incoming and outgoing emails spam filters / blocked / quarantined email data? Having this visibility is a must, to ensure that no important mail data is missed or lost.

4.    Speed – What is your expected internet speed, performance and latency expectations? A good provider will possess a fast and efficient internal network and plenty of capacity. Ensure that you understand how increased bandwidth usage will affect both the local ISP and cloud provider.

5.    Surprising cost increases – Will I be charged extra if my requirements change – if so, what for? This is important as you need IT flexibility and will undoubtedly have to tweak storage space, data backup retention policies, use more bandwidth, change users and add additional applications.

6.    Licensing agreement – Are you correctly licensed for all software I will use? You must establish your license rights and usage needs before using third-party software in the cloud, then effectively capture those in your contract with the cloud vendor.

7.    Data centre credibility –  Are your data centres certified to international standards including ISO 27001 for information security management, ISO 9001 for quality management and ISO 14001 for environmental management. This will ensure the cloud provider’s data centres are up to scratch and will provide a good insight into their operational qualities.

8.    Cloud suitability – Which is the best cloud option for me – public, private or hybrid  cloud? The key to a successful outcome is understanding what IT to place where. Most organisations currently want flexibility and access to additional services, combined with localised control and immediate usability. So, for the majority of organisations, the best solution tends to be a flexible, hybrid option of private on-premise cloud – bursting into the public cloud, for areas such as backup or disaster recovery, or as processing capacity increases. 

9.    Security – What encrypted, security technologies do you employ to enable user access?  Even though most cloud providers’ security levels are far greater than most organisations’ in-house measures, you should still ensure they offer SLAs of at least 99.8%, or guarantees for security provision and audits. If in doubt, you may be wise to keep your proprietary data and critical business applications in-house, at this stage.

10.    Continuity provision – What backup systems and disaster recovery plan do you employ?  Your business can’t afford downtime in an outrage, so ensure that the provider has the infrastructure in place that offers quick, guaranteed recovery. The cost of exiting the cloud should be identified – as well as having an exit strategy.”


April 30, 2014  1:40 PM

Is the dirty end of IT outsourcing where the money is?

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Back in the day all IT services firms were talking about the importance of increasing margins by offering services on top of services. Many years ago when I worked in the IT channel press everybody was talking about how hardware was dead and no one could make money out of it.

But according to Sean Finnan, former head of EDS in the UK and more recently director of European IT services at IBM Global services it is the old fashion datacentre space where the money is today. Not even hardware just datacenter space.

This he says is the result of all the cheap finance that has been available lately. Businesses have borrowed money on low interest rates and build and kit out datacentres. They then rent it out for years to come.

And there is certainly demand for datacenter space with companies of all sizes requiring the more and more datacenter space. There are also an increasing number of cloud suppliers that need somewhere to host their software and make it available to customers.
Finnan who is now partner of an independent consulting company which focuses on IT outsourcing among other things, told me about the change.

“The value add bit is still important but the so called ‘dirty end of the business’ of running the datacentre is having a renaissance,” said Finnan.

“Cheap credit has been used to drive extensive datacenter builds. This is not even hardware but space.”

Finnan said that businesses are building datacentres on the doorstep of particular types of companies, such as retail and financial services hubs.


April 15, 2014  4:32 PM

Steria and Sopra merge to get on more supplier lists

KarlFl40 Profile: KarlFl40
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Interesting story last week that two of France’s IT service providers have come together in a “friendly” merger that will cut costs and probably more importantly make them more attractive to potential customers and get them on more multi-sourced IT lists.

The merger will create a group with €3.1bn sales, 35,000 staff and customers in 24 countries. It is also expected to cut operational costs by €62m a year.

According to the people in the industry that I have spoken to this is a reflection of the multi-sourced outsourcing environments at big companies today. As a consequence suppliers are trying to make sure that they are on “the list” of suppliers that businesses use.

Today businesses are increasingly drawing up lists of suppliers they will buy from and are splitting up the services they buy between different suppliers. Suppliers have to be on these lists to stand a chance.

When I ask about certain suppliers I often get the response from experts saying they are on the list or not as the case may be.

Steria is the better known brand in the UK, with sales worth over €700m, compared with Sopra’s €80m UK sales. The coming together of Steria and Sopra will put the companies on more lists and enable them to offer more services to the lists.

Outsourcing advisor  Jean Louis Bravard said businesses and their third party advisors compile lists of suppliers that they will consider for projects. “With Steria and Sopra combined they will get to the €3bn revenue mark which will put them on more lists.”
And that list is becoming attractive. In Europe and particularly the UK IT outsourcing is steaming ahead it seems.

The latest figures from ISG reveal that in the UK there were 59 contracts signed in the first quarter of 2014, worth €1bn. This represented a 66% increase in value compared to the same period a year ago and the highest number of contracts in a single quarter for three years.

So what do you need to get on “that list?”


April 15, 2014  10:06 AM

Could Facebook/bank destroy the retail banking giants?

KarlFl40 Profile: KarlFl40
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I have written a few articles recently about how large internet companies like Google, Facebook and Twitter could be the biggest threat to retail banks for many of their services.

Facebook is moving into financial services. Read this article I wrote.  In the meantime banks are struggling with a lack of consumer confidence, pressure from regulators and creaking IT systems.

Why shouldn’t a massive internet firms offer a current account for example? They have the technology and the customer trust. They already hold lots of customer details. Retail banks like RBS, lumbered with legacy IT, might end up being just B2B, leaving internet firms to offer retail banking services.

A good contact of mine in the banking sector believes major change is on the horizon.

He said: “I think Amazon, Ebay and Paypal will become banks soon.”

“The dinosaur banks won’t be around in 10 years except for business to business products. Cost base too high and service level too low combined with poor reputations and pressure from regulators, governments, public and media. The writing is on the wall, extinction is inevitable, but they are in denial at the moment.”


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