Posts Tagged ‘IBM’

IBM sales shrink for 14th consecutive quarter

October 22nd, 2015

IBM’s big bets still aren’t paying off fast enough to offset its weakening core business.outsourcing8

Sales at the company were down for the fourteenth consecutive quarter as a result of continued investment in “strategic imperatives” like cloud services, and analytics — and decreased focus on legacy hardware, software and mainframe related business and consulting services.

During the past three months of the year, IBM revenues shrank 14%, according to its latest earnings report.

At the same time, combined revenue for cloud, mobile, analytics and security products continued to grow, climbing 27%.

“Those results show a lot of progress and there’s just more work to be done,” CEO Ginni Rometty said during the WSJD conference on Tuesday.

Rometty added that since taking the reins, the company has invested in 37 companies and divested $8 billion of products, including its mid-tier server products, customer care outsourcing, and micro-electronics unit that built its chips.

Analysts weren’t surprised by the company’s latest performance, given that IBM has said its transition would take multiple years.

“We’re certainly not pleased with the quarter, but we don’t think IBM’s business is broken,” Morningstar analyst Pete Wahlstrom wrote in a research note.

About half of IBM’s annual sales come from legacy services related to running IT infrastructure products like DB2 and IBM WebSphere.

Forrester analyst Andrew Bartels calls this a “foundation of revenue” that has been flat, but still core to IBM’s business.

The key to getting IBM (IBM, Tech30) back to growth is getting the company’s cloud, data analytics, mobile, social and security products to become a bigger contributor to revenue.

Getting to that point from where they are now will take about another two to three years, Bartels told CNNMoney. The “strategic imperatives” only make up about 20% to 25% of IBM’s overall sales at the moment.

“Once they get there, they’ll be well-positioned for the long run,” he said.

In a prepared earnings statement issued on Monday, IBM said that its transformation was always going to take time, and that “progression wouldn’t be a straight line.”


Etihad awards $700m cloud-computing contract to IBM

October 14th, 2015

Etihad Airways has signed a US$700 million deal with IBM to provide cloud computing services that the airline says will make air travel easier for passengers.Outsourcing47

The 10-year technology services agreement will mean IBM provides new information technology services to Etihad and its partner airlines via a new cloud data centre in Abu Dhabi.

Etihad said the centre – which IBM will develop and operate – would be one of the most sophisticated technology facilities in the Middle East. Global competition among airlines is encouraging a wave of investment in IT solutions as airlines turn to technology in an attempt to reduce queue times, improve security and make life easier for passengers while reducing costs.

Etihad is the latest global airline to adopt cloud-based collaborative decision-making systems which are intended to help share information such as flight departure and arrival times, passenger and baggage information.

Last year, Lufthansa signed a €1 billion (Dh4.181bn) IT outsourcing deal with IBM, while British Airways signed a deal with Red Hat to build up its cloud computing capabilities.

IT providers say new technologies could include better luggage drops with label printing and self-boarding gates based on data generated from check-ins, enable airlines to order, replace and maintain aircraft components more efficiently, better estimate travel times, and better manage loyalty programmes.

“This is a game-changing agreement for Etihad Airways, for our partners and employees, and for Abu Dhabi,” said James Hogan, Etihad’s president and chief executive.

“This is a long-term, strategic partnership which will allow Etihad Airways and its partners to harness the latest technologies as we deliver our services.

As part of the deal, IBM and Etihad will also create a joint technology and innovation council in Abu Dhabi to develop more personalised travel solutions.


Finnair selects IBM for cloud transformation

October 13th, 2015

Finland’s national airline, Finnair, has signed a five-and-a-half-year services deal with IBM to transform its technology infrastructure into a hybrid cloud platform.Outsourcing46

The agreement also includes development of new digital services, such as mobile on-flight services.

“The basic element [in the agreement] is our datacentre services, which we want to consolidate into one environment and under one provider,” said Kari Saarikoski, CIO at Finnair. “At the same time, we want to start to take these services into the cloud to gain flexibility, cost-efficiency and the other goodies the cloud promises. We’ll start with less critical services and then move on to the more critical ones.”

At the core of this transformation is the Finnair Cloud Platform, which will be run by IBM and will enable the integration of different operational and commercial services into single environment. This is a new step for Finnair which, while favouring the software-as-a-service model, has previously used the cloud sparingly.

The agreement also includes application management and development services, as well as a new services governance model. IBM will also take on responsibility for managing Finnair’s IT provider network.

“This will take some time, but is one of our goals,” Saarikoski said. “During the past years we have taken on many new applications and providers and it takes a lot of our time to manage them all…Besides looking for cost, consolidation and management benefits, we want to move the focus of our own people more towards digitalisation, development and innovation.”

Finnair’s employees will also trial IBM’s Watson Explorer capabilities and use its cognitive skills to locate information and respond to customer queries more efficiently.

While Saarikoski notes other vendors were considered, Finnair’s long term collaboration with IBM was a factor in its selection. The airline outsourced its basic IT services and application management to IBM in 2002.

A major driver for Finnair’s move towards the hybrid cloud is its need to boost digitalisation and customer experience in the highly competitive and cost-focused airline market.

Since launching its mobile app last year, the airline’s development focus has been on new consumer-facing mobile and in-flight services. These will now be progressed further with its upcoming cloud capabilities in collaboration with IBM and other partners.

Finnair will also join the growing number of airlines that offer in-flight connectivity and plans are in place to introduce Wi-Fi to its entire Airbus fleet by the end of 2016. The roll-out will start with its new Airbus A350 airliners, which will have built-in wireless networks.

“This opens up new opportunities for services development – it’s a new platform,” said Saarikoski. “Based on what we have talked about with our colleagues, everybody is focused on the same themes: customer experience and how to increase the sales of ancillary services to our customers.”

Finnair is Finland’s largest airline, carrying more than nine million passengers a year. The financial terms of its services deal with IBM were not disclosed.


Euro IT Group Enters European Nearshore IT Outsourcing Market with a 600-strong base of IT professionals

October 8th, 2015

Euro IT Group today announced the launch of its operations within the UK and Western Europe. Euro IT Group is a premier technology consulting firm with a unique group structure and a holistic perspective across technologies and industry verticals.Outsourcing43

Euro IT Group has access to a diversified range of IT application technological skills and the know how of more than 600 IT professionals, in both established and cutting edge technologies. 1000+ projects endorse Euro IT Group, all being delivered by its Central and Eastern European member companies’ to international customers.

“While leading my previous company to a successful Exit, I understood the extraordinary benefits clients can extract from a mix of CEE-based technical knowledge and broad business acumen of Western industry experts. We have now decided to match the booming demand of IT services in Western Europe and the growing market of IT companies in Central and Eastern Europe (CEE).” stated Ian Tidder, Founder and CEO.

The Euro IT Group team has a proven track record in integrating various technologies and industry specific competences into single solutions. Euro IT Group can deploy mixed teams from different locations, without compromising on quality.

In the last year Euro IT Group has evaluated various IT companies from the CEE region. The Group now incorporates several CEE companies that share the group’s values.

Each Euro IT Group company has high quality and security standards, performance driven teams, year-on-year growth, experience with leading edge technologies and a focus on fast-growing sectors.

“Euro IT Group possesses proficient technological skills, resources and references in its CEE nearshore delivery centers to match the demand. Customers now require agile, accelerated product development and high quality IT services. Using the skill set within our group, we focus on latest technology trends such as cloud services, IoT, sophisticated mobile applications and big data . Furthermore, on the basis of the certifications and experience we achieved in leading solutions from Microsoft, SAP, IBM or Oracle we build international strategic partnerships, thus delivering value oriented services and state of the art solutions in international markets,” Ian Tidder added.

Euro IT Group is an international technology provider with delivery centers in selected Central and Eastern European locations. Euro IT Group focuses on accelerating software development through a blend of first-rate people and technologies, acknowledged processes and methodologies and forward-thinking employee development programs, all combined to deliver value for customers. Euro IT starts from a base of 600+ IT professionals who have successfully executed 1000+ software projects worldwide to customers of various sizes from a range of industry sectors such as such as banking, insurance, ecommerce, telecom, media, travel or healthcare.


IBM launches yet another Watson business unit

October 7th, 2015

A new IBM Watson consulting unit aims to speed up the commercialization of cognitive computing—a.k.a. artificial intelligence.

IBM is establishing yet another business unit centered on Watson, its famous cognitive computing system.Watson computer at IBM in New York City

On Tuesday morning, the company announced a new consulting organization aimed at speeding up the commercialization of “cloud-delivered cognitive innovations.”

Translation: IBM is still working on ways to make money from its pricey Watson project and realize the substantial margins that the technology promises It’s a years-long effort, as CEO Ginni Rometty explained to Fortune in September 2014. “There is always a new shift coming in technology,” Fortune wrote two years before that, “and if she doesn’t help IBM become the first to discover and commercialize it, the company will lose its shirt.”

IBM  IBM -0.17%  said it will invest (yes) $1 billion in the new Cognitive Business Solutions group, which will be led by Stephen Pratt, who had been an executive with Infosys, the Indian outsourcing firm, before a brief stint at TPG, the investment firm. Rometty announced the news at the Gartner Symposium in Orlando.

The news comes weeks after the official opening of a new Watson Healthcare facility in Cambridge, Mass.

Watson and its self-learning capabilities first captured the public’s attention on Jeopardy! five years ago. Since then, there’s been hardly an industry that IBM has not attacked with the technology. Last year it set up the first Watson Business Group in Manhattan.


What to consider when IT outsourcing contracts come up for renewal

October 7th, 2015

Outsourcing contracts worth billions of pounds come up for renewal over the next few years – but unprecedented industry change complicates the CIO’s decisionMagnifying Glass Over Contract Papers

According to figures from ISG, if you just take into account IT outsourcing contracts worth over $5m a year, globally there are nearly 3,000, worth over $270bn (£175bn), coming up for renewal around the world in the next three years.

ISG figures show there are 1,400 deals in the Europe, Middle East and Africa (Emea) region, worth over $14bn, coming to an end before 2019.

In 2016 alone there are over 1,100 contracts – worth about $20bn – coming up for renewal around the world.

According to ISG, the likes of Accenture, Atos, BT, Capgemini, HP, IBM and TCS all have significant numbers of contracts coming to the end of term.

But what should a CIO or business leader be thinking about as a contract nears its conclusion? It is a great opportunity to shake things up and learn from past mistakes – but there is a lot of choice out there, which can make decisions more difficult.

A recent example of an organisation that shook up its IT outsourcing strategy when its contract came to an end is the Driver & Vehicle Licensing Agency (DVLA).

When its major “Partners Achieving Change Together” (Pact) IT outsourcing contract with IBM, Fujitsu and Concentrix – which had been running for 13 years – came up for renewal, the DVLA weighed up its options after outsourcing IT for about 30 years.

Newly appointed CEO Oliver Morley and his team looked at the fashionable tower and service integration and management (Siam) models, both increasingly common in the public sector. But in a matter of weeks he had decided to bring IT in house. The two-year move to in-house completed on 12 September 2015.

There are a lot more options available today than when many of the contracts coming up for renewal were signed, and a lot to consider. The DVLA case shows that nothing – including bringing IT back in-house – should be ruled out.

Technologies, models and consultants

As well as different models and contracts to consider, technology has shaken things up. Today increasing numbers of IT services are based in the cloud, which changes the nature of contracts and delivery. Then there is the automation software and artificial intelligence (AI) shaking up the IT outsourcing sector

The increased pace of technology change and the speed at which consumers are changing their habits could also be a calling for business consultancy. Businesses today are re-inventing their businesses to fit the habits of the digital age. Choosing the right technology and services contracts to fit with a transforming business might be something CIOs will need support with: Business and IT consultancies might have to enter the renewal equation.

Then there is globalisation to consider. Today CIOs have a number of choices in where to have services delivered from. It is no longer the case that India is the first choice, as there are locations throughout the world offering their own advantages.

When renewal time arrives

“When a contract comes to an end, the client firm gets an opportunity to do things differently,” said Ilan Oshri at the Centre for Global Sourcing and Services at Loughborough University’s School of Business and Economics.

Oshri said there are two questions organisations should ask themselves: “Are we going to renew and, if so, what will change in the new arrangement? And are we going to bring work back in house – and, if so, how are we going to do that?”

For the first question, he said the opportunity is to examine the latest models and technologies in the market.

“For the second question, bringing work back has become a real option for many firms, but there are still obstacles,” said Oshri.

“Firms should regularly assess their ability to re-integrate the service, be in a sound financial position to bear additional costs involved in bringing back the operations and an exit plan that ensures the transfer of knowledge from the supplier.”

Unprecedented change

Outsourcing consultant Jean-Louis Bravard – who was a CIO at JP Morgan and headed global financial services at IT services giant EDS in the past – said CIOs should think about outsourcing agreements all the time, and not just when they are coming to an end.

He said planning for change now might be more complicated than last time around, due to the level of change in the last five or 10 years. “The world has changed dramatically. So any contract signed even five years ago is fundamentally obsolete. And, to make matters worse, I think the rate of change is not about to drop in the next five years.”

Bravard said CIOs should organise their thoughts around certain themes.

He said the big US suppliers such as Hewlett-Packard (HP) and IBM are all trying to protect their business from in-sourcing and Indian players in IT, as well as more international suppliers in business process outsourcing (BPO).

Meanwhile, the advent of software robots will force major changes to IT and business process outsourcing. “The human consequence on employment is obvious but increasingly the CIO will have to become responsible for all production and interactions. Glitches will longer be tolerated and fault tolerance and redundancy will be absolutely critical for all,” he said.

Bravard added that another major change in the last few years is how pay-as-you-go services have transformed. CIOs as well as suppliers must understand what this means to their businesses, he said. “Even internal solutions must be priced ‘by the drink’ and most often with a downward slope. This presents a huge challenge on pricing and funding for both users and suppliers.”

Mark Lewis, head of outsourcing at law firm Berwin Leighton Paisner, said that, as revewals approach, CIOs should be thinking strategically rather than tactically.

“First, strategically, how they can benefit from either renewing the current contract or going to the market potentially for a new provider or providers. The stress here is on strategic, rather than tactical, decision making,” he said. “It has been tempting for many CIOs to consider at a tactical level the disruption and cost of retendering, as well as taking the approach of ‘better the devil you know’.”

He said logic and market forces dictate a retendering exercise, and there is no reason not to include the incumbent. “There is the task of persuading the rest of the market that this is genuinely an open process and that the outcome isn’t a foregone conclusion.” Otherwise, he said, the most promising potential providers will be deterred from bidding.

Support your decision with action

He urges CIOs ensure they have the right exit plans in place. “When outsourcing contracts near the end of term or are coming up to termination for whatever reason, one of the big – and more often than not – painful and too-late lessons learned by CIOs and their operational and contractual colleagues is that their exit plans and processes are not fit for purpose,” said Lewis.

If existing plans are not sufficient, the CIO will be forced into a corner, he said. “If plans are not fit for purpose, there is an understandable desire by CIOs and their other colleagues not to endure the pain of separation from the incumbent provider – unless the pain of separation is going to hurt less than staying with the incumbent.”

He said a robust exit plan should address the hardware and software assets used to provide the services at the time of transfer, and similarly third-party assets and contracts, people, operations libraries and manuals: “In other words, all the people, tangible and intangible assets and know-how necessary for an incoming provider to make sense of the services before or at transition.”

Then, he said, the exit plan needs to contain the necessary processes and actions for a a smooth handover to an incoming provider.

HP and IBM rated top IT outsourcing service providers

October 7th, 2015

HP and IBM have received the highest industry Net Promotor Scores, meaning IT outsourcing customers are much more likely to recommend them than other service providers.Outsourcing40

A company’s NPS is considered a measure of customer loyalty and has been proven by some to be a leading indicator of corporate growth. Customers are asked to rank the likelihood they would recommend a brand to a friend or colleague on a scale of 1-10. Those who answer 9 or 10 are considered promoters: loyal enthusiasts who will keep buying and refer others to the company, thereby fueling growth. Respondents who answer 7 or 8 are considered passive customers: satisfied, but unenthusiastic and vulnerable to competitive offerings. Those who answer between 0 and 6 are detractors: unhappy customers who can damage a brand and impede growth with their negative word of mouth. The NPS is a straightforward calculation achieved by subtracting the percentage of detractors from the percentage of promoters, ranging range from -100 (all detractors) to 100 (all promoters).

HP Outsourcing had a score of 52, according to the Temkin Group, which has been evaluating NPS results for 62 vendors for the past four years. The top IT vendor overall was SAS Institute, which scored a 57. Other outperforming IT service providers were IBM Global Services, Oracle Outsourcing, and Dell Outsourcing, all of which scored at least five points above the IT vendor average.

HP, particularly the company’s legacy EDS outsourcing unit (which HP acquired in 2008), and IBM Global Services have had consistently high NPS results relative to their peers for some time, says Bruce Temkin, managing partner of the Temkin Group.

Accenture finishes at the bottom

Accenture Consulting had the lowest NPS score, not just among IT service providers but among all the technology vendors in the report, with a score of just one. In fact, the other four lowest scoring vendors were also IT service providers: CA Technologies, Hitachi, Wipro and Deloitte all had NPS scores below 10.

While the scores for IT vendors overall improved to an average of 31.8 in 2015—an increase of more than eight points after two straight years of declining scores—many IT service providers (including Unisys, Capgemini, CSC, Cognizant, Infosys, ACS and Tata Consultancy Services) ended up on the bottom half of the list, according to Temkin.

The Temkin group also surveyed 800 IT decision-makers from large North American firms to learn about their relationships with their technology providers in order to determine the link between NPS and customer loyalty, customer satisfaction and other aspects of a good customer experience. “We often find a strong correlation between NPS and satisfaction if the satisfaction score is calculated in a similar manner to the NPS score. What’s a more telling question is whether or not NPS correlates to customer loyalty,” says Temkin.

The research revealed that promoters are much more likely than detractors to spend more money with tech vendors, try new products and services when they are announced, and forgive their tech vendors after a bad experience. The report also revealed that SAS Institute and Cognizant were the top companies for purchase momentum and customers of HP outsourcing and Intel were most likely to forgive them for mistakes.

“If tech vendors use NPS to identify and do less of what causes detractors and identify and more of what causes promoters, then they should see a lift in both NPS and sales,” Temkin says.


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