Posts Tagged ‘IBM’

Indian outsourcing is booming in the Nordic countries

April 13th, 2015

Indian IT service providers are securing more and more high-profile outsourcing deals in the Nordics, involving the likes of Nokia, DNB and ABB. And with companies such as HCL Technologies and Wipro announcing further investments in the region, their presence is expected to grow.Outsourcing23

Gartner research analyst Mika Rajamäki said: “Based on 2013 figures, Indian IT suppliers have been growing faster in the Nordic market than the traditional service providers. If the annual growth of the traditional suppliers has been 2-3%, Indian companies have been growing by almost 20% a year.”

Indian IT companies have not yet hit the Nordics’ top 10 IT suppliers list, but this is likely to change. Because Indian service providers focus mainly on the biggest fish in the manufacturing, finance and telecoms industries, one major deal can boost their market share significantly.

“Sweden has the largest market, but Indian companies seem to have the highest market share in Finland, around 4%,” said Rajamäki. “In Denmark, Sweden and Norway, their market share is around 1%, but these figures are from 2013 and there were some major deals last year, so the figures have definitely grown. Average market share for Indian companies in the Nordics is probably around 4-5%, closer to 5%, and in Finland it will grow to 6-7% this year.”

Some Indian IT suppliers have been operating in the Nordics since the 1990s, but the real challenge has begun over the past five years. Their aim is to shake up a static market dominated by local and multinational suppliers such as Tieto, Evry, KMD, IBM and Accenture.

Increasing investments in the region include HCL’s seven-year deal with Norway’s DNB bank, worth $400m. While most services are still offshore, companies such as Tata Consultancy Services (TCS), HCL Technologies, Wipro, Infosys and Tech Mahindra have several offices in Nordic countries and a growing number of local delivery centres.

Johan Hallberg, research manager at IDC Nordic, said: “In the past, Indian IT suppliers were doing lower-level outsourcing and were often invited as subcontractors by medium-size Nordic players. But they have learnt that they can’t sell on price alone. They understand that they need more than a sales force in the Nordics and have started to market themselves in a different way.”

The Nordic appeal
But why the Nordics? Hallberg says the Nordic IT services market has been growing more quickly than in continental Europe, especially in Sweden, which has not been hit as hard by the economic crisis as many other European countries. The Nordics also have a relatively mature market and a large public sector with a major IT budget, he adds.

According to IDC figures, the IT services market in the Nordics was worth $24.4bn in 2014. Outsourcing is worth $12.6bn of that and it remains the main area where Indian suppliers operate.

While it is an attractive market, a key fact about the Nordics is that they still value local presence. A 2013 Ernst and Young study found that most outsourced services remained ‘onshore’ (in the same location or country). This is especially true of Sweden, where 87% of outsourced services were located onshore. Denmark was at the other end of the spectrum with 59% of services onshore, while Finland (74%) and Norway (80%) sat in the middle.

“The Indian suppliers have understood that they need to have local sales forces, local consultants and local datacentres,” said Hallberg. “It has become even more important for Nordic services companies to show their understanding of local business culture, laws and rules. Nordic suppliers have also started to specialise to meet Indian competition.”

The importance of a local presence is echoed by TCS, the biggest Indian IT supplier in the Nordics. Amit Bajaj, the company’s head of North Europe, says TCS has more than doubled the size of its operation in the Nordics since 2010 and has increased local hiring.

“We see the Nordic countries as a very interesting market,” said Bajaj. “This region hosts a number of very innovative and internationally competitive firms – just the kind that are a good match for us.”

Shaking up customer service
Gone are the days when the success of Indian IT suppliers could be measured only in cost savings. In recent years, Indian service providers have shown up well in customer satisfaction surveys. In Whitelane Research’s 2014 Nordic IT Outsourcing Study, TCS led the pack with 83% for contract satisfaction, with Infosys close behind at 79%, both well above the average of 71%. Three out of the top 10 companies in the survey were Indian.

IDC Nordic’s Hallberg added: “Many companies in the Nordics are in their third generation of outsourcing and are often mature in their requests. This has led to services companies needing to be even better in their customer understanding and to be closer to customers.

“The local revenue of some Indian suppliers has grown by more than 30% year-on-year. They are usually in the final selection phase in larger deals, which was not the case just a couple of years ago.”

Gartner’s Rajamäki pointed out that Indian companies can be very agile in their operations and act like small companies.

“Indians are slightly more daring in taking risks [than traditional players] and share the risk of their customers,” he said. “They are also efficient in the transition phase. Most deals today are taken over from competitors, and completely new deals are a rarity. What Indian suppliers do very well is to rapidly take over a customer and invest in the relationship.”

The deals Indian companies are winning are not just focused on one area, but range from help desks and IT infrastructure to application development and modernisation of legacy systems.

Breaking down barriers
Hallberg and Rajamäki both believe competition in the Nordic market can only grow. Indian IT suppliers are starting to gain a foothold in other IT services, such as project services. They are also starting to challenge traditional players for public sector deals as language barriers can be overcome by hiring locally, forming local partnerships or even acquisitions.

“Traditional Nordic and multinational players will increase offshoring where it is viable, such as cloud services, while Indian suppliers have come to the Nordics to stay and will continue to build their presence here,” says Rajamäki.

At the same time, the IT services market is undergoing a wider transformation. Although Bajaj cannot comment on TCS’s future plans in the Nordics, he highlights the internet of things, cloud services, digitisation and BYOD trends as drivers of change in the industry.

“The market is in a state of dramatic and constant change,” says Bajaj. “It has been predicted that in 10 years’ time, 40% of the current Fortune 500 companies will no longer exist.

“In this changing environment, organisations are fighting to get a lead on the digital re-imagining of their business, to simplify their processes and systems and to secure appropriate governance in terms of security, risk management and compliance. As Gartner pointed out, global IT spend will continue to grow at over 3% for this year.”

The changing Nordic market presents both an opportunity and a challenge for services providers, but one thing is certain: competition is increasing, and so are the rewards.

Source:http://www.computerweekly.com/news/4500244037/Indian-outsourcing-is-booming-in-the-Nordic-countries

Why Companies Opt to Insource for IT Innovation

March 20th, 2015

Companies are increasingly taking a multisourcing approach to IT outsourcing, signing shorter, smaller deals with a mix of providers. At the same time, some are pulling certain pieces of the IT portfolio back in-house.Outsourcing11

“As you get into the second and third generation renewals, each renewal sees a bit more work being sliced off and taken back in-house,” says Mike Slavin, Managing Director of outsourcing consultancy Alsbridge. “And those functions being repatriated are often related to innovation.”
Outsourcing customers seek innovation

Lack of innovation remains one of the top complaints about outsourcing. Outsourcing customers say that providers fail to bring any new ideas to the table. Providers protest that clients don’t know what they mean by innovation and aren’t willing to pay for it. And traditional outsourcing bidding and contractual processes aren’t designed to drive innovation–in fact they thwart it.

“Because of competitive pressures, providers have to do internal cost take-outs to win deals. That squeezes margins and profit expectations, and means that most of the upside for the service providers is during the latter portion of the deal,” says Slavin. “This gives account management teams little room to provide creative ideas and fund innovative pilots and projects.”

In addition, few outsourcing agreements call for a standing innovation committee or an innovation fund, for example.

Traditional IT service providers — like IBM and HP — built their businesses on the transfer of both human capital and physical assets to the supplier, creating an environment that discouraged innovation, says Slavin. Indian vendors developed business models on a foundation of labor arbitrage and price competition, which also obstructed innovation.

Little has changed about either approach in the last decade. “Rather than hiring and training a new style and culture of technical talent to support what IT looks like in 2015, clients often see 20- and 30-year veterans who have survived the many layoffs and workforce reductions being rebranded as cloud or mobility experts,” says Slavin. “But the reality is that these veterans have little grounding in those technologies.”

Innovating for customers vs. supporting in-house customer innovation
Traditional players with significant infrastructure assets are digging in, arguing that their years of experience running those systems makes them best suited to innovate on behalf of their customers, Slavin says. In addition, they employ various “handcuff” strategies that make the process of exiting agreements and moving operations back in-house difficult for a customer, according to Slavin.

Some Indian firms, however, are encouraging their clients to take some services back in-house, even offering their staffing resources to support in the transition to and management of the new model, says Slavin. “These providers do not have the large asset base in fixed assets such as data centers and are happy to provide services to a client in their own data center or perhaps a [co-located center].  Several pitch this strategy as something that mitigates the traditional sourcing risks, allowing the clients to potentially move services more readily if they are not happy.”

Meanwhile, consultancies like Accenture and Deloitte are pitching themselves as sources of IT innovation to companies. “These players have generally stayed out of the highly price-competitive and sometimes asset-heavy infrastructure marketplace,” Slavin says. “These consulting firms have a business model built on human capital, one that focuses on skills and experience and is better-suited to deliver technology relevance and alignment with the client’s business. They’re also committed to ongoing training and are willing to carry out needed trimming of non-performers. Finally, they’re able to avoid the episodic large mass workforce reductions that plague the large outsourcing firms.”

It’s too early to say which approach will win out long term.

“The most challenged players will continue to be firms like IBM, HP and CSC,” says Slavin. While they are trying to reorganize to provide vertical solutions like mobility, cloud and analytics, they remain desperate to hold and serve their big clients to avoid revenue run-off.

“HP and IBM have great hardware, and clients expect innovative solutions that take advantage of that great hardware,” Slavin says. “Unfortunately, the outsourcing organizations seem to be lagging at enabling and accessing the emerging technologies needed to drive innovation.”

Indian providers will continue to grow their market share, says Slavin. “The challenge for this group is to grow into more profitable markets and expand footprints in clients fast enough to stay ahead of aggressive pricing, which is built into their deals as an investment to win.”

In the short-term, IT outsourcing customers will either be looking to providers who can provide real business outcomes or taking their innovation-related business back in-house to run themselves.

“Innovation is always in the eye of beholder. It’s hard to argue with something that aligns with the client’s business and moves that business forward,” Slavin says. “So the winners will be those who can provide applications and the supporting infrastructure and link them together as a product, service, or offering that focuses on and is tied to the business.”

Source:http://www.channelworld.in/feature/why-companies-opt-to-insource-for-it-innovation

IBM leads infrastructure outsourcing segment: Forrester

February 27th, 2015

IBM is the leading supplier in the global infrastructure outsourcing segment, said Forrester Research in a new research note.Outsourcing6

IBM scored the highest or among the highest among 13 suppliers across three high-level evaluation criteria: Strategy, Current Offering and Market Presence.

Forrester recognized IBM’s vision for the future of infrastructure services, noting that cloud services has become a major element of IBM’s infrastructure management strategy, said the report called The Forrester Wave: Global Infrastructure Outsourcing, Q1 2015.

According to Forrester, the size of the global infrastructure outsourcing market is $187.5 billion, with North America comprising nearly 58 percent of this total.

Infrastructure outsourcing services are critically important as enterprises prepare their infrastructure for the digital age. Outsourcing providers are emphasizing qualities that include predictability through analytics, self-healing with autonomic computing and automation, and self-service with adaptation to cloud models and use of service stores.

IBM views the current infrastructure management services market as the age of outcomes, IP, and automation. IBM is pursuing several initiatives, including automation with IBM Workload Automation and integration across systems of record and systems of engagement. Since its acquisition of SoftLayer Technologies in 2013, cloud services have become a major element of its infrastructure management strategy.

The report says IBM has a very strong vision for the future of infrastructure services and a very well-balanced global delivery model.

Recently, IBM announced IT infrastructure services deals with enterprise clients including WPP, ABN Amro, Lufthansa and WOOX Innovations.

Source:http://www.infotechlead.com/it/ibm-leads-infrastructure-outsourcing-segment-forrester-28388

HP Lands Multi-Billion Dollar Outsourcing Deal with Deutsche Bank

February 27th, 2015

Deutsche Bank has outsourced a large part of its IT infrastructure to Hewlett-Packard in a deal that will help it cut costs, besides injecting agility into its operation. It is a multi-billion dollar deal spanning 10-years, according to the company’s statement.Outsourcing4

The deal paves the way for the bank to cut back on investment in hardware and move most of its IT applications onto the cloud.
Under the agreement, the financial firm will use use HP’s Helion private cloud to buy HP’s on-demand data center services, including storage, platform and hosting. Deutsche Bank will however retain activities such as IT architecture, application development and information security.

The bank has claimed that the deal will also help it upgrade some of its IT applications.
“Having a more modern and agile technology platform will further improve the bank’s ability to launch new products and services and lay the foundation for the next phase of its digital strategy,” stated Henry Ritchotte, Chief Operating Officer of Deutsche Bank.

It seems HP was waiting for a deal of this magnitude to bolster its Enterprise Services division, which is struggling to compete with IBM, whose SoftLayer platform has seen a lot of demand of late. Amazon is also vying hard to win clients for its cloud service.

Launched in May last year, HP’s Helion is based on the open-source cloud operating system OpenStack.

Deutsche Bank had already signed a similar but smaller deal with IBM, but that was limited to the bank’s operations in Germany.
Across the world, large financial firms are increasingly restructuring their operations as pressure rises on the financial sector to cut costs while remaining agile.

Source:http://www.nearshoreamericas.com/hp-lands-multibillion-dollar-outsourcing-deal-deutsche-bank/

IBM signs nine year IT outsourcing deal with Birla Sun Life Insurance

February 9th, 2015

IBM has announced that Birla Sun Life Insurance (BSLI), the life insurance arm of the Aditya Birla Financial Services Group, signed a nine year IT outsourcing deal with IBM to consolidate, redesign in-scope applications and use analytics to provide client insights that build competitive advantage. BSLI will leverage mobility and cloud solutions developed by IBM Research and the IBM India Software Lab to achieve increased revenues, reduce costs and enhanced profitability.Outsourcing66

BSLI in this partnership with IBM will adopt a first-of-a-kind technology solution to the insurance sector that will radically transform the business technology model. BSLI will leverage IBM’s business consulting, application development and maintenance services to drive process efficiencies and transform the business towards better outcomes for customers and employees. Tailor-made solutions from IBM will bring process maturity best practices, IT portfolio consolidation and introduce innovative tools.

This deal could help BSLI realize a cost reduction advantage from consolidation of IT vendors. IBM’s flexible pricing model will enable dynamic ramp up/down and consumption based operational spending along with a roadmap to modernize, consolidate and rationalize the application portfolio, bringing in speed and reduced time to market.

Speaking on the occasion, Mayank Bathwal, Dy. CEO, Birla Sun Life Insurance said, “We at Birla Sun Life Insurance are committed to offering an enhanced experience to our customers while improving on efficiencies and profitability of the business. We believe that this winning partnership with IBM will help us excel and stay ahead of the curve in this fast evolving life insurance industry, while addressing all business needs. IBM’s vast experience and technology capabilities will add tremendous value to our business.”

“IBM remains committed in the transformation of the BFSI industry catalyzing growth and inclusion. We are pleased to partner with BSLI to help leverage leading technology solutions like cloud and analytics to make critical strides in achieving business transformation, improving service delivery and increasing customer satisfaction,”said Vanitha Narayanan, Managing Director, IBM India. “We will bring our local and global expertise and capabilities to fuel BSLI’ expansion and growth in this dynamic Insurance industry in India.” she further added.

Source:http://articles.economictimes.indiatimes.com/2015-02-05/news/58838513_1_bsli-birla-sun-life-insurance-outsourcing-deal

IBM India staff still battle tech blues fearing more layoffs

January 28th, 2015

For employees of IBM India, once considered the jewel in the crown of Big Blue, the coming weeks are expected to bring yet more layoffs and soul-searching about the unsettled nature of working in the software industry which has helped create a new middle in India over the past two decades.
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Across three of the biggest offices of IBM India in Bengaluru, anxious employees are scrambling to find new jobs in IT services industry or even new careers at online retailing firms, engineering or telecommunication companies. Layoffs are not new at IBM in India— they have been a feature for about a year as CEO Gini Rometty orchestrates a restructuring which she believes will help the 103-year-old company cope with the rapid changes in technology and business models.

“It’s a complete opposite to the emotions we had when IBM gave stock options to all employees in June 2011,” said Shekhar (he only gave his first name to protect his identity), a former IBM employee who now works at a Bengaluru security software startup.

From around 1.65 lakh employees on its payroll in 2011, IBM’s India headcount is expected to slide to one lakh by March this year. Globally IBM and its units had 4.33 lakh employees at the end of 2011 compared to an estimated 4.3 lakh now, suggesting that the layoffs have been particularly severe in India.

BLEEDING BLUE

IBM, whose 2014 revenue was $93 billion, has denied a report on Monday that it is about to fire around 1.1 lakh staff globally, but it acknowledged that the reductions will affect “several thousand” employees. Last week, IBM said it was taking restructuring charges of $580 million, with one Wall Street analyst suggesting that could mean job cuts of just 8,000. ET spoke to at least a dozen people who were sacked by IBM India, apart from several company insiders, for this story. An IBM India spokeswoman had not responded to ET’s query sent last week.

“Work from home at IBM has a completely new meaning now,” said a source referring to the flexible work arrangement offered by IBM to nearly half of its employees.

For the software engineers who are leaving IBM, new opportunities are coming their way from the likes of rival Cognizant and India’s biggest online retailer Flipkart. But it is not just engineers who are losing jobs—sales professionals across divisions are being laid off units are merged. According to a person familiar with the discussions, IBM’s Integrated Technology Services (ITS) and Strategic Outsourcing units have significant overlaps, and with a proposal to merge these units, hundreds of sales specialists could lose their jobs.

Apollo and Chrome projects IBM, which has not seen its revenue grow since 2008, has launched two aggressive internal projects to trim its payroll. The first one, termed “Apollo,” is aimed at employees from the level of junior programmer up to midmanagers. Unlike in the past when managers had to identify “the bottom 5%” as part of annual pruning, the new norm is to identify “the bottom 20%.”

The second one called “Chrome” is aimed at senior executives, of whom are 150-160 in IBM India. “Around 40 of them could either get demoted or let go,” said another person familiar with the company’s thinking.

In some ways, IBM’s efforts to trim its payroll and selectively hire people with specialised skills in new technologies underscores a tectonic shift in the global IT industry. And India’s software outsourcing giants—Tata Consultancy Services, Infosys and Wipro—too are not immune to this shift. Indian IT companies only added 13,000 employees for every billion dollar of revenue in the 12 months to March 2014 as against 26,500 employees the year ago, according to Nasscom. The software and services industry in India employs 3 million workers.

As part of project Apollo, those with no skills in SMAC (Social, Mobile, Analytics and Cloud) or even analytics platform Watson, are being asked to go. According to people familiar with the development, the attrition rate at IBM is currently pegged at around 26%. “IBM is shrinking workforces not just in India -70% of costs in that economy are related to labor. That is grossly inefficient when you compare to modern factories or data centres,” said Vinnie Mirchandani, a technology analyst and CEO of advisory firm Deal Architect.

“I am not sure IBM optimised its global delivery model. Many of the Indian vendors were disciplined by customers like GE to optimise that model.” While IBM is laying off employees, it also creating new jobs those may be far fewer in number and not necessarily located in India.”In areas like social marketing, security and mobile app development, IBM and other firms are developing talent pools in newer global regions and so are not as dependent on India,” added Mirchandani.

Source:http://economictimes.indiatimes.com/jobs/ibm-india-staff-still-battle-tech-blues-fearing-more-layoffs/articleshow/46036521.cms

Koramangala IT Cos bet on price tweak tactics

January 27th, 2015

In a bid to compete against global IT majors like IBM and Accenture, Koramangala-based IT majors are playing the price card on delayed risk on fees pattern.Outsourcing58

Industry experts say that milestone-related payments have become a norm in the IT industry, while, bank guarantees that the vendors need to provide upon winning projects, have increased to as much as 20 percent of the deal value from the earlier 5 percent. Their strategies include coughing up money upfront to sweeten the deal and win large contracts.

T Umakanth Rao, director, Zarlina Systems, said, “India’s top IT outsourcers, including the traditionally conservative Infosys and Wipro, are becoming increasingly risk-taking as they chase commoditised contracts. While cut-throat competition is giving more bang for the buck for customers, technology vendors are risking future cash flow and locking up resources.”

Commenting upon the risk on fees or milestone related payments, Rao said, “While bank guarantees have increased to as much as a fifth of the deal value, the aggressive pricing strategies being adopted by the IT companies in the locale and their promise of value-added offerings to win contracts have made customers cautious and they want to see results before paying up.”

“In the last year and half, we have seen customers holding back the risk-on-fees which we normally get upon completion of certain milestones,” said a bid manager working with a large IT company based out of Bengaluru. The bid manager went on to add, “Across industries, we have seen customers holding back this money which they normally give more in a staggered manner than at the time when payments are due.”

Naved Ahmed, director, MN Associates said, “Indian firms play the pricing card often these days as they battle with global majors like IBM and Accenture to win bread-and-butter outsourcing deals.” He said that in earlier years, the top Indian IT services firms in Koramangala generally avoided heated price competition with their professional brethrens both in domestic market and in global merchandise. “However, the IT services industry has definitely become more competitive, and today, we as an industry observer, see certain IT firms actively pursuing price-to-win strategies,” said Ahmed.

Giving credit to the sizeable improvement in the operating margins of the local IT outsourcing companies Sushanth K Nair, proprietor, Innova Team Software, a Koramangala-based IT company which has base in New York as well said, “Operating margins of the home grown IT outsourcers have significantly improved over the past two years. One of the biggest cost components for IT companies, is manpower, and technologies like artificial intelligence and automation for completing repetitive low-end work have helped them cut down on this cost.”

Giving caution upon the upfront payment for wining a big ticket contract, Nair said, “Delayed payment by customers and upfront spending could prove to be an issue in the event of turbulence in the markets these companies operate in, or if the customers face financial troubles. Promising tough-to-achieve milestones is another problem that could affect expected cash flow.”

“A pricing trend I’ve seen is Indian firms taking on more risk by tying more fees to contractual milestones – milestones that in a number of cases are tough to predict and achieve, especially as work assignments get more complex,” he added and continued, “This trend tends to occur on deals in which the client is large and experienced with outsourcing contracts and on deals in which an outsourcing adviser is helping the client with vendor selection and pricing.”

However, a large number of IT professionals in the locale who avoided being named confirmed the trend and said that it was more a function of maturity of the deal and depends on how effectively a customer was able to negotiate with an IT vendor. “Agreed! More customers nowadays are holding back fees in some industries but then this is more a function of what kind of contract it is. As more customers mature in their use of outsourcing and are able to manage their IT vendors, they will explore different models,” the professionals said.

Source:http://economictimes.indiatimes.com/news/emerging-businesses/regional-hubs/south/koramangala-it-cos-bet-on-price-tweak-tactics/articleshow/46018613.cms?curpg=2

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