The launch of a new all-party group on outsourcing and shared services could offer a more objective assessment of the involvement of the private and third sectors in delivering public services

Throughout the public sector, outsourcing projects are becoming ever more pervasive – following on from the Open Public Services white paper, there has been a glut of local authorities and emergency services teaming up to take their IT and communications needs to the marketplace. Every day, a new announcement, a new tender document, a new relationship forged.

Yet it seems that the media pays most attention to outsourcing projects when they go wrong – government paying over-the-odds for PCs, data leakages in India, computers not being ready on the first day of a school term; these are the situations that capture the imaginations of editors, and subsequently, enter the public consciousness.

What of the gloriously successful cases? The projects that go largely unnoticed, as they quietly add value for all concerned – benefiting not just departmental budgeters, but internal stakeholders, and the all-important service users, all at the same time.

When it goes right, you never hear about it. And that is wrong. There is a need for increased knowledge-sharing of outsourcing successes and how they were achieved. And if it went wrong, why: what were the bad decisions? How could things have been done differently?

The new All-Party Group on Outsourcing and Shared Services addresses an urgent need. A need for an open forum where outsourcing successes and failures are analysed closely, by experts in the field, and findings are presented to government decision makers, and discussed in detail.

Despite the media hyperbole, the majority of government outsourcing projects bring about positive change, which leads to improved services and cost savings. But even projects that perform well can get better. When spending on behalf of the taxpayer, there needs to be a constant drive to be slicker, leaner, and more cost-effective.

Politicians and outsourcers will come together and pool their cognitive resources under the chairmanship of Bob Blackman MP. As well as members of the Conservative, Liberal Democrat and Labour parties, there will be representatives of every facet of the outsourcing industry, provided from the broad-ranging membership base of the National Outsourcing Association.

Our members’ remit is to showcase the methodology of their best practice, providing insights from projects that have been delivered on-time and achieved their objectives, such as improved services or cost savings. They will also get down to the nuts and bolts of projects that didn’t work, presenting candidly on what went wrong and why. This openness will help the government become a savvier consumer of outsourcing services.

Improving dialogue between the outsourcing industry and politicians is the raison d’etre of the group. Bringing an increased transparency to the interactions between outsourcers and Whitehall will help the government spend more wisely, and the outsourcers from the private sector add more value for their number one client.

Source:http://opinion.publicfinance.co.uk/2011/08/in-the-know-on-outsourcing/

After sustained fall over the past few days, IT stocks saw a rebound on Monday and also on Tuesday. In fact the BSE IT index, which hit a 51-week low of 4638 last Friday, saw a strong rally and emerged the biggest gainer among all sectoral indices so far on Tuesday. It rose over 4 per cent while the broader benchmark Sensex gained 1 per cent.

Infosys has gained 4.2 per cent so far on Tuesday while TCS is up 5.66 per cent. Wipro was up less than 1 per cent. Patni Computers rallied 4.5 per cent, Financial Technologies rose 1.5 per cent, HCL Tech rose 1.05 per cent. This showed the rally on the IT basket didn’t have any market-cap bias.

So are the worries around the IT sector really over? Not really, in fact far from it. What has happened is that these stocks have been battered too much too fast over the past few days, and this has triggered a short covering and also some value buying opportunities for investors.

The fact is, however the developed economies deteriorate from here on, Indian IT companies have a more or less guaranteed cash flow waiting for this financial year.

Says Pankaj Pandey, head of research at ICICIdirect, “IT stocks have been beaten down pretty badly in this market correction. We don’t think IT firms will face a lot of margin pressure this year, as IT budgets have already been decided for the year. If at all, they may face some pressure next year, that is FY13.”

However, Ankur Rudra, an analyst with Ambit Capital, said the situation is not that comfortable.

“There is still a chasm between (still high) share prices versus the macro-economy driven concerns regarding IT companies’ performance, guidance and commentary. Our scrubbing of earnings commentaries of enterprise software and hardware vendors, our discussions with US banks and our channel checks point to leading indicators of a visibly worsening spending environment. We maintain sell on Infosys and Wipro, and buy on HCL and TCS,” he said.

Brokerage Sharekhan says in the near term, the macro headwinds will continue to make headlines, which could possibly result in further correction in prices of IT stocks.

“In the last one month, owing to increased uncertainties in the USA and the euro zone (which could lead to another potential slowdown in the IT sector), the BSE IT Index has fallen by around 19 per cent compared with the broader market indices that have fallen by around 14%. Infosys, for instance, has fallen around 19% in the same period,” he said.

“Nevertheless, we believe the recent fall has provided a good opportunity to enter these stocks, especially Infosys, with an attractive risk-reward profile for the next 12-18 months,” it said, adding that it maintains a buy rating on Infosys with a price target of Rs 3,358.

Sanjeev Zarbade of Kotak Securities says frontline IT stocks have been down mainly on the back of expectations that the developed world slipping into recession. Morgan Stanley slashed its global growth forecast for 2011 and 2012, saying the US and the euro zone were “dangerously close to a recession”.

Pinc Research says value proposition of Indian IT firms is strong and the long term growth is intact. In the medium term, the revenue growth might get affected but a crash is unlikely and a rebound in outsourcing is expected to come in main verticals along with support from newer verticals which have adopted outsourcing.

The uncertainties in the west and S&P downgrade of US debt rating have weighed down on IT stocks. The economic concerns are likely to impact the revenue growth and particularly the discretionary IT spending in the medium term as clients may delay decision making.

“But after a medium-term softness, we expect a rebound in the outsourcing activities and FY13 is unlikely to see a meltdown as IT outsourcing trends are positive and the value proposition of Indian IT firms continue to be strong. A bear case will be single digit revenue growth in FY13, which will be similar to growth achieved in FY10 subsequent to the Lehman crisis. But it is unlikely this time that firms will sink to such growth rates. We think there is a long0term potential and the correction has provided an opportunity,” the brokerage said in a note.

“We believe there is a potential of upside in large Indian IT firms and downside is limited. we maintain buy recommendation on Infosys, TCS, Wipro and HCL Tech with a target price of Rs 2,730, Rs 1,100, Rs 382 and Rs 464, respectively,” it said.

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Source:http://www.moneyguruindia.com/article.php?cid=1889&id=4