When it comes to the outsourcing of IT, security, multi-vendor management and measuring RoI are some of the dilemmas that CIOs face. An interactive round table discussion on Day 3 of Technology Summit 9.0 sought to debate and discuss the experiences of CIOs in this regard. Sunil R Chandiramani, Partner and National Director Advisory Services/ Business Leader, Ernst & Young moderated the discussion.

The panel began by discussing the outsourcing experiences of the panelists and how they were going about measuring the RoI on their outsourcing projects. Vikram Poovanna, Associate Director – IT, MindTree Ltd., started off mentioning that, at Mindtree, almost 50% of the IT requirements had been outsourced. “We have outsourced infrastructure, desktop management and about 15-20% of our applications.” For the overall application infrastructure, Poonave explained that he had a full-fledged team managing the SAP layer.

Sebastian Joseph, President – Technology & FM, Mudra Communications, explained that he practiced two types of outsourcing. The first being with regard to software development and testing while the second was all about end-to-end infrastructure management.

He emphasized that, it was vital that CIOs outsourced basic tasks such as infrastructure management so that they could focus their resources on critical business applications.

Tejinderpal Miglani, CIO, Indiabulls, concurred, although he added that his experience with outsourcing had been a mixed one. Miglani observed that every CIO needed to consider a couple of factors before deciding to embark on an outsourcing journey. “Firstly, you have to decide how critical IT as a function is perceived to be within your organization. Secondly, you have to analyze the type of resources and talent that you have within the organization as, if there is a lack of knowledge inside, then you have no choice but to look outside,” he explained.

Adi Jehangir Shroff, CIO & Sr. VP Corporate Human Resources, Eureka Forbes Ltd., whose outsourcing model is quite mature, said that he had a 100% outsourcing contract that was currently running in its third year and revolved around four tracks. “The tracks are business transformation where we have well-defined parameters for every vertical, defining the applications to be used in five years, infrastructure which includes all three aspects of hardware, software, services as well as application support.”

He explained that the trigger behind this evolved model was some internal brainstorming. “The important thing is to identify the current resources that you have in your team and whether they are capable of application development,” said Shroff.

When asked by a member of the audience if outsourcing IT was a good solution for a startup, Miglani of Indiabulls mentioned that, “For a greenfield business, it is possible to outsource a lot. However, every new business needs to chart out its application requirements and whether vendors in the market have the expertise that’s required to develop the same.”

The other key question that was asked was with regard to how to go about choosing an outsourcing partner. Although experiences with outsourcing partners varied, one thing was unanimously agreed upon. The first step in any outsourcing contract is that the vendor and the customer should have the same set of expectations from the outsourcing contract.

Shroff said, “When the relationship is being defined, clarity is of the utmost importance.” There were other concerns voiced by the audience like security issues and multi-vendor management.

Poovana of MindTree explained that, in matters of dealing with customer information, security was the crucial aspect to examine in an outsourcing contract. The solution, in that case, was simply to keep the control and access to information entirely in-house.

Instances of vendors being unable to scale up as required were also discussed and the panel’s take was that a little bit of give and take was a given in any outsourcing relationship and that, like in every relationship, “CIOs also have to invest in an outsourcing relationship.”

Source:http://www.expresscomputeronline.com/20110930/expresstechnologysenate31.shtml

Information technology (IT) stocks have done well in the past two weeks, climbing by about 11% from their lows in mid-September compared with a mere 1.5% rise in the benchmark Nifty of the National Stock Exchange. The European markets have done well during this period on the hope that governments will work towards tackling the region’s debt woes.

It’s natural that IT stocks should rally on such hopes. After all, they had fallen more than 30% between January and mid-September, higher than the 20% decline in the broader markets, due to concerns that the debt crisis in Europe would result in a slowdown in the global IT demand.
Regardless of what current stock prices convey, it’s too early to say these concerns are behind us. Having said that, it does look like the current macroeconomic situation will not affect the immediate September quarter results, if the performance of Accenture Plc is any indication.

The US-based technology firm, which competes with Indian IT services firms in some areas, reported strong results for the quarter ended August. Accenture follows a September-August fiscal year. Revenue grew by 14% year-on-year in local currency terms in the fourth quarter, not much lower than the 15% growth it managed in the rest of the year.

More importantly, it reported new order bookings of $8.4 billion (over Rs. 41,000 crore today), the highest in three quarters. Outsourcing bookings accounted for about 51% of the total bookings and were the highest in over seven years.

The management commentary was also positive, “Clients continue to invest in replacing their core systems and initiating more cost-reduction projects and in improving operational effectiveness… The challenges of globalization, increased regulation and the need for operational efficiency are even more prevalent today than they were a few months ago… Our clients continue to take steps to adjust to this new environment and this continues to drive demand for our services.”

Not surprisingly, IT stocks outperformed the markets on Thursday. But things seem a bit overdone now, at least in a few counters. Infosys Ltd, for instance, has risen by 16% from its low in mid-September. This gives the impression that the industry is out of the woods, while that’s clearly not the case. And it doesn’t make sense to get excited about Accenture’s quarterly results.

There’s weren’t many concerns about the near-term growth prospects. And while some of Accenture’s work overlaps with that of Indian vendors, the correlation in demand isn’t that high, given the high proportion of consulting work Accenture does.

IT stocks had underperformed the markets earlier because of concerns that demand may get affected in the second half of the year and in the next fiscal year. These concerns haven’t disappeared. Even Accenture’s guidance for the next fiscal year builds in some caution for the second half.

Investors need to keep these factors in mind before getting carried away with the recent rise in IT stocks.

Source:http://www.livemint.com/2011/09/29232609/IT-stocks-relief-rally-looks-o.html