Finance regulators overlook offshoring in RBS IT failure statements

November 25th, 2014 by Manmohan No comments »

The Financial services regulators in the UK made no mention of the role of offshoring  IT problems at the Royal Bank of Scotland (RBS) in 2012 which ended in a fine of ₤56m on the bank last week.

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A worker made a mistake in India when a CA-7 batch processing system was upgraded, according to a number of sources.

Banking industry sources believe offshoring is a risk to IT if companies fail to transfer the proper knowledge to service providers.

The Royal Bank of Scotland was last week fined ₤42m by the Financial Conduct Authority (FCA) and ₤14m by the Prudential Regulation Authority (PRA) for its failings that led to an IT meltdown that left customers unable to bank.

Many customers were locked out of their accounts for days as a result of a glitch in the CA-7 batch process scheduler, which caused 12 million accounts to be frozen. Customers were left unable to access funds for a week or more as RBS, NatWest and the Ulster Bank manually updated the account balances.

In their separate press releases, the FCA and PRA made no mention of the role of offshored IT in the fiasco.

The PRA said: “The cause of the IT incident was the failure of the banks to have the proper controls in place to identify and manage exposure to the IT risks within their business.”

The FCA said: “The problems arose due to failures at many levels within the RBS Group to identify and manage the risks which can flow from disruptive IT incidents and the result was that RBS customers were left exposed to these risks.  We expect all firms to focus on how they ensure that they can meet the requirements of their customers when looking at their IT strategies and policies.”

While these statements are accurate, nowhere in the separate press releases was offshored IT and knowledge transfer mentioned.

Data breach concerns

This is a concern to IT professionals in the banking sector as outsourcing and offshoring of critical systems continues apace and it is not just about service unavailability. “The large scale of offshore outsourcing of banking IT worries me a lot. I think outages will be the least of our worries. Security breaches will be the next big issue. The bad guys are smarter and better funded than the good guys and they only need to win once to cause chaos,” said one senior IT professional in the banking sector.

“Most of the issues I’ve seen have been due to human error, equipment failure or in recent years errors made by outsourced firms who are more distant than they were historically.

“More work has gone abroad as a result of cost pressure and that has led to a drop in standards across the industry. Outsourcing and offshoring development didn’t hurt production but now that more production support is both offshore and outsourced, the scope of live problems is much higher than a few years ago. All too often human error by a junior person at a third party somewhere half way round the world who did not understand or follow a process properly.”

RBS offshored jobs from Edinburgh that worked on CA-7. These workers were paid ₤250 a day, but RBS wanted a cheaper option.

Litany of banking IT failures

RBS’s problems are not the first in banking, where offshored IT delivery has been described as a significant contributor. Also in 2012, when a rogue trader ay UBS caused losses of over ₤2bn through unauthorised trading, an offshore delivery centre in Hyderabad, India was revealed as playing a role.

When fining the Swiss bank ₤29.7m the UK finance regulator, then the FSA, said: “The computerised system operated by UBS to assist in risk management was not effective in controlling the risk of unauthorised t6rading.” This system was run from  a USB captive in Hyderabad.

A source in India told Computer weekly at the time the reason the rogue trading was missed was because data had been deleted as part of a system upgrade. He said when data was being migrated to a new system it started to slow things down. The person doing the migration deleted data to speed things up, which meant the trading went unnoticed.

In 2009 an IT contractor, who worked for the RBS as a mainframe technician for a number of years, told Computer Weekly business-critical work had been moved to India to cut costs: “RBS started moving the work we were doing to its datacentre in Mumbai, known internally as Indian Datacentre. I had to train Indian workers to do my job.”

“This was to cut costs and not about filling a skills shortage. They move the jobs to India because it is cheaper.”

Some commentators have called on regulators to investigate the offshoring of banks’ IT. RBS is still seeking staff in India to work on its CA-7 batch process scheduler.


Tata Consultancy Services sets up offshore development centres in India for Japanese clients

November 25th, 2014 by Manmohan No comments »

Tata Consultancy ServicesBSE -0.66 %, the country’s largest IT services firm, is setting up offshore development centres in India for Japanese clients in a bid to boost the company’s margins in the (1)

TCS has the largest scale of any Indian IT company in that region, following its acquisition of Mitsubishi’s IT business earlier this year. Since virtually all of Mitsubishi’s IT work was done in Japan, the business has single-digit margins. “Now as we are growing and our hope is that the Japanese market and business will definitely grow -we are setting up a dedicated centre with a Japanese intent. We want to do more and more Japanese projects consolidated in one or two centres,” Ajoyendra Mukherjee, executive vice-president and head of global human resources at TCS, said in an interview. Japan is the second-largest market in terms of IT outsourcing, with total spending of about $109 billion.

Almost 70 per cent is serviced by Japanese players and it has been tough for non-Japanese vendors to gain a foothold. Indian IT share of the business is less than 1 per cent. “They have talked of moving the work offshore and that should help the margins. It is hard to quantify the impact because it depends on the amount of work that they will be able to move. But they have said that they are looking to increase the margin over there, so you should expect more offshoring,” said Harit Shah, analyst with Karvy Stockbroking.

Mukherjee added that while the dedicated centre is being set up in India, the company could look at some other markets as the Japan business scales up. China is often considered a delivery market for Japanese work. The company is also increasing its focus on train ing employees in Japanese. “For people inside India, we have language courses like Japanese, which is being strengthened given our Japanese venture,” Mukherjee said. Japan was a very small part of TCS’ business -with about $100 million in revenue. In April, the company announced it was acquiring Mitsubishi Corp’s IT arm, which has about $500 million in revenue a year, and about 2,400 employees. The deal closed at the end of June.

TCS Chief Executive Officer N Chandrasekaran has said that he expects Japan to become a billion dollar market for the company in the next few years.


Wipro to appoint new vertical heads by year-end: Sources

November 25th, 2014 by Manmohan No comments »

India’s third-largest software exporting firm, Wipro, will name some new vertical heads by the year-end, according to two people familiar with the matter, as part of chief executive TK Kurien’s strategy to improve growth numbers.

India’s third-largest software exporting firm, Wipro, will name some new vertical heads by the year-end, according to two people familiar with the matter. 

WiproBSE 0.23 % has already made more than a dozen changes at its 50-odd verticals and practices since December last year. It is now expected to name bosses for product engineering services and global SAP practice, while some of the other verticals may see new faces, the people quoted earlier told ET.

“TK realises that vertical heads now have the most important role to execute our long-drawn work,” said a head of a vertical at Wipro. “Obviously, elevations also brings in more accountability (for these leaders).” A company spokesperson, however, said, “Wipro has no plans to announce any organizational restructuring and any such suggestion would be purely speculative.” Kurien, who took charge as CEO in February 2011, was tasked with the job of steering the Bangalore-based company back to industry-matching growth numbers.

However, Wipro’s sequential quarterly revenue growth rate has not crossed 3% since the quarter ended September 2012, when it had reported 4.6% growth.

For the second quarter ended September this year, Wipro posted a sequential growth of 1.8%, much lower than peers InfosysBSE 0.68 %, which reported 3.1% growth, and TCS, which recorded a 6.4% growth. Kurien in the past has told this newspaper that a key measure of his success will be hitting the 4% sequential growth mark.

Although Wipro has won some large deals under Kurien’s leadership— including a $1.2-billion outsourcing contract from Canadian utilities company ATCO last year which was Wipro’s largest ever-—some analysts, including JP Morgan’s Viju K George, believe the company has been “good in parts but must get multiple engines firing in tandem for it to qualify as a secular pick”.

Although Wipro has won some large deals under Kurien’s leadership— including a $1.2-billion outsourcing contract from Canadian utilities company ATCO last year which was Wipro’s largest ever-—some analysts, including JP Morgan’s Viju K George, believe the company has been “good in parts but must get multiple engines firing in tandem for it to qualify as a secular pick”.

At present, Wipro’s product engineering services is being overseen by Ayan Mukerji, who is also chief executive of the company’s media and telecom businesses. Since December last year, Wipro has brought in new leaders to head many of the verticals and practices, including making two changes in the banking, financial and insurance verticals.

The Bangalore-based software firm named Roop Singh as head of securities and capital markets vertical in April while in August it named Gaurav Chadha as the new head for its insurance vertical. Both Singh and Chadha report to BFSI vertical head Shaji Farooq, who in turn reports to Kurien. Wipro BPO also saw a new leader in Nagendra Bandaru, who was appointed as head of the back office unit in August after his predecessor Manoj Punja left the company.

In April this year, Vishal Arora was made head of Wipro’s manufacturing and hitech vertical for India and the Middle East. Two months later, Neeraj Sahdev was made the new boss of Wipro’s government and defence vertical for India, Gulf and South Africa.


India’s Tech Mahindra to Acquire Lightbridge Communications

November 21st, 2014 by Rahul Jain No comments »

India’s Tech Mahindra Ltd. said Thursday it has agreed to buy U.S.-based network-engineering services provider Lightbridge Communications for an enterprise value of about $240 million.Outsourcing9

Lightbridge, which helps telecommunications clients design and optimize their networks, has more than 5,000 employees in more than 50 countries. Lightbridge has annual revenue of more than $400 million, the Indian outsourcing-services company said in a statement.

Tech Mahindra said it would absorb all of Lightbridge’s employees.

Tech Mahindra earns more than 50% of its revenue from telecommunications business.

The deal would bolster Tech Mahindra’s telecommunications network-consulting and operations through Lightbridge’s tools and technology platforms to provide services to clients.

Enterprise valuation usually adds the target company’s debt as well as the value of any preferred shares, but excludes its cash and cash equivalents. Tech Mahindra didn’t provide any details on Lightbridge’s cash or its obligations.


Infosys gains on collaboration with Stanford Graduate School of Business

November 21st, 2014 by Rahul Jain No comments »

Infosys rose 0.65% to Rs 4,207.10 at 09:49 IST on BSEafter the company announced collaboration with Stanford Graduate School of Business to create a comprehensive executive education program.Outsourcing8

The announcement was made after market hours on Wednesday, 19 November 2014.

Meanwhile, the BSE Sensex was down 24.31 points, or 0.09%, to 28,008.54

On BSE, so far 6,197 shares were traded in the counter, compared with an average volume of 72,222 shares in the past one quarter.

The stock saw initial volatility. The stock hit a high of Rs 4,215 and a low of Rs 4,182 so far during the day. The stock hit a record high of Rs 4,225 on Tuesday, 18 November 2014. The stock hit a 52-week low of Rs 2,894 on 30 May 2014.

The large-cap company has an equity capital of Rs 287.12 crore. Face value per share is Rs 5.

Infosys announced after market hours on Wednesday, 19 November 2014, that it will collaborate with Stanford Graduate School of Business (GSB) to create a comprehensive executive education program. As part of this agreement, Stanford GSB will team with senior Infosys executives to design and deliver a customized strategic leadership development program for the company’s executives, clients and partners. The executive education program will include a suite of business management skills, as well as courses in corporate innovation processes to help Infosys balance business discipline and entrepreneurial spirit. The office of Executive Education at Stanford GSB and Infosys will deliver the leadership program through in-person and online instruction, as well as live sessions enabled by distance-learning technology. The initiative will include 200 executives who will each participate in a part-time, year-long program in groups of 40 over three years. Executives will be able to test and apply their learning to real business challenges in parallel, the company said in a statement.

Infosys’ outsourcing unit Infosys BPO had on 18 November 2014, announced the separation of Abraham Mathews, its Chief Financial Officer from the services of the company for not complying with its code of conduct. This departure was in keeping with the company’s goal of setting the highest standards of corporate governance and adhering to the letter and spirit of the company’s code of conduct. Gautam Thakkar, the current Chief Executive Officer has submitted his resignation to the company effective 30 November 2014, taking responsibility on moral grounds and will be assisting Uppadhayay in this transition. Meanwhile, the company appointed Anup Uppadhayay as Chief Executive Officer and Managing Director of the company. The board of Infosys BPO also appointed Deepak Bhalla as Chief Financial Officer of the company.

Infosys’ consolidated net profit as per International Financial Reporting Standards (IFRS) rose 7.28% to Rs 3096 crore on 4.48% rise in revenue to Rs 13342 crore in Q2 September 2014 over Q1 June 2014.

Infosys is a global leader in consulting, technology and outsourcing solutions.


Infosys unit’s overbilling Apple led to exit of top executives: sources

November 21st, 2014 by Rahul Jain No comments »

Indian outsourcing major Infosys Ltd’s back-office services unit was overcharging Apple Inc, leading to the exit of top executives, two senior Infosys people said on Thursday.Outsourcing6

Infosys, India’s second-largest IT services exporter, said on Tuesday it had fired Abraham Mathews, chief financial officer of its Infosys BPO unit, for failure to comply with the company’s code of conduct.

Infosys BPO chief executive officer Gautam Thakkar resigned on “moral grounds” and would leave the company on Nov. 30, Infosys said. It did not give details about the charges against Mathews.

Infosys spokeswoman Sarah Gideon said the company would not comment further on the confidential investigations.

“The financial irregularities are not material in nature and the company has already made required disclosures. The company has taken disciplinary action on employees,” she said in an email.

Apple did not immediately respond to an email sent outside business hours seeking comment.

The irregularities in Infosys BPO’s dealings with Apple came out during an internal audit, said one of the people at Infosys, who declined to be named as he was not authorized to speak to the media.

Though the audit showed that the financial impact of the wrongdoing on the company was minimal, Infosys decided to take a tough stance to demonstrate its “zero-tolerance policy for any improper conduct,” he said.

The Economic Times newspaper on Thursday said Infosys would soon fire at least six more employees at the unit, after investigations revealed that they had produced inflated invoices and allegedly overbilled Apple for many months.

Infosys earlier this year brought in Vishal Sikka as its new CEO to chart a new strategy for the company, once a trend-setter for India’s more than $100 billion IT outsourcing industry. Infosys has struggled in recent years to retain staff and market share.


Leading BPO Harnesses Slideshare to Present The 10 Best Reasons to Outsource Telecom Services

November 21st, 2014 by Rahul Jain No comments »

Sound Telecom, a provider of call center services throughout the country with US-based agents, has released a presentation via Slideshare that outlines The 10 Best Reasons to Outsource Telecom Services. The slides touch on the varying functions a call center can exercise before delving into the most beneficial reasons for a business to outsource their telecommunications.Outsourcing7

While each of the ten reasons stands to make its own point, there are themes that grow clear as the viewer progresses through the presentation. Some of the most prevalent motives that would most likely intrigue businesses include gaining an advantage over the competition, being able to focus on core competencies, enhancing customer service, and cutting costs. When compared to keeping call center function of business in-house, the benefits of outsourcing become quite apparent.

According to the presentation, one of the most crucial elements for creating a successful telecom outsourcing program is the relationship between both parties. The author of the article that these slides are based on states, “Building client trust should be embedded in the culture of any top tier telecom business process outsourcer as they strive to fully understand the objectives of each client and develop a customized solution that will meet specific needs. To achieve that goal, they need to listen closely to clients throughout the entire life of the relationship.”

Slideshare was chosen to showcase this content because it presents it in a much more visually appealing format than a simple article. Since Slideshare’s founding in 2006, their goal has been to share knowledge online, and they have grown into what is now the largest presentation sharing community for professional content. Sound Telecom chose this platform to share their presentation based on the natural connection between this type of content and typical Slideshare users.


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