DVLA plan to bring tech back in-house reveals IT outsourcing flaws

October 2nd, 2015 by Rahul Jain No comments »

This month, the Driver Vehicle and Licensing Agency ended three decades of IT outsourcing and started to take back control over its technology estate. Here are some of the lessons they learned – and tips for other organisations who want to wrest back control over their IT.Outsourcing37

Last week the Driver Vehicle and Licensing Agency announced (with some fanfare) it had ended three decades of IT outsourcing and started to take back control over its technology estate.

The agency’s 13-year, £1.5 billion contract with IBM, Fujitsu and other partners has finished and the DVLA has now transferred 302 people in-house from Fujitsu, doubling the size of its IT department.

It expects to save at least £225 million over the next 10 years, chief executive Oliver Morley told ComputerworldUK.

It is now directly responsible for managing the 300-odd companies that provide various different components of its IT estate.

First priorities
The first priority is to stabilise its legacy VME systems and separate out the various layers of its technology stack to improve visibility, the DVLA’s chief technology officer Iain Patterson explained.

The agency will gradually move to an “open standards landscape” and become “as infrastructure free as possible” by moving much of it to the cloud, Patterson told ComputerworldUK.

“This is not just because cloud is cool. Our infrastructure needs to handle billions of transactions. A lot of what we do is very ‘peaky’ – we don’t need all of the capacity all the time – and cloud will give us more transparency over costs,” he explained.

Patterson will now return to the Government Digital Service after a two-year stint on secondment to help bring the agency’s IT back in-house, with the DVLA due to recruit a replacement imminently.

Meantime, the DVLA is pursuing an ambitious digital transformation project. It has increased digital uptake of its services from 66 percent to 90 percent over the last two years, according to Morley.

It has launched new online services that let you view and update your driving record, personalise your registration number and pay your car tax, replacing paper discs and driving licences.

Despite mixed initial success with some of these launches (the website has crashed repeatedly on major deadline days), the DVLA plans to expand the range of services online in the coming years.

Now it has control over its IT, of course, the DVLA will no longer be able to blame its opaque supply chain for technical glitches (as it did over the website crashes).

IT outsourcing model broken
DVLA is now a testbed for the rest of government, as departments and agencies move on from 10-year, single-supplier deals and wrest back control over their technology and digital services. It’s a policy they have talked about since 2010 that finally seems to be coming to fruition.

The agency’s case shows how badly broken this old IT outsourcing model seems to be, especially within the public sector – but also how it can ultimately be fixed.

Although Morley said “it may have been cost effective to outsource IT in the old world”, he conceded it is decreasingly defunct in a fast-changing world where the price of technology is plummeting.

The agency was paying for far more than it needed, he admitted. Many departments, especially those that handle the big traffic peaks and troughs due to deadlines, have suffered this issue.

HM Revenue & Customs pays full whack yet its average compute power utilisation is a tiny 6.7 percent, just to ensure it can handle busier times of year, its CIO Mark Dearnley has admitted – a problem it hopes it can solve by moving more of its infrastructure to cloud.

The DVLA IBM contract’s costs soared from an original estimate of £287 million to £1.5 billion – a common characteristic of these sorts of deals across Whitehall, it seems.

Even worse – the DVLA sometimes did not know what it was paying (very expensively) for, due to the lack of transparency over spending, Patterson hinted.

“We’re undergoing a stabilisation period where we review what we’ve been sold versus what we were charged,” he said.

Another problem with these sorts of IT deals is the lack of investment in keeping technology up-to-date: something suppliers are not incentivised to do.

Some very basic things have not been invested in. In these situations [outsourcing deals] people won’t make those sorts of big changes,” Morley admitted.

Where the client decides they want to order changes to the contract they have to endure “a long change management process and inevitable uplifts on quotes,” he added, euphemistically.

The Home Office, HMRC and the Department for Work and Pensions are just three of the departments supposed to be working to move away from monolithic big supplier contracts right now – but it is a common story across all of Whitehall and the wider public sector.

Thankfully, it seems the government has woken up in recently years and is starting to take action to end this damaging, expensive over-reliance on a handful of outsourcers. So what tips do Morley and Patterson have for others due to cut themselves loose?

What lessons we learn from the DVLA’s experience?
If you are trying to wrest back control over your IT estate, make sure you and you alone are in charge, Morley said.

“If you are bringing parts of your tech estate back in-house, you have to do that project yourself. It has been DVLA led and run throughout. We had to deliver it on our own to our own standards.”

You should try to “build in governance from the start” – make sure you engage with staff, suppliers and have strong oversight over the project, he added. It’s also important to do the job one bit at a time, not try to rush at it or do too many things at once.

“Keep it simple. Transform, stop, transition, then carry on transforming,” Morley said.

You need to make sure you fully understand what technology you own or use, and the skills of the people working for you, according to Patterson.

“Work to understand your tech estate, the capability within your teams and your commercial positions and arrangements,” he said.

He suggested to use SMEs “wherever possible” as they are generally far more flexible than large multinationals, and constantly check back on costs to ensure they stay under control.

“Look at your supply chain and crucially look at their future strategy, products and their direction of travel,” he added.


Business outsourcing: Indian investor challenges Nigeria

October 2nd, 2015 by Rahul Jain No comments »

CHAIRMAN of technology company, iSON BPO, Mr. Ramesh Awtaney, has challenged Nigeria to encourage business outsourcing because of its great potential to develop the Nigerian economy.Outsourcing36

Speaking in Lagos, he said outsourcing had been tested in India for decades and found to be a sure economic enabler.

Awtaney said, “what will not work in the Nigerian economy is offshoring. Taking a job from Nigeria to execute in India, which is offshoring, is not a good business plan. Staying in Nigeria to operate support service business, which is outsourcing, is of course a business model that will work in Nigeria, just the way it is working well in India.

What we do at iSON is to develop intellectual property and bring it to the job place and we do not take the job to places where there is already developed intellectual property. What we are saying is that we train local skills and allow them to do the job, rather than taking the job out of Nigeria to places where there are developed skilled manpower.

When we started operations in Nigeria in 2011, we said to ourselves that the combination of outsourcing and offshoring will not work for us in Nigeria because we do not see it as a good business model. We believe in the transformation that outsourcing brings, hence our business in Nigeria is all about outsourcing alone, where we train local skills to do the job in Nigeria. What we are doing is to bring the skills and knowledge of outsourcing from India and develop it in Nigeria, in order to replicate India’s growth in business outsourcing in Nigeria. In doing so, we need to create an outsourcing industry for Nigerians. In our business model, offshoring is completely out of it because we want to give Nigeria the best of service that will impact positively on the country’s economy and on her citizens” he added.

Explaining his company’s contributions in the country’s economy, Awtaney noted that in the last four years iSON has trained Nigerians to do the job in addition to opening call centres in different cities of the country.”

He also said that the company had employed over 4,000 Nigerians with plans to increase the number to over 5,000 by the end of the year.


Multi-billion dollar opportunity awaits India IT companies

September 1st, 2015 by Rahul Jain No comments »

Several outsourcing contracts worth at least $1 billion (about Rs 6,500 crore) each from companies such as US retailer Gap and British telecom firm Vodafone are coming up for renewal over the next one year, providing an opportunity to home-grown software exporters such as Tata Consultancy Services and Infosys to grab the deals from incumbent multinational rivals such as IBM and Hewlett-Packard and further increase market share over these companies.Outsourcing35

According to data from outsourcing advisory ISG, at least six such deals are set to expire in 2016. Further, another nine deals with a total contract value of at least $500 million each from customers such as Arcelor-Mittal and BAE Systems will also come up for renewal during this period.

According to the report, about $250 billion worth of deals are set to be renewed over the course of the next 36 months.

“The increasing number of contract expirations each year directly results from specific market trends. We’ve seen the number of outsourcing transactions increase dramatically over time. At the same time the average duration of contracts has declined. As a consequence, contract expirations are occurring at a faster rate,” said Dinesh Goel, partner and India head at ISG.

Even as IBM and HP are expected to strive to renew these contracts, India’s top outsourcing firms fancy their chances, having already grabbed significant market share from their multinational rivals over the past five years.

According to another ISG report, Indian IT firms increased their share of the market to 27.1% during January-June, from 23.6% a year ago. This gain came at the cost of European rivals such as Capgemini and Atos, according to the report.

Executives from both Indian and multinational firms are currently eyeing Vodafone’s $1 billion contract with IBM which is set to expire early next year. Preliminary discussions to renew the contract have already started, according to executives involved in the deal.

“There is no question that incumbency isn’t what it used to be – the non-incumbent win rate on competitive restructuring and renewal deals stands at over 60%,” said Goel. “India-heritage firms have been the significant beneficiaries of this trend as a winning provider. But going forward, they have their own turf to protect as an incumbent provider of large expiring deals.”

Indian IT firms have aggressively snatched large contracts by adopting tactics such as heavy upfront payments while bidding for large billion-dollar outsourcing deals and also using price to undercut rivals.

At a time when investors are worried about the economic slowdown in China triggering a global meltdown and with technology spending set to drop at least 5.5% this year, India’s top IT services firms will chase these upcoming deals even more aggressively, executives said.


IT outsourcing remains healthy, but the functions being outsourced are changing

September 1st, 2015 by Rahul Jain No comments »

Companies are increasingly farming out functions such as IT security and application hosting, according to a report from analyst firm Computer Economics.Outsourcing34

The company interviewed over 130 companies in North America for its report, IT Outsourcing Statistics 2015/16, asking them about their outsourcing practices. Overall, it found that outsourcing is keeping pace with a rising overall IT operating budget.

Median IT budgets rose 3% in the last year, and outsourcing continued to account for a tenth of that money overall. Large companies continue to be the leaders in outsourcing, spending a median average of 7.8% of their IT budgets on it. This compares to 6.7% for mid-range companies and 3.7% for small firms.

Under the covers, though, the functions being outsourced are changing. IT security outsourcing is increasing, as are web/ecommerce systems and application hosting, according to Computer Economics.

Application hosting is the most popular function to outsource, with 62% of organisations doing it, and two thirds expecting to do more so in the future.  The rise of SaaS is a big contributor to application hosting, the report suggested.

Not all IT functions are being outsourced at the same rate. Datacenters and database administration are  all flat, as is application development.

The percentage of work application development work farmed out by companies is typically low, and often project-based, the report suggested. The median average of a firm’s total application development work that it will farm out is around a fifth.

Customers just aren’t that happy with the service from application outsourcing providers. A third of those who outsource application development found the service worse than doing it in-house, while 42% found it the same.

Cost certainly isn’t a driver either. Fewer than one in five organizations who outsource application development work (17%) save money on it. In fact, 58% of them find it costing more.

The outsourcing of network operations and disaster recovery is also flat. That’s odd, because disaster recovery is one of the IT functions that the report says has the biggest potential for reducing costs through outsourcing. Another is desktop support.

Expect to see outsourcing increasing gradually over time, concluded the firm, as the adoption of cloud computing continues.

One reason for the general health of IT outsourcing could also be that it’s simply too difficult to find the staff. Canadian firms have resorted to temporary workers to fill the IT talent gap.

Some companies have also been found replacing Canadian workers with foreign ones in a bid to cut costs, sparking outrage. In 2013, RBC was found to have bought in IT workers from India via outsourcing company IGATE. The firms had been working together since 2005, it was revealed.

Since then, the Canadian Government has clamped down on workers entering the country under its Temporary Foreign Worker program. Perhaps this could also fuel the growth of outsourcing contracts over the next few years?

Computer Economics looked at 132 north American organizations with at least $50m in annual revenues, or $2m in IT operational spending.


Edinburgh Council signs £186m IT outsourcing deal with CGI

August 28th, 2015 by Rahul Jain No comments »

Seven-year contract aims to introduce integrated digital services across the authorityStatistics Business Background

City of Edinburgh Council has signed a seven-year IT outsourcing contract with CGI in a bid to transform council services.

The £186m contract will see CGI update the council’s IT systems and support its “channel shift” programme, which aims to introduce integrated digital services across the local authority.

In 2001, the council signed a 10-year deal with BT for outsourced IT services. The contract was then extended for five more years, but will expire in March 2016.

Claudette Jones, the council’s chief information officer, told Computer Weekly that the first point on the IT agenda is to improve broadband speeds in schools. This includes introducing 1GB of bandwidth for high schools and installing 4,000 Wi-Fi points across the city’s schools.

“We are investing a lot in infrastructure for schools,” Jones said. “The work to get the schools’ networks improved will start in advance of our BT contract ending, so by next summer, the schools should be upgraded.”

CGI will also update IT systems across Edinburgh council and put in place a new enterprise resource planning system, which will integrate with “citizen-facing digital platforms”.

Forty of the council’s transaction services are already online, and Jones said a further 150 will go online “within the year”.

Alasdair Rankin, convener of the City of Edinburgh Council’s finance and resources committee, told Computer Weekly that another crucial part of the contract is to include small and medium-sized enterprises (SMEs) in CGI’s supply chain.

A council report published earlier this month said the project would contain a commitment by CGI to deliver 25% or more of the contract value to SMEs by 2018.

“SMEs are an important part of the contract,” said Rankin. “We have a lot of SMEs in Edinburgh and we are keen to support the local economy and businesses.”

Other projects include introducing Office365 for council staff and school pupils, introducing a document management system where staff can access their documents from any secure device, and introducing new collaboration tools.

CGI’s UK public sector SVP, Steve Thorn, said: “This is an ambitious programme that will change the way citizens access and use public services and will introduce new ways of working for the council’s employees, ultimately making their jobs more productive and satisfying.”


How and why billion dollar businesses make IT investments

August 28th, 2015 by Rahul Jain No comments »

Kable Global ICT Intelligence: Companies choose IT providers based on expertise and price to support revenue growth.Outsourcing33

Analysis from Kable unveiled enterprises with over $1 billion in revenues are or will be looking into outsourcing IT functions with nearly 60% (57.9%) of participants saying they are already outsourcing applications, service desk support and help desk or planning to do so in the next two years.

Only 36.8% admitted they are not outsourcing or planning to do so within these areas, while 5.3% answered ‘no’ but said they are considering outsourcing.

As for IT infrastructure, 52.5% of respondents said they already are or may be outsourcing solutions in this space in the next two years, with 36.8% not doing so and 10.5% considering this route.

Similarly to IT infrastructure, 10.5% of those surveyed said they currently do not outsource IT management but are considering it.

Kable has found that the most important criteria for businesses when choosing an IT provider are industry expertise, price and specific functionality expertise.

The research took into account respondents from businesses with over $1 billion in revenues.

Those surveyed rated the three mentioned criteria with a score of 3.3, with the rating scale going up to four points meaning ‘very important’.

Leading-edge technology was voted fourth with a score of 3.2, followed by financial stability, breadth of solution offerings and geographical reach with 3.1, 3.0 and 2.9 respectively.

At the bottom of the league, companies put financing options like payment terms (2.8) and contract flexibility (2.7).

Kable’s research also revealed that the importance of various IT objectives in influencing IT investment strategies do not have a big disparity between them.

Using the same measurement technique from one to four points, businesses said that using IT to support revenue growth, with an average rating of 2.7, is their main objective influencer when investing in IT strategies.

This is followed by aligning IT with overall business goals and better demonstrating the value of IT to the business, both with a rating of 2.6.

Organisations taking part in the report rated the objective to deliver new functionality to business users with 2.5, while meeting internal service level agreements scored the lowest with 2.4.

All figures come from Kable’s ICT Customer Insight survey, which polled 2685 respondents, from across the world in Q4 2014. The survey findings include data on criteria when choosing an IT provider, importance of IT objectives in influencing IT investment strategies and IT functions that are outsourced now, or which may be outsourced in the next two years.

Source:    http://www.cbronline.com/news/enterprise-it/it-services/how-and-why-billion-dollar-businesses-make-it-investments-4653297

Council’s IT outsourcing plan hit by delay

August 28th, 2015 by Rahul Jain No comments »

The implementation of a new outsourced information and communications technology (ICT) service for Scottish Borders Council – in a shared arrangement with Edinburgh City Council – has been delayed.Outsourcing32

A report on the future of the 80-strong in-house department at Newtown was due to be presented to councillors in October.

But a meeting of SBC’s executive heard this would be delayed until December following the announcement last month that Canadian IT giant CGI has won a seven-year contract to replace BT as the provider of ICT services to the city council.

“Once we have access to the proposals that CGI have put forward, the suitability and cost of individual services can be further examined,” said Rob Dickson, SBC’s corporate transformation director.

“This analysis and engagement phase will now run through September and October.

“It is now planned to finalise the full proposal on December 17.”


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