Archive for September, 2013

Top five reasons for IT directors to outsource IT services

September 26th, 2013

This article was written by Mark Walker, Business Development Director at Ubertas


Fear of surrendering control is probably the main factor holding many IT directors back from realising the benefits of outsourcing some IT services – or even their entire application or database management infrastructure.


But if you can find an IT services supplier who will work with you in a genuine partnership, understanding the specific needs of your business, it soon becomes clear that this fear is misplaced. It is perfectly possible to retain your strategic power while outsourcing the fundamental and mundane elements of your IT service and support. And in doing so, you can generate a host of business benefits.


The top 10 benefits of outsourcing


  1. Reduced service and support costs within a managed and predictable budget.

  2. Better quality of service, fewer IT failures and less downtime – thanks to well-defined SLAs.

  3. Access to the latest applications without high up-front license costs.

  4. Access to accredited engineers, skills and technical expertise without having to train your own staff.

  5. Reduce the risk of employees leaving and taking their knowledge with them.

  6. Round-the-clock access to a help desk primed to resolve problems remotely and rapidly.

  7. Compliance with the latest regulations.

  8. Guaranteed data security at remote, hosted data centres.

  9. Real accountability via contracted commitments from a third party supplier partner that wants to keep your business, rather than reliance on an in-house group that is hard to pin down.

  10. Remove high IT staff costs from your balance sheet and run an opex budget instead.


For some time, there have been signs that IT directors in smaller enterprises are increasingly receptive to these benefits – and are even embracing them with greater agility than their global counterparts. A 2009 survey from Computer Economics suggested that 27% of businesses now outsource applications management, while 21% outsource database management.


According to Information Week, as this level of outsourcing gains credibility and trust among SMEs, the benefits quickly accumulate in terms of greater flexibility (particularly for companies that are growing rapidly); access to cost-effective expertise, techniques and programs; access to third-party resources such as the help desk, which liberates IT staff to focus on more productive business-focused activities; and the wider savings achieved by not having to invest in infrastructure and licenses.

Take email services as one example: Gartner estimates that outsourcing just this one application could save businesses with fewer than 300 employees a significant amount, because an outsourcing partner has the dedicated infrastructure to manage it at a much lower cost.


Here are five good reasons why you should think about outsourcing your IT services:


1.       You could save significant staff costs.

Not just on the recruitment and hiring front – and skilled people with strong application-based credentials don’t come cheap – but in the longer term. Why spend time and money training somebody to support a core business application, only to see them poached by another employer and taking their expensively-acquired skills with them? And why not liberate your in-house IT staff to focus on projects that add value to the business rather than spending their precious time on firefighting duty?

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2.       An outsourced call centre/help desk frees your resources.

Providing round-the-clock support for your users in-house is expensive. Depending on the size of your business, you might need a dedicated facility that is operated by key IT support staff and is a significant cost centre in terms of facilities management overheads. Even in a smaller IT operation, somebody – it might even be you – has to be on call outside office hours to provide IT support for an increasingly mobile workforce. Thanks to its greater economies of scale, a dynamic IT services partner should provide a superior help desk at a greatly reduced cost.

3.       You can save money all round – with the right outsourcing strategy and partner.

A good IT services partner will work with you to identify the pressure points at which it makes sense for you to outsource aspects of your IT service and support. These can vary tremendously from one business to another, as consultancy points out. But they could depend on the number of employees who need support and to what degree, the number of devices involved, the types of applications that you use, the ratio of employees using office space to remote workers, and even your geographic location when it comes to the price of on-site support. These are complex calculations that deserve patient analysis.

4.       Your business will be more flexible in its use and consumption of IT services.

Infrastructure is expensive. Why invest in servers, complex networks and other hardware, just to deliver vital but everyday applications to your users, when you can have those applications managed and distributed as a service direct to the desktop without the expense of hardware maintenance? Because your applications are being managed and hosted by a third-party, they can be scaled up or down to meet fluctuating demand – and your costs will be more tightly controlled as a result.


5.       Peace of mind.

Why let worries about more complex issues such as data security or disaster recovery keep you awake at night, when they can be managed and supported by a third-party who has all the necessary expertise and infrastructure to meet your security and business continuity requirements? Yes, they are important – but by choosing the right partner to provide relevant support services, you are prioritising them rather than allowing them to become distractions that need constant attention from your in-house IT team.


This is the key to getting your relationship with your IT services supplier off to the best start – and making sure you realise the business benefits that you have in mind. And it starts long before the contract is signed.

As Forrester analyst Wolfgang Benkel says in his useful report, Negotiate a Successful  IT Service Outsourcing Contract, ‘Renegotiating during an existing outsourcing relationship requires time and effort, decreases agility, and is always based on less competition, which influences the provider’s motivation and the price.’

In other words, you’ll get more bang from your buck – and keep a tight hold of your IT service strategy – if you decide what you want from your contract before you choose your supplier.

Matching goals

Combine your goals with an IT service partner who has the vision to match them and deliver the latest service desk technologies, provide you with complete visibility of the way your service strategy is performing – including measurable indications of performance quality – and you’ll soon become part of the rising tide of SMEs that are living proof of the benefits of outsourcing.


  • Outsourcing IT services does not mean all or nothing.

  • Fear of surrendering control is the main factor holding many IT directors back from outsourcing IT services ‒ but you can keep control if you wish.

  • You can deliver genuine benefits to your business by outsourcing IT services if you negotiate service levels that are customised to your company.

Seven IT outsourcing myths busted

September 24th, 2013

For all its usefulness and cost-saving potential, IT outsourcing is still surrounded by all manner of myths, legends and cautionary tales. Here we debunk seven of the common myths to show how outsourcing can help your business use IT to achieve more with less.

1. Outsourced means abroad

The rush for outsourced services in many sectors meant that many jobs were shipped to locations abroad where employment costs are much lower. The language barrier and perceived poor performance of these foreign services leave many people and businesses wary of using outsourcing themselves.

But outsourcing simply means making someone else responsible for operating aspects of your business. And that service provider could still be located in the UK, immediately avoiding language issues.

2. Outsourcing costs more in the long-term


Over the course of an outsourcing agreement, it is perfectly possible that businesses will spend many thousands of pounds maintaining their IT services. However to suggest that the contract costs more than employing in-house staff to perform the same duties is incorrect.

Even employing a single member of staff to control IT staff will cost tens of thousands of pounds each year in salary, employer National Insurance contributions, plus a workplace pension and training. If your IT systems are more complicated, you will need more staff, meaning even greater expenditure. Using outsourced IT support services you get all the benefits of a complete team of IT experts without the associated employment costs.

3. Outsourced means ‘locked in’


The fear of being unable to leave an IT support services agreement makes many businesses wary of signing up. The assumption is that once IT support has been devolved, it is then impossible to claw back IT services in the event of a problem.

However when negotiating a support contract, your business can always discuss the potential for leaving and ensure that caveats allow for such a move. Support contracts are there to benefit your business as well as the provider’s, so you always have the right to include such exit clauses.

4. Outsourced means out of your control

There is a common confusion between responsibility and control when it comes to outsourcing, with many businesses assuming that they cede control of their IT to the service provider. The truth is that although your IT support provider can suggest strategies and improvements, your business retains overall decision-making control regarding how your business uses and implements computer services. In the meantime, your service provider will support your strategy, rather than define it.

5. Outsourced means out-of-sight, out-of-mind

Because outsourced IT support is often performed remotely, it is easy to think that the service provider is doing nothing in between reports of issues. However a good IT support service provider will be spending time proactively maintaining systems to ensure that they are running in peak condition.

If in doubt, ask your service provider for activity reports that show the behind-the-scenes work taking place. You may be surprised that the out-of-sight approach is often a good thing, as engineers work to prevent issues that may otherwise require them to come onsite to fix, entailing disruption and downtime.

6. Outsourcing is ‘all or nothing’

Sometimes businesses only need to outsource a small portion of their IT support, such as smaller remote offices. Rather than obtain support for all of their IT, these companies prefer to pick and choose the service they need. As long as outsourcing of certain IT tasks supports your wider IT strategy, there is no reason not to adopt a piecemeal approach to contracted-out services.

The good news is that there is no reason that an IT support provider cannot accommodate such a request. If a provider is unwilling to take on aspects of your IT system and software support, they are probably not the right partner for you.

7. Outsourcing is just for big businesses

Often, outsourcing contracts are discussed in terms of millions of pounds, suggesting that outsourcing is a luxury affordable by only the largest of businesses. The fact remains however that any business can benefit from outsourcing regardless of their size.

Small businesses will find guaranteed IT support is far cheaper than trying to resolve computer issues in-house. Larger businesses can make similar savings, often spending less than it would cost to hire one dedicated member of IT staff. At the same time, businesses benefit from an IT system that runs well and is customised to meet their operational demands, providing further added value to any support contract.


There are all manner of myths surrounding IT outsourcing that have sprung out of poor experiences, badly managed contracts or even ignorance. However, you should remember that:

·       Outsourcing does not mean offshoring – you can outsource IT support to British-based businesses.

·       Outsourcing IT costs less than maintaining systems in-house when contracts are negotiated properly.

·       Well-negotiated contracts provide your business with escape clauses in the event of irreconcilable differences.

·       Your business sets the IT strategy, not the service provider.

·       Ask IT support providers for evidence of their behind-the-scenes activity to keep tabs on proactive maintenance tasks.

·       Outsourcing can be done on a piecemeal basis with great success.

·       Outsourcing works for business of all sizes.

This post was written by Mark Walker, Director of Business Development at Ubertas.

Turners upgrades its IT system

September 12th, 2013

Durban shipping, freight management and logistics company Turners Shipping has recently upgraded its IT infrastructure, bringing the firm in line with global best practices and trends.Outsourcing22

Making the upgrade possible is Network Configurations, the shipping company’s technology business partner, which has been providing Turners Shipping with an IT outsourcing service for more than a decade.

Ian Losinsky, the group financial director, said the upgrade to Microsoft’s new operating system, a new offsite disaster recovery centre, redundant storage systems and back-up servers connected in a nationwide fibre-optic network has positioned the company at the forefront of the shipping fraternity.

“In this competitive industry client service is paramount and if you can’t offer a world-class service, you won’t last. We’ve quadrupled our connectivity through our association with Telkom without having to outlay additional costs and we have the option of improving this tenfold should the need arise,” he said.

The dual fibre-optic lines cater for Turners’ wide area network and internet functions, such as e-mail and browsing, while at the same time ensuring a failover service in the event of a disruption.

The next phase of the upgrade will be to implement a voice over internet protocol solution to the Turner Group’s operations throughout the country.

Losinsky said Network Configurations has been the driving force behind the upgrade, allowing his personnel to focus on their responsibilities while leaving the complex technology details to their IT partner.

“It’s worked for us since we were a small 20-user company and it still does now that we are a 170-user networked corporate,” he said.

“Managing the IT infrastructure of companies within the small and mid-size corporate space is our core business,” said Iain Emerson, the managing director at Network Configurations. “We’ve grown up and matured with the Turner Group and are ideally positioned to deal with convergence around communications, collaboration and most importantly, business productivity.”

Emerson said the creation of a disaster recovery centre meant that in the event of a catastrophe the maximum downtime of Turners’ critical applications would be 15 minutes. “In addition, we have in place our unique managed services framework, which is a proactive maintenance and management service, ensuring (that) business uptime expectations are met.”

He said they often detected problems before they affected the network and addressed them before the client was aware there had been a problem in the first place.

“Generally, if we phone with a problem, it’s taken care of immediately. It’s a win-win relationship which we try to achieve with all our service providers. It’s all about servicing the customer,” said Losinsky.


Synnex shares skyrocket on deal to buy IBM unit

September 12th, 2013

Synnex Corp. shares soared Wednesday after the company announced plans to buy a unit of IBM for $505 million.outsourcing21

THE SPARK: Synnex said late Tuesday that it has reached a deal to buy IBM’s customer care outsourcing business for $505 million. The company will pay about $430 million in cash and $75 million in stock, giving IBM an equity stake in Synnex.

THE BIG PICTURE: Synnex, based in Fremont, Calif., is a high-tech contractor that provides distribution and business process outsourcing to retailers, resellers and equipment manufacturers. IBM, based in Armonk, N.Y., has been focusing on its software business and selling off its other businesses.

The companies said in a statement that they expect the deal to close in the coming months.

THE ANALYSIS: Stifel analyst Matthew Sheerin called the deal “transformative.” He said the acquisition will add about $1.2 billion to the company’s small but fast-growing global business services unit and add to earnings after the first year.

Sheerin said in a research note that the financial terms seem “almost too sweet” given the attractive returns, but it appears that IBM is more interested in focusing on the software business.

The analyst remained neutral on the stock for now, given where shares are valued compared to its peers, but said he views the deal quite positively.

SHARE ACTION: Synnex shares jumped $10.06, or 21 percent, to $58.02 in early afternoon, earlier hitting $59.11, well above the previous high of $52.53.


MoJ selects Lockheed Martin for £125 million IT contract

September 12th, 2013

The Ministry of Justice has selected U.S defence giant Lockheed Martin as preferred bidder for a £125 million contract to provide the transformation of out-dated IT services.Outsourcing21

The Service Integration & Management (SIAM) contract for the overhaul of legacy IT contracts have seen the American defence giant compete against IBM.

The SIAM contract will see the winning bidder help to organise the MoJ’s many IT contracts, by moving the ministries IT services to service towers.

The selection of Lockheed Martin as the preferred bidder comes after a strong year for the company in the UK from the creation of new revenue.

The MoJ said: “We are transforming our IT contracts to ensure they provide the best possible value for taxpayers. -Lockheed Martin have been awarded a contract to provide IT services to around 90,000 users across the criminal justice system, replacing the three different providers who currently deliver these services”.


Govt’s ignorance about ICT, threat to Vision 20:2020, says NITDA

September 12th, 2013

The National Information Technology Development Agency (NITDA) has warned that if the ignorance about information communication technology (ICT) in and out of governmet is not tackled, attainment of Visions 20:2020 of the Federal Government will remain a wishful thinking.Outsourcing20

NITDA is the clearing house for IT projects in the public sector with the mandate to bring government and its services closer to the people through IT. It was also created to implement of the National IT policy, which seeks to make Nigeria an IT capable country in no distant future.

NITDA’s Director-General, Dr. Ashiru Sani Daura spoke during a visit by a delegation of the Nigerian Computer Society (NCS) in Abuja led by its new President, Prof David Adewumi.

He lamented that Nigeria is lagging behind in lobal ranking as shown by the country’s position on the global e-readiness index.

According to him, though ICT penetration was improving, there is need for the country to do more and be front runners in Africa. He stressed the need for massive enlightenment, adding that there was also need for collaboration.
“The transformation agenda and achieving Vision 20:2020 also requires IT,” Daura said.

While noting that NCS had been playing an important role in accelerating IT development in Nigeria, Daura recommended that NCS and NITDA should meet to create an action plan on the issues mentioned, advising that both organisations should strengthen their relationship for better mileage and benefit for the nation.

The NCS boss solicited for strategic partnerships in programmes and projects relating to research and development (R&D), cybersecurity, IT-enabled employment generation, promotion of excellence and professionalism in the industry and IT policy formulation that are of immense benefit to the country.

He commended the NITDA chief for not only sponsoring but also taking time out to attend NCS last conference in Osun State.

He said the goals of NITDA are in line with the core objectives of the NCS. He also praised Daura’s efforts at developing the outsourcing sector of the country, adding that NCS is proud that NITDA, which was borne out of the NCS vision and initiative, has firmly established.


IT stocks defy gravity even when rupee is rising

September 12th, 2013

The rupee’s appreciation, generally good for the market as a whole, is not favourable for software companies that earn a large chunk of revenue from exports. But, despite its steep 7% rise against the dollar in the last six trading sessions, IT stocks have not fallen; in fact, the BSE IT index has risen by a percentage point.Outsourcing19

Analysts attribute this sterling performance to steady US growth and Indian vendors’ abilities to penetrate the European market. TCSBSE -1.28 % and other frontline stocks rise rapidly when the rupee falls, but do not fall much when it bounces back, making them stock market darlings in a volatile market.

“Recent quarterly results, key US economic indicators make us believe a sustained uptick in IT outsourcing spend over the next 12-18 months is underway. This coupled with a significant cushion from depreciation in the rupee will keep the win ratios for Indian IT stocks favourable,” said a note by Macquarie.

The wisdom in Dalal Street is that IT stocks are inversely correlated to the rupee – they tend to fall when the rupee appreciates and vice versa. But, for the past few weeks, this logic seems to have worked in favour of IT stocks – when the rupee rose, IT stocks were either flat or fell just a wee bit, but when the rupee fell, IT stocks rallied sharply.

IT services sector has been the best performer in the Indian stock market year to date and has outperformed other defensive sectors such as FMCG and pharmaceuticals. While the BSE IT index has gained over 40% so far this year, BSE FMCG and BSE Healthcare have risen 13% and 15%, respectively.

TCS, which has risen 57% so far this year, is the second-most valuable IT services company in the world after IBM. With a $61-billion market cap, TCS has a big lead over Accenture ($50.5 billion) and HP ($43 billion). It also contributes a major chunk to the total market cap of the entire Tata Group — almost 60%.

The other Indian IT services firms such as InfosysBSE -1.14 % and HCL TechnologiesBSE -0.59 % gained 71% and 35% this year. “While the IT sector has performed YTD and valuations have inched up to higherthan historical average, we believe they are not in the exorbitant zone and can still sustain as demand signals show improvement, risks recede and market set-up remains favourable with benign currency, limited supply-side constraints and relative attractiveness of export-oriented IT sector versus a worsening domestic macro backdrop,” said Ashwin Mehta, analyst at Nomura.

“We expect current economic structure to imply low risk of a recession in the key markets of Indian IT companies over the next 12-24 months.”

TCS trades at around 27 times its trailing 12-months net profit, Accenture trades at around 16 times, while IBM is at 14 times earnings. The data from FY08-13 points to Indian IT companies utilising the benefit of the depreciated currency to invest in the business. The fall in the rupee will ensure this pricing intensity does not translate into narrowing of margins.

The rupee’s 63 to the dollar levels won’t affect IT stocks heavily but if there’s further appreciation to 60, then investors may start booking profits, analysts said. “IT companies are riding on the sharp recovery in the US economy and rupee depreciation,” said Sonam Udasi, head of research at IDBIBSE 0.84 % Capital. “However, if the rupee strengthens below 60, then the negative sentiments will prevail and investors could start selling these stocks.”


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