The Cleveland Police Authority in Northern England is paying Groupe Steria SCA to help manage the control room of the 2,200-strong force, allowing chief constable Sean Price to “concentrate on policing.” The € 211-million ($295 million), 10-year contract to take calls, assist in preparing criminal case files and manage payroll, recruitment and expenses became effective October 1.
Mr Price and other first-time customers seeking to simplify back-office operations or upgrade rickety computer systems are helping information technology services companies such as Steria, Capgemini and Cognizant Technology Solutions grow faster than the economies they serve. ” outsourcing used to be a bit of a dirty word,” Mr Price said. “I don’t think that’s the case any more.”
France’s Capgemini and Teaneck, New Jersey-based Cognizant have raised their outlooks this year, while India’s Infosys Technologies and Tata Consultancy Services have signalled rising demand from corporate clients. The companies are gaining as corporations revive spending postponed by the global economic crisis while also looking to cap costs. “Information technology is doing better than the economy,” Francois Enaud, chief executive officer of Velizy, France-based Steria, said.
“The crisis forced companies in many industries to reconsider the way they do business and their cost model.” About 53% of public and private-sector organisations in Europe surveyed by Gartner plan to outsource more this year, while 40% plan to increase spending on IT services, the research firm said on September 7.
Gartner also found that 14.7% of organisations with IT budgets of less than € 1 million expressed interest in outsourcing, compared with 6.1% last year. The recovery in spending has been slower at large corporations, postponing the rebound at companies such as International Business Machines (IBM), the world’s largest computer-services provider. The Armonk, New Yorkbased company this month posted its third straight quarterly decline in new contracts.
Its services signings fell 7% to $11 billion in the third quarter. “Very large corporate IT projects of the type that IBM would get involved in aren’t recovering to the same extent as smaller pieces of work, which are more significant to smaller companies,” said Gianluca Tramacere, an analyst with Gartner in Milan. These large contracts have traditionally been multi-year commitments with a fixed base of servers and personnel.
While those are harder to come by, smaller companies are increasingly able to outsource some operations. That’s in part thanks to the spread of cloud computing services, which shrink the footprint necessary for upgrades to IT infrastructure by storing data and applications online. Providers including Steria and Capgemini are promoting “pay as you need” cloud-based services, challenging the industry’s use of long-term contracts. “The cloud should enable entry into these services faster,” for smaller companies, said Patrik Karrberg, a researcher in the London School of Economics’ information systems and innovation group. “The promise of the cloud is more flexibility.”
That’s helping cloud services grow faster than more traditional IT. Worldwide cloud services revenue is expected to reach $68.3 billion this year, up almost 17% from 2009, while overall global IT spending may rise about 4%, according to Gartner. Tata Consultancy Services this month reported a quarteron-quarter increase in revenue of 12%, the biggest jump in more than four years. Infosys raised its full-year revenue forecast to about $6 billion, compared with a July estimate of as much as $5.81 billion. Steria reported an 8% gain in third- quarter revenue to € 402 million.
At Capgemini, Europe’s largest IT services provider, second-quarter revenue climbed 1.9% to € 493 million in France and 6.6% in Asia, Latin America, and Europe outside of France, the UK, and the Benelux countries. Sales in the UK and Ireland slid almost 9%. Capgemini spent € 233 million for 45% of Brazilian provider CPM Braxis in September. India’s HCL Technologies and Wipro have suggested they may do deals in Europe to expand their services on the continent.
In France, companies are “much more open to considering the outsourcing of non-core business” than before the economic crisis, Steria’s Enaud said. Still, demand driving many corporate clients to spend more on their IT systems will eventually slow, some executives said. “There was a surge in pent-up demand that we saw in the first and second quarter,” Cognizant CEO Francisco D’Souza said.
First half revenue at Cognizant surged 35% to about $2 billion as deferred spending returned, the company said on August 3. Demand later in the year is unlikely to be “quite as strong, as we return to a more normal situation,” Mr D’ – Souza said. IT providers also face a battle to safeguard revenue from cuts in government spending in the US and Europe. In the UK, the government said last week departments will cut their budgets by an average 19% over four years, with police budgets falling by 14%.
Longer term, the cost-cutting efforts may help computer services companies, said the LSE’s Karrberg. “The problem for many governments is that they don’t have enough competent in-house people,” he said. “There will be a response among the providers to create more efficient services, and it’s a big opportunity at the moment.”
At the Cleveland Police Authority, meanwhile , Mr Price is fielding queries from other police departments for the service contract he has with Steria.
RISING DEMAND
Capgemini and Teaneck, New Jersey-based Cognizant have raised their outlooks this year, while India’s Infosys and TCS have signalled rising demand from corporate clients Providers including Steria and Capgemini are promoting “pay as you need” cloud-based services, challenging the industry’s use of long-term contracts About 53% of public and private-sector organisations in Europe plan to outsource more this year, while 40% plan to increase spending on IT services Gartner found that 14.7% of organisations with IT budgets of less than € 1 million express interest in outsourcing, compared with 6.1% last year
GAINS INC
World-wide cloud services revenue is expected to reach $68.3 billion this year, up almost 17% from 2009, while overall global IT spending may rise about 4% TCS reported a QoQ increase in revenue of 12%, the biggest jump in more than four years Infosys raised its full-year revenue forecast to about $6 billion, compared with a July estimate of as much as $5.81 billion Steria reported an 8% gain in third-quarter revenue to E402 million Capgemini’s second-quarter revenue climbed 1.9% to E493 million in France and 6.6% in Asia, Latin America, and Europe outside of France, the UK, and the Benelux countries. Sales in the UK and Ireland slid almost 9% First-half revenue at Cognizant surged 35% to about $2 billion as deferred spending returned, the company said on August 3.
Source:http://economictimes.indiatimes.com/tech/ites/Outsourcing-not-a-dirty-word-as-IT-spend-perks-up/articleshow/6819849.cms
