Australia Post proposes to outsource 108 IT jobs

May 21st, 2015 by Rahul Jain No comments »

Australia Post will soon take plans to outsource 108 internal technology jobs to Fujitsu to its board for approval.Outsourcing41

The plans to offload the functions of AusPost’s end user computing and enterprise technology services teams to an external provider were first revealed in September last year.

At the time, the Communications Workers Union warned that reductions would add to the 900 jobs in management, administration and support areas already in the firing line before June 2015.

The outsourcing decision would affect around 108 workers within the organisation’s 1200-strong IT division.

The union criticised AusPost’s consultation with workers as “box ticking exercises”, which had forced the CWU to go to the Fair Work Commission late last month.

“Obviously the workers affected are very disappointed by Post’s decision,” the CWU said in a statement.

“Some have been through a restructure last year. There can be no guarantees that work won’t be offshored.”

The positions are likely to be outsourced to Fujitsu, which has been named the preferred supplier.

AusPost’s initial plans to take the Fujitsu proposal to the board in May have been held back to June, the CWU said after AusPost agreed to develop an alternative option to the outsourcing.

“We have told Post that the decision to outsource EUC is not well thought out. The alternative proposals put by workers and their union should be trialled for 12 months,” the CWU said in a statement.

“Post should go back to the drawing board and examine who and what must be kept because they are critical to the organisation.”

The union said it had been advised by AusPost that the expected savings from the outsourcing agenda would sit somewhere between $5 million and $8 million.

An Australia Post spokesperson told iTnews a decision on the proposed outsourcing had not yet been made.

“Just like many businesses, Australia Post is operating in a challenging business environment.  We will continue to assess our services against the market to ensure we are delivering value to our business and our customers.”

Australia Post was aiming to achieve four key objectives through the Fujitsu partnership, according to the CWU.

It said the organisation was after confirmed pricing for specific service options; the ability to add and remove resources quickly as needed; access to new technologies; and faster speed to market for new products.


Indian IT captured quarter of top 100 outsourcing deals in 2014

May 21st, 2015 by Rahul Jain No comments »

India-based outsourcers captured nearly a quarter of the top-100 outsourcing deals in 2014, said International Data Corporation’s (IDC) analysis of worldwide outsourcing deals during 2012-2014.Outsourcing40

The analysis shows the top-five vendors in 2014 captured over 50 per cent of the total contract value (TCV) of top-100 outsourcing deals in 2014. This is up from 43 per cent by the top-five vendors in 2013, which included IBM with $13.8 billion, CGI with $2.8 billion, Cognizant with $2.7 billion, Capgemini with $2.6 billion, and Wipro with $2.3 billion. However, the average deal size continues to shrink with fewer mega-deals (TCV of $1 billion or more).

Research shows that there has been a shift from public to private sector deals in 2014.

An additional shift to fewer providers winning and potentially competing for the largest outsourcing deals is also occurring. “India-based outsourcers are making significant inroads into the global top-100 outsourcing deals,” said David Tapper, vice-president, outsourcing and offshore services.

“The combination of effectively leveraging the offshore business model; incorporating new methods of service delivery such as hosting and cloud; investing in more transformative capabilities in areas such as analytics, social media, and mobility; and enhancing strategic local capabilities and resources has enabled the India-based outsourcers to effectively compete with well-established competitors in the outsourcing industry for the largest of large-scale outsourcing deals.”


Gartner says Indian healthcare providers to spend US$ 1.2 bn on IT in 2015

May 19th, 2015 by Rahul Jain No comments »

Healthcare providers in India are expected to spend US$ 1.2 billion on IT products and services in 2015, an increase of 7 per cent over 2014, according to Gartner, Inc., leading information technology research and advisory company. This forecast includes spending by healthcare providers (including hospitals, as well as ambulatory service and physicians practices) on internal services, software, IT services, data center, devices and telecom services.Outsourcing40

Dr Anurag Gupta, research vice president at Gartner said, “IT services, which includes consulting, implementation, IT outsourcing and business process outsourcing, will be the largest overall spending category through 2019 within the health care providers sector. It is expected to reach US$ 317 million in 2015, up from $295 million in 2014 – with the consulting segment growing 11 per cent.”

Internal services will achieve the highest growth rate amongst the spending categories with a 17 per cent increase in 2015 to reach US$ 297 million. Internal services refer to salaries and benefits paid to the information services staff of an organization. The information services staff includes all company employees that plan, develop, implement and maintain information systems. Software spending will grow 6.2 per cent to reach US$ 103 million in 2015, up from $97 million in 2014, led by growth in vertical specific software (software applications that are unique to a vertical industry. These are stand-alone applications that are not modules or extensions of horizontal applications).

“India has a young population and a fast growing middle class. Public sector healthcare will expand their focus on providing access to care mainly through primary coverage and leveraging mobile technologies. Private sector, on the other hand, will focus on building middle tier and tertiary care facilities mainly for the city dwellers,” said Dr Gupta.” India’s healthcare technology investments are still very small compared to the overall population. We expect providers to benefit by offering low upfront cost, recurring, or outcome base models, especially in core digitization technologies like hospital information systems.”

Gartner, Inc. delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in hightech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to clients in approximately 10,000 distinct enterprises worldwide.


Sale of Serco BPO hits pricing stumbling block as PEs drop out

May 19th, 2015 by Rahul Jain No comments »

The sale of Serco BPO, India’s third-largest business process outsourcing company, has seen some private equity firms drop out of the bidding, as the price being asked for by the BPO’s UK-parent is too high, leaving Blackstone as the main private equity firm in the fray, sources with direct knowledge of the matter told ET. Outsourcing39

Serco BPO, which has about 60,000 employees globally, was put up for sale by Serco Group late last year, to help fill a £1.5 billion hole in its balance sheet. The process was expected to be completed by May, but it may take a little longer, as buyers and sellers haggle over price.

“Serco Group has set a threshold that is just too high. Apax has dropped out and, though Blackstone is the front-runner, the deal over there too is being held up on the price,” a source with direct knowledge of the matter said.

Part of the problem is the kind of haircut Serco Group will have to take on the sale. It bought Intelenet, as the firm was known, for over $630 million in 2011. Nearly four years later, it is being valued at a little over $400 million.

“The parent is trying to lessen the blow they will have to take on the sale. It’s not an easy negotiation. It makes it worse than Blackstone is trying to buy the unit back for much less than it sold it to Serco for. Serco is looking at a price closer to $500 million,” a second source with knowledge of the matter said.

He added that it was unlikely the sale would fall through entirely because Serco Group is a ‘very motivated seller’. CVC Capital Partners is also in the final stages of the process.

Serco had not responded to a request seeking comment for this story at the time of going to press. Apax declined to comment and Blackstone could not be reached. Serco has mandated Citigroup to manage the sale. Blackstone had backed management buyout of Intelenet in 2007, with investment of about $260 million. It then sold the business to Serco.

In a strategy meeting in March, the group told analysts the process of selling its Entertainment and Leisure was ‘well advanced’ and in its Great Southern Railway business has confirmed diligence and definitive documentation is being negotiated.

“We think Serco could consider selling the Indian and UK BPO private sector BPO businesses separately,” Robert Plant, an analyst with JPMorgan, said.


CW500: Where next for IT outsourcing?

May 19th, 2015 by Rahul Jain No comments »

IT outsourcing is emotive, but it is hard to find a company today that doesn’t do it in some way.CW500 Logo

Outsourcing is also changing fast. In the past, IT outsourcing was a case of handing over the running of the back office, with suppliers offering to manage “the mess for less”.

This extended to companies choosing to have mess managed for even less in offshore locations, particularly India, where the cost of labour is lower.

But developments in cloud computing, automation software and big data technology are changing the way outsourcers offer services and how businesses consume them.

Traditional application development and maintenance outsourcing is being shaken up as a result of cloud computing and the software as a service it brings. Offshore business processes and IT services are being replaced by automation technology, reducing the need for low-cost, full-time staff to run them. Meanwhile, big data is turning suppliers into information gatherers and translators rather than software maintainers.

Another change taking place is the digitisation of business, which is placing difficult demands on in-house IT resources. Businesses want support in the back end to free up staff for digital projects at the front, where their business knowledge is vital.

All this means IT outsourcing is set to continue, but will change in its form.

Computer Weekly’s CW500 Club recently discussed the future of IT outsourcing. CIOs from Croydon Council, Cambridge University Press and clothes retailer Monsoon Accessorize described some of the changes happening now and their impact on IT outsourcing.

Public sector is open to change
The fact that the public sector is transparent is the reason we hear so many public sector IT outsourcing horror stories, not simply because there are more of them. Private sector companies, on the other hand, are unlikely to publicise failed outsourcing arrangements. But outsourcing in the public sector does have its challenges.

Outsourcing is an attractive cost-cutting mechanism for any organisation forced to cut costs. The London Borough of Croydon is a good example of an organisation facing this, as the council has to cut £100m from its budget over the next three years.

Nick Roberts, head of ICT at London Borough of Croydon, and former president of local authority user group Socitm, says while many commercial organisations are coming out of austerity and are able to invest, local government is only about halfway through the process.

Outsourcing provides cost-cutting opportunities, so public sector bodies, with seemingly impossible austerity targets, will inevitably look to the market for options. But while outsourcing contracts promise cost savings, it seems they are failing to support the future plans of customers, despite the importance of IT in these plans.

Roberts says government organisations have had bad experiences with large outsourcing contracts, many of which were set up with the knowledge of what was required from day one, with the supplier offering a competitive price to deliver.

“But then day two comes and you have to change things, but this is a commercial process,” he says.

The supplier has its own targets, so making changes to the agreed contract is not easy.

He says this situation inevitably causes problems, with the inability to change being “difficult to manage in a world where the only constant is change”.

Roberts, not surprisingly, “has a few gripes” about traditional outsourcing contracts.

“They focus on the current operational state and are not built for change,” he says. “That change process is always mired in a commercial process. The business wants to change, but it can’t because it has to go through this commercial process.”

He says contracts reinforce this because they are written to measure success in terms of support rather than the ability to change and be flexible.

But cloud is bringing change, according to Roberts. “A lot of the contracts in place are effectively in-house datacentre support contracts. But the big change is the move to native cloud, which takes that out of the equation,” he says.

For example, enterprise applications that were kept up to date by suppliers are not relevant with software as a service. The hardware estate is also not managed in the same way, with staff using a large number of different devices.

IT that supports the customer-facing operation needs to be in-house. The in-house teams that understand the relationship with customers have vital skills for IT today, because IT is an interface with citizens rather than just underpinning systems.

Roberts says increased multi-sourcing mixed with in-house services and shared services will be the make-up of IT services going forward.

Where shall I take my IT?
While outsourcing changes, so do the locations from which it is delivered.

Mark Maddocks, CIO at Cambridge University Press, says the medium-sized publisher is in the process of moving from print to digital publishing, which is a big step for an organisation that is almost 500 years old.

Cambridge University Press publishes academic journals and books and has English language courses and education businesses across the world. Most of its sales are outside the UK.

The company has significant outsourced operations, many of which are in offshore locations.

Maddocks says the company uses four types of outsourcing and, following success with the approach, has increased its offshore operations over the last five years.

“We have a traditional outsourcing model. We buy services where we are looking for scale and cost reduction. Here we are not really looking for differentiation and I would be quite happy if all our competitors used the same service,” he says. “This works a treat when you have a really clear interface and when you can measure it. We use this for all sorts of things, such as hosting.”

The company also has offshore captives.

Its first was in Manila, Philippines, where it started around five years ago with 40 staff focused on software development and testing, supporting its online digital product. Currently, it has just over 250 people and expects over 300 by the end of 2015. The Manila centre now has 18 seperate teams carrying out a wide range of internal services.

According to Maddocks, it is “cost-effective, low attrition and wage inflation is not as bad as people say”.

But there are disadvantages. Maddocks says it requires management time and overhead. “They are my team and I still have to manage them.”

The company’s third model is offshore software development in India, with development centres in Calcutta and Hyderabad. These are with two very large Indian IT services providers and both centres have about 50 people in them.

The Calcutta centre supports the organisation’s learning management platform, which is an English language resource used by about 500,000 people worldwide.

“I put this in Calcutta, rather than Manila, for access to skills. There was a particular technology stack I did not think I could bring in quick enough in Manila,” says Maddocks.

“We have built a long-term relationship and are in the fourth year of working with that supplier. In Hyderabad we are in the third year of a deal to run one of our internal systems,” he adds.

The fourth model, a hybrid of traditional offshoring to a supplier and a captive, has just been launched through a business process outsourcing operation, where it shares a building with the existing team in Hyderabad.

“We have big growth plans and will expand from about 10 people to over 100 by the end of the year,” says Maddocks.

This model uses an Indian partner to help the company recruit for a centre that uses a traditional supplier/customer model, but will have the ability to change to a captive centre easily if the organisation wants it to, he says.

His advice to CIOs thinking about outsourcing and offshoring is to “be really clear what your aims are and think beyond cost reduction and getting rid of a problem”.

“Think about accountabilities and make sure teams have ownership of the relationships with the people you work with and have good offshore leads,” he adds.“Spend time building relationships with teams offshore.”

It is clear the changing role of the IT department is moving it from the dark depths of the basement to the shop window.

Retail’s speedy and necessary take-up of digital customer services is a good example of a sector where IT is split in two. Today there will be teams, probably outsourced, supporting legacy systems, while in-house IT, which understands the business, focuses on providing customer facing apps and understanding customer behaviour through data.

John Bovill, IT and e-commerce director at Monsoon Accessorize, says the retail industry is in a state of flux.

“People are interacting with our company in different ways and this has put IT at the front of house,” he says.

About 50% of Monsoon Accessorize’s customers have first contact with the store via the website and the other 50% through the store, but 75% of final transactions are still in-store.

These changes in customer behaviour meant in-house IT had to change. Resources can no longer focus on the systems that keep the company running but must be dedicated to attracting customers.

In the past, says Bovill, stock was sent to outlets and sold on the high street to consumers  physcially browsing in the stores. But today it is about drawing customers in, which means understanding them.

“The corporate IT function as we know it in our industry will be very different. Consumerisation will turn it on its head. It will be analytics-based and all about understanding data and using it in an intelligent way,” says Bovill. “The day-to-day IT grunt and robust solutions will be provided by suppliers.”


Wipro to open innovation lab in Silicon Valley by December-end

May 18th, 2015 by Rahul Jain No comments »

Wipro Ltd will open a technology innovation centre in Mountain View, California, by the end of December as it seeks to build products on automation and artificial intelligence technologies in partnership with innovative start-ups nested in the Bay Area, thereby strengthening its offerings to clients when competing for large outsourcing orders.Outsourcing37

Wipro’s new facility—the firm’s first outside its headquarters in Bengaluru—will have to compete with global software giants, including Google Inc. and Facebook Inc. for talent and partnerships with start-ups, and comes after local rival Infosys Ltd decided to shut its research and development wing and merge it with other business units within the company earlier this year.

“Why Mountain View (having an office)? (Because) Bay Area represents that right area where we can bring together a lot of start-ups (to work along with our) customers,” Wipro chief technology officer K.R. Sanjiv said in an interview. “We are (already) working with lots of start-ups in the automation space and we are looking at having this facility opened by December-end”.

Sanjiv declined for now to give details on this innovation lab, including the number of engineers and scientists the lab will have, but another executive familiar with the development said that, for now, the firm plans to have “about 100-150 people” working out of the facility.

“We will have start-ups work with our core team, especially in areas of automation, artificial intelligence and big data,” said the second executive.

Wipro’s Bengaluru innovation lab has helped the company come up with its first artificial intelligence platform, Wipro Holmes, and other technology platforms for its banking and financial services customers and retail clients, which the company believes gives it an edge when bidding for outsourcing deals. The Bengaluru innovation centre employs nearly 300 people.

Silicon Valley is considered to be the cradle of start-ups focused on next-generation disruptive technologies and home to blue-chip companies across sectors. Firms ranging from Apple Inc. to Ford Motor Co. have significant presence in the area. Institutes such as Stanford University supply people to these companies, while venture capital firms such as Andreessen Horowitz help in turning many ideas into blockbuster products, thereby making the region a powerful magnet for companies across the world. Of late, many Asian firms, including Chinese search giant Baidu and South Korean electronics giant Samsung have set up research arms in Silicon Valley. India’s largest software exporter Tata Consultancy Services Ltd has a presence in the area for close to eight years. Its COIN, or Co-Innovation Network, screens almost 800-1,000 start-ups every year, some of which work with the Mumbai-based company.

“Silicon Valley is a unique, very dynamic innovation ecosystem where players are used to innovate across boundaries, and to experiment and take risks—so firms from around the world see this as a place where they can best learn fast and access skills and resources they need in order to succeed,” said Eilif Trondsen, research director at Strategic Business Insights, formerly Stanford Research Institute.

Sanjiv, who reports to Rishad Premji, head of group technology and strategy and son of chairman Azim Premji, said the company decided to merge the technology office with the strategy office earlier this year as technology is core to the future of any firm. “The tipping point for merging the role of strategy with technology happened over what we have seen over the last year or so. It is becoming more technology-led. Over the last two-three years, strategy was not so much technology dependent as far as process dependent. So historically, it was kept separate,” explained Sanjiv.

However, some observers believe that having a mere presence in the valley does not assure success.

“The vast majority of corporate incubators in Silicon Valley are disasters. That is because companies think that just by having some people in Silicon Valley, some magic will happen and their culture will change,” said Indian American technology entrepreneur and academic Vivek Wadhwa. “The problems are much more fundamental. This is likely to be the fate of incubators that Indian companies are setting up here as well. They are making the same mistake that American companies do.”

Infosys, the India’s second largest software exporter, knows this well as it had to shut its research and development arm, Infosys Labs, which first started in 1999, before merging it with the back-end verticals of the firm.

“They (Indian software exporters) are deluding themselves by thinking that by setting up Silicon Valley incubators and investing in some companies here, they will be saved. They need to be rethinking their entire strategies and reinventing themselves—not chasing Silicon Valley rainbows,” said Wadhwa, who in the past has suggested that Rishad Premji seek more partnerships with India-based start-ups.

Understandably, Wipro is going a little slow when engaging with start-ups, and said that 80% of the $100 million corpus kept with its corporate venture arm will be used to invest in start-ups based in the US and India.

“Our focus remains in the US and India. So let me put it like this, when making a strategic investment, focus will remain in US and India, and 20% for those in Europe and rest of the world,” said Sanjiv, who has a small team of “three-four” executives who evaluate start-ups that Wipro could partner. Last year, Wipro evaluated more than 200 start-ups, of which the company partnered with less than five and eventually bought a $5 million stake in Drivestream, a US-based start-up that helps in integrating Oracle cloud applications systems. “We are one of the funnels for start-ups before Venu and team (Wipro corporate venture heads Venu Pemmaraju and Biplab Adhya) come and make investments,” Sanjiv said.

For now, Wipro has partnerships with about 30 start-ups, and it has also made a minority investment of $30 million in New Jersey-based data analytics firm Opera Solutions. Wipro did make another investment of $5 million in machine-to-machine learning focused start-up Axeda, but sold its stake last year after the start-up was bought by a Nasdaq-listed firm.


IT firm TCS to start making investments in next two years for M&A deals

May 18th, 2015 by Rahul Jain No comments »

Debashis Poddar may have a busy two years ahead. The global head of mergers and acquisitions at Tata Consultancy Services is expected to help boost the company’s appetite for M&A deals when its rivals are dipping deep into their wallets to buy growth.Outsourcing32

TCS, the country’s largest software services company, has always been a conservative player in the M&A space, a trait it used to share with others in the IT industry. However, over the past few months, Infosys and Cognizant Technology Solutions have become more aggressive in buying companies, while Wipro is boosting investments in startups.

Experts believe TCS will start making investments in the next two years or it will risk being left behind. “TCS must decide if it wants to lead or have others catch and surpass it in size and scale. It seems unlikely that they can maintain their leadership by relying exclusively on an organic expansion strategy,” said Peter Bendor Samuel, chief executive officer and founder of Dallasheadquartered outsourcing advisory firm Everest Group.

“If TCS is indeed committed to its publically stated goals of growth and broad industry leadership, it will need to raise its sights and change its historical posture regarding M&A.” Bendor expects TCS to jump into M&A in a much larger way than it has in the past. TCS has no lack of money to fund an acquisition. At the end of March, the company had about $2.8 billion in cash and bank deposits on its books and virtually no debt.

“You will find Debashis and TCS looking at every deal that comes their way, but they may have to start being less stringent about price because in the IP (intellectual property)-led deals the valuations aren’t cheap,” a private equity executive who interacted with Poddar and TCS told ET, declining to be identified.

TCS did not make Poddar available for an interview. Poddar has spent about 14 years at TCS. He previously worked at Arthur Andersen and GE Capital.

“Our M&A is dictated by strategic considerations in order to gain scale, acquire functional capability or for some other strategic value,” a TCS spokesperson said in response to an e-mail seeking comment. Even equity analysts say the company may need to boost its M&A activity, especially to compete in the fast-growing digital space.

“TCS’ M&A track record in digital (which we see as the next big 3-4 year opportunity wave) seems to be muted, especially in relation to what peers such as Accenture and Cognizant are habitually doing on acquisitions in this arena.

A more active M&A strategy in digital may help to power TCS’s platform strategy and more broadly, its digital practice,” Viju George, an analyst at JPMorgan, said in a note last month.

George also highlighted that the company’s strategy currently appears focussed on entering new markets than on game-changing digital acquisitions. TCS’ rivals have all become increasingly more active.


Protected by تهنئة
Get Adobe Flash player