Posts Tagged ‘IT’

Fury and fear in Ohio as IT jobs go to India

November 10th, 2015

The IT workers at Cengage Learning in the company’s Mason, Ohio offices learned of their fates game-show style. First, they were told to gather in a large conference room. There were vague remarks from an IT executive about a “transition.” Slides were shown that listed employee names, directing them to one of three rooms where they would be told specifically what was happening to them. Some employees were cold with worry.outsourcing24

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The biggest group, those getting pink slips, were told to remain in the large conference room. Workers directed to go through what we’ll call Door No. 2, were offered employment with IT offshore outsourcing firm Cognizant. That was the smallest group. And those sent through Door No. 3 remained employed in Cengage’s IT department. This happened in mid-October.

“I was so furious,” said one of the IT workers over what happened. It seemed “surreal,” said another. There was disbelief, but little surprise. Cengage, a major producer of educational content and services, had outsourced accounting services earlier in the year. The IT workers rightly believed they were next.

The employees were warned that speaking to the news media meant loss of severance. Despite their fears, they want their story told. They want people to know what’s happening to IT jobs in the heartland. They don’t want the offshoring of their livelihoods to pass in silence.

The employees remaining at Cengage have begun training their replacements in person and via the Web. Their work is being “shadowed” and recorded. Their jobs will end in January.

Cengage, in an email statement, acknowledged a reduction in the workforce of 75 positions. An additional 20 positions have been moved to Cognizant and most employees have accepted those positions, the firm said.

Susan Aspey, senior vice president of public affairs for Cengage Learning, said in an emailed statement that the “business is evolving and we now serve more customers with software than print materials.

“Over a period of nearly a year, we reviewed our technology systems and staffing,” Aspey wrote. “We were very transparent with the team about this process. We determined that we needed a more flexible staffing model that could better serve the cyclical nature of our business, and a different model of software support for our customers. To do this quickly and efficiently, we needed the support of an outside partner. We chose Cognizant, a U.S. firm that supports several companies in the education industry.

“This was a very difficult decision, as we value all of our nearly 4,000 U.S. employees and their contributions.”

Cognizant, based in Teaneck, N.J., employees about 219,000 people, most of them in offshore locations.

It’s not clear how many people Cognizant employs in the U.S., but in 2013, David Amsden, the form’s vice president of human resources, put that number at 27,000. Overall, Cognizant employed more than 171,000 at that point. (Computerworld has asked Cognizant for an updated number.)

Cengage employees offered a job with Cognizant had little choice but to take it. If they rejected the offer, they would leave without severance, said IT workers. The severance offered is two weeks of pay per year of service.

The Web-based workers that the Cengage employees are training to take over their jobs are believed to be in India.

Cognizant applies for thousands of H-1B visas annually, and is one of the top three users of the visa, according to government data. Cengage employees reached for comment didn’t know what visa, if any, the contract workers in their offices were using. But they said some of these workers spoke a foreign language in the office, along with English.

The idea that their work is being taken by foreign workers is very unsettling, according to the Cengage workers interviewed.

“The jobs are being replaced offshore, and I don’t think people even understand what’s happening here,” said one IT worker, who pointed out that good opportunities were scarce. “The jobs out there are pathetic.”

Said another worker about offshore outsourcing: “I think it’s what’s killing the American economy — the middle class jobs are going away.”

Cengage is based in Boston, but runs IT operations in Mason as well as in other states. The layoffs affected workers across IT, including networks, desktop support, database administration, developers, data warehouse and other systems.

The U.S. Bureau of Labor Statistics reported Friday that the labor market grew by 271,000 jobs in October. But Victor Janulaitis, CEO of Janco, a consulting firm that studies the IT labor market, says IT hiring has been weakening compared to earlier this year.

There were about 10,200 IT jobs created in October, but the trend is slowing, said Janulaitis. In July, 17,000 IT jobs were added; in April and January, the number of jobs added was 16,000 in each of those months.

On Friday, Janco reduced its IT job growth estimate for 2015 from 160,000 to 145,000.

The number of jobs is still positive, but the situation varies regionally. Ohio has been hurt by a decline in manufacturing that has also reduced IT work.

Offshore outsourcing is having “a fairly strong impact” on IT employment, said Janulaitis. Students coming out of college are facing trouble starting a career “and a lot of that is driven by jobs that are taken by non-U.S. nationals in our economy, and a lot of that is H-1B [visa holders],” he said.

“Why are we talking about more H-1B visas for people when we have people who are unemployed?” said Janulaitis.

The IT offshore industry relies heavily on H-1B workers to deliver services, and large offshore firms, both in the U.S. and in India, are the largest users of this temporary, non-immigrant, work visa. The issue is getting a little more attention in the unfolding 2016 presidential contest, but it remains to be seen whether this attention will have any impact.

Sen. Sherrod Brown (D-Ohio) was one of 10 senators who asked in April for an investigation into the use of H-1B visa workers to replace IT employees at Southern California Edison.

With Sen. Chuck Grassley (R-Iowa), Brown also tried to amend the 2013 Senate comprehensive immigration bill with a provision requiring a business to first offer a vacant position to an equally or better qualified American worker before seeking an H-1B visa worker. The amendment failed. Grassley opposed the overall bill, but Brown voted to support it. The final bill, never adopted by the House, included provisions for increasing the base H-1B cap from 65,000 to 180,000.


ICT Sector Is More Than BPO And Call Centres, Shareholders Want Government To Maximise Other Opportunities

November 9th, 2015

Information and Communications Technology (ICT) has been hailed as one of the planks of Jamaica’s growth-inducement strategy.outsourcing22

The growth-inducement strategy, drafted in 2011, places inordinate focus on the business process outsourcing (BPO) and call-centre segment of ICT, a fact that seems to have spilt over into the development of the sector.

While BPO and call-centre operations in Jamaica have delivered an estimated US$250 million in value, account for more than 14,000 jobs, and enjoy the highest employment growth rate of any subsectors over the past decade, industry insiders are concerned that it is being viewed as the panacea of ICT development to the detriment of other areas of the sector.

Trevor Forrest, who is a vice-president of the Jamaica Information Technology & Services Alliance (JITSA), has called for whichever party forms the next government – when the election dust has settled – to “seriously look at ICT as the enabler of economic growth above and beyond BPOs”.

Joining him in that call is immediate past president of the Jamaica Computer Society Dean Smith, who opines that “we continue to operate by importing expensive base technology (hardware and software) without using it to generate economic growth across all sectors (agriculture, construction, tourism, manufacturing, ICT, government, etc) and solving chronic challenges by examining business processes for optimisation despite our nuanced milieu”.

Ignored Opportunities

Smith further points out that Jamaica has, in large measure, ignored opportunities to take a share of the more than US$2 trillion information technology outsourcing -knowledge process outsourcing system architecture and software engineering services market because of its singular focus on the BPO call-centre subsector.

Another level of analysis to the BPO call-centre dominance is added by director of the ICT Division at the University of Technology, Lisa Facey-Shaw, who argues that there is too much concentration on low-end ICT services.

For Facey-Shaw, the BPO sector in its current state is too low down in the value chain, and she wants the Government to “consolidate data across all government agencies for greater efficiency, provide greater levels of e-citizen services, foster an innovation mindset among the nation’s youth by instituting innovation education from the early levels of education, attract higher-end BPO services, and facilitate an enabling environment for the development of ICT businesses”.

Internet Marketing Consultant Wayne Marsh highlights the fact that Jamaica has not been able to benefit from non-call centre, BPO-based ICT-outsourced projects because of the lack of skilled personnel to engage in other high-end areas of the sector.

“The next government should create a national vision around training and creating a workforce to develop software to replace the current imported ones now in use (a software import substitution programme), while developing Jamaica as an outsourcing destination for software development. This would result in significant hard currency savings in software licence and maintenance fees as well as provide opportunities for local graduates to attain the well-needed work experience,” he said.


Big data expert claims death of IT outsourcing is imminent

November 9th, 2015

Tom Davenport – the Harvard Business School professor who is seen by many as responsible for the term big data’s rise in popularity – has caused a stir on LinkedIn after claiming that “companies have stopped outsourcing IT” and the rest will soon follow.outsourcing20

While the big data expert and author acknowledges that “IT outsourcing still drives about 60% of the entire services sourcing industry”, he goes on to say that the “practice is in decline for all but the most commoditized IT services”.

His belief is that the rise of digitalisation, big data analytics and cognitive technologies has made IT simply too precious a resource to outsource, proposing that “even in the heyday of outsourcing, some companies realized this”. He adds that automation, along with the rise of as-a-service and cloud-based tech, are also contributing to the demise of IT outsourcing.

Davenport adopts a narrow perspective to say the least. Firstly, his argument neglects all but the largest companies. The benefits that IT service providers, proficient in the exact fields he mentioned – digital, big data analytics, cognitive technologies – can bring to smaller organisations that are not financially capable of expanding in these areas are massive.

Furthermore, it seems a tad naïve to argue that your Accentures, IBMs and Wipros no longer have anything to offer buyers of IT outsourcing – even the largest ones. Certain ITOs will need to adapt their services in order to stay in the game in the build up to 2020, but they will always be able to primarily focus on IT-related fields, incorporating new digital services as and when they come. As always, IT vendors will be able to take over particular operations they specialise in on behalf of the buyer, allowing that client to concentrate on core tasks that are responsible for bringing in revenue.

As one high profile industry expert commented on Davenport’s post: “No sane organisation outsourcers everything in IT, and few sane organisations outsource no IT at all”. New trends and technologies are not going to change that fact.


Learning from IT contracting mistakes in the public sector

November 6th, 2015

Government outsourcing became popular in the 1980s as a means of improving service delivery and cost-efficiency. Outsourcing promised the following benefits through the provision of services:outsourcing19

Increased productivity
Cost savings through competition amongst contractors
Strengthening the public budget by protecting against wasteful practices
Creating a smaller, more efficient government
Better performance measurement and management
Better insulation from political pressures

However, outsourcing has not been the solution to all of government’s problems. In fact, it has become a source of substantial waste and fraud.

For many governmental agencies, outsourcing has been a longstanding headache for numerous reasons. The most prevalent is the non-performance or poor performance of contractors’ duties that can result in unfinished projects or budgets and timelines stretched beyond allocated funds. Perhaps the most recent and well-known outsourcing failure has been the work on The site was contracted to over 50 contractors and subcontractors who were responsible for building segments of the website that would eventually need to be integrated for full operation. Work was not completed and could not be integrated, which resulted in the resounding failure of on its release date. Although a large failure, this type of outsourcing relationship between the government and contractors is not unique, and definitely not new.

One area where outsourcing is particularly troubling is in information technology (IT). As many governmental agencies are seeking to modernize their systems and streamline their services, they are overwhelmingly entering into contracts with vendors who underperform and, ultimately, do not deliver. The State of Virginia entered into a 10-year, $2.3 billion contract with Northrop Grumman to assume full responsibility for the operation and maintenance of Virginia’s IT in addition to modernization efforts for a number of state services. The contract was seen as a groundbreaking method of managing state IT infrastructure. However, the project was inundated with cost overruns, technical problems, and missed deadlines. The technical problems impacted several of the state’s agencies with numerous outages at the same time.

Failed or problematic outsourcing can be a product of development and management failures. The development of an outsourcing plan requires forethought on the type and scope of the contract. First, agencies should consider if the service they are attempting to outsource is appropriate to outsource. Appropriateness can range from the type of service, the level of outsourcing (i.e., complete privatization, privatization of operations, open competition, contracting), whom to contract with (i.e., for-profit, nonprofit, intergovernmental), the cost of service, performance goals, performance measures, and contract rules. Since each government entity has its own rules and regulations, a lack of uniformity makes it difficult to use other agencies’ templates for outsourcing. Without careful upfront outsourcing considerations, the outsourcing relationship begins at a disadvantage.

Much of this can be solved with a thorough analysis of the cost and benefits. A common mistake that agencies make is focusing on cost reduction and not on associated or fixed costs. The fixed nature of contracts can mean that contracts established today could impact projects initiated tomorrow, which may include new potential costs. Further, a cost-benefit analysis considers various factors such as complexity, vendor reputation, and pool of competition, which can all help make clear if outsourcing is most appropriate.

Once contracts are executed and the work begins, agencies begin to fail miserably due to the management of the contract. For outsourcing to work there needs to be a ‘cop on beat’ that can monitor the performance of the work and bills being paid. Without this, contractors are left to their own devices. Improper oversight of work being performed is a key factor of failure.

Government outsourcing has been nightmarish for several governmental agencies. Lessons learned and new practices should be adopted for governmental agencies to prevent the types of missteps discussed here. Undoubtedly, all agencies must establish dedicated positions for employees to oversee and scrutinize contract operations to ensure performance goals are being met. Without them, the perceived benefits of outsourcing will be lost, and waste will continue.


Federal IT outsourcing spend alarmingly poorly managed

November 6th, 2015

The U.S. government spent $30 billion on IT services in 2013, yet the majority of that investment is not strategically managed, according to a recent report by the Government Accountability Office (GAO). The GAO studied IT services outsourcing at three military branches within the Department of Defense (DoD) along with the Department of Homeland Security (DHS) and the National Aeronautics and Space Administration (NASA), which together accounted for more than half of reported federal third-party IT services spending in 2013.outsourcing18

Leading companies approach IT outsourcing strategically, taking an aggregate approach to managing IT services spending rather than making such purchases on a piecemeal basis. By doing so, they achieve four to 15 percent savings on these services annually, according to the GAO. While this report noted that efforts by these federal departments to better manage their IT outsourcing has improved in recent years, with each agency designating officials and creating offices to identify and implement strategic sourcing opportunities, it found that most of these agencies’ IT spending “continues to be obligated through hundreds of potentially duplicative contracts that diminish the government’s buying power.”

The GAO analyzed agency policies, procurement and contracting data, and interviewed agency and contractor officials. While leading companies strategically manage about 90 percent of the IT procurement spending, these government agencies strategically managed just a fraction of that. The U.S. Navy, for example, which spent $3.3 billion on IT services in 2013, awarded just 10 percent of that work via strategically managed outsourcing contracts, according to the GAO. The U.S. Air Force strategically managed 17 percent of its $1.4 million IT services spend, the U.S. Army did so with 27 percent of its $3.5 billion spend, and NASA did so with 35 percent of its smaller $855 million IT outsourcing investment. DHS was the best performer, sourcing 44 percent of its $2.2 billion IT procurement budget in strategic deals.

“This data just reinforces how alarmingly poorly run U.S. government agencies are with their IT spend. Why only a fraction of external IT service spending is actually managed via an established contracting model in this day and age is baffling—and indicates a huge amount of unnecessary wastage of taxpayer dollars,” says Phil Fersht, CEO of outsourcing analyst firm HfS Research. “Also remember that external IT spend is only a fraction of total IT spend. In some cases, the total spend per agency could amount to two or three times the external IT spend.”

A lack of industry best practices

The GAO also found that most of the agencies failed to follow leading commercial outsourcing practices, like clearly defining the roles and responsibilities of the offices responsible for strategic sourcing, conducting enterprise-wide spend analysis, monitoring spending, and establishing savings goals and metrics. As a result, the report stated, “the agencies are missing opportunities to leverage their buying power and more effectively acquire IT services.”

Specifically, contracting officials from the reviewed agencies had difficulty benchmarking their outsourced IT labor rates and, as a result, paid wildly varying labor rates for similar services with the same contractors. Typically, companies who outsource IT services use standardized labor categories to enable rate comparisons in order to ensure competitiveness and, ultimately, cost savings. The GAO’s analysis of 30 contracts for IT services revealed a 62 percent average difference between the lowest and highest labor rate within categories. What’s more, two of the IT service providers had proposed more than 117 different labor categories—some with multiple variations—which further complicates efforts to compare labor rates.

The report did say that there are several government-wide and agency-specific efforts in early development or implementation stages that are intended to address aspects of these IT outsourcing issues, including acquiring tools to assess labor rate variations and streamlining labor categories.


Indian IT at inflection point

November 6th, 2015

For T.K. Kurien, the 57-year-old boss of Wipro Ltd, running India’s third largest software services exporter is becoming more challenging with every passing day.outsourcing17

“There is this huge change…the way clients are buying technology, the impact it is having on the way we have traditionally worked,” Kurien said in a recent interview.

Kurien, who is based out of Bengaluru, spent just 13 of the 90 days in the quarter ended September in India—the most he has spent travelling in a quarter since taking over as Wipro’s chief executive officer (CEO) in February 2011. He spent most of the time in meetings with executives at Wipro’s 1,000-odd clients, trying to understand their technology needs and how the company could help them become more efficient.

Vishal Sikka, boss of Infosys Ltd, Wipro’s cross-city rival in Bengaluru, is more eloquent in his description of the way technology is impacting India’s $146 billion software services industry.

“I believe that the traditional model of IT (information technology) services is dying,” Sikka has said repeatedly in the 15 months since taking over in August 2014 as the first non-founder CEO of Infosys, the 34-year-old firm set up by N.R. Narayana Murthy and six friends in 1981.

“This is the biggest phase of technology disruption I am seeing,” said Natarajan Chandrasekaran, CEO of Mumbai-based Tata Consultancy Services Ltd (TCS).

The change and disruption Kurien, Sikka and Chandrasekaran—who helm companies that together employ more than 650,000 engineers and posted over $30 billion in revenue for the year ended March 2015—are referring to is the way commoditized IT deals are changing.

Historically, engineers at Indian IT vendors traditionally managed the computer infrastructure of clients and wrote codes for some of the largest banks, including Citigroup Inc. and retailers, such as Wal-Mart Stores Inc.

With the advent of cloud computing—in which clients buy computing power and services over the Internet from a third party—almost all IT vendors have rapidly built up their capabilities to offer these shared services or tied up with cloud service providers such as Inc. and Microsoft Corp.

Indian IT vendors have also started deploying small teams to evaluate the potential of some of the disruptive technologies—TCS and Infosys, for example, are looking to build applications around blockchain technology, which is essentially an electronic system currently being used by crypto currencies, including Bitcoin and Ripple, and helps in authenticating transactions.

Sarvesh Sharma/Mint
Click here for enlarge
These investments come at a time when banks and other financial firms—their customers—are looking at the use of disruptive technology, including blockchain technology, to cut settlement times and lower costs tied to international payments.

At the same time, IT vendors are being forced to bring in elements of disruptive technology in their service offerings, promising to offer greater efficiencies for their clients, and introducing new approaches, including user-centric approach of Design Thinking in their engagements with clients.

Remaking IT firms

IT vendors themselves are cutting their dependence on engineers and increasing their focus on non-linear growth—which means growth in revenue is not linked to growth in the number of employees—by automating a lot of traditional tasks. Finally, most software services exporters realize that not all technology innovations can come from within the organization and they need to partner with start-ups, thereby enabling them to take the technologies of some of these start-ups to their clients.

“We are seeing a big shift in adopting the culture of innovation from Silicon Valley and the rest of the world,” said Ray Wang, founder of Constellation Research, a technology research and advisory firm. “There is a big push to remake the IT services firm as a strategic partner on co-innovation and co-creation.”

“It is becoming a challenge,” laughs Kurien. “How do you balance it all and, at the same time, keep recording higher growth rates?”

Growth in the short-term is not just a challenge for Wipro but even for firms like TCS. Wipro hardly recorded any growth in the first quarter April-June period of this fiscal year and TCS, too, grew at just 3.5% in US dollar terms in the first quarter and 3% in the second quarter period.

This has worried a few analysts, who believe TCS may actually struggle to grow at over 10% in US dollar terms and less than 12-14% in constant currency terms, as projected by software services industry lobby group Nasscom, during the fiscal year ending March 2016.

“We have to live and re-calibrate to what you call is the ‘new normal’ growth rates—growing at 13-15% annually. I don’t think any Indian IT firm is even factoring a 20% annual growth in the next two-three years,” said a senior executive at TCS, who declined to be named as he is not authorized to speak with the media. “But, certainly, as more digital contracts come up, and new investments are being made (by all IT firms), one can again look to clock growth of 15%-plus in three-four years’ time”.

As the Indian IT industry approaches an inflection point, the bosses at these companies are shaking up the way the firms have traditionally operated and make each of their firms future-ready—and, thereby, aim to post higher growth rates in the future—by investing in new-age technologies.

“Infosys, Wipro and others were all behind about three years ago. They suddenly got religion and are working furiously to catch up (with their global peers). They (Indian IT firms) still have to keep the old business going, but the shift to the front end of design and strategy is happening and the Indian IT services firms are now seen as more strategic than where they were three years ago,” said Wang of Constellation Research.

One of the ways the three poster boys of the Indian IT industry are making themselves future-ready is by re-skilling their existing workforce to learn competencies in these new-age technologies. Infosys has already made 54,000 of its existing workforce attend day-long classes in “design thinking”, the user-centric approach which has helped the company win more than $100 million deals and helped its engineer write better codes.

Wipro is in the midst of re-educating its workforce on new languages, while TCS aims to train more than 100,000 of its engineers in this fiscal year in cloud computing, machine learning and other areas of digital technologies.

Renewed optimism

And again, the early results are encouraging. Since Sikka took over in August last year, Infosys is a more confident, 180,000-strong company now than it has been for some time. Rivals are seeing a more aggressive Infosys when IT vendors are making pitches to clients, even if the company is winning new business at the expense of margins.

It was not a surprise when Infosys’s sequential growth outpaced TCS for the second successive quarter in the July-September period; the last time Infosys’s revenue growth was higher than TCS for the first two quarters in a row was in the April-June and July-September quarters of 2008.

This renewed optimism is explained by a series of steps taken by Sikka. Sikka first won the trust of his employees and, eventually, brought down attrition rates. It was no easy task. Infosys was haemorrhaging talent, with one in five employees leaving the company between April and June last year. Now, Infosys has the lowest attrition rate among the Big Three IT firms.

Sikka then put his trusted lieutenants in important roles, went for a management and organizational restructuring earlier this year, and started to marshal his team to win the confidence of clients. It helped that in the April-June period, it recorded 4.5% sequential revenue growth in US dollar terms, and 6% in the second quarter.

Agreed, Infosys has warned of a softer third and fourth quarters. Still, most analysts believe that the investments being made by Sikka should help transform Infosys into a $20 billion next-generation IT services firm by 2020.

Not for nothing, both Sikka and Kurien believe that Infosys and Wipro should see the “first meaningful impact” of automation on the company’s results by the start of fiscal year 2017. This truly would be a big step in Indian IT’s embrace of non-linear growth.

“The catch-up mode India-centric vendors continue to operate in places greater pressure on their abilities to balance innovation and sales growth,” said Bozhidar Hristov, an analyst at US-based technology research firm TBRI. “Recent investments in ‘new’ technologies illustrate their aspirations to depart from their status of low-cost outsourcers.”

At the $15.5 billion TCS, the single biggest challenge ahead of Chandrasekaran is to find ways to generate close to $2.5 billion in new business this year, if the country’s largest software exporter expects to outpace the average growth of 12-14% Nasscom has forecast for the IT services industry in FY16.

It is an onerous task as companies across the world are pressing their IT vendors for cost savings and there is intense pricing pressure for deals that are coming for re-bids.

“TCS clearly has reached a point where generating more business from some of its largest clients is nearing saturation,” said the head of research at a domestic brokerage who spoke on condition of anonymity. “Some of its largest clients bring in more than $700 million in annual revenues. How do you continue growing with such large accounts?”

Client mining

TCS itself is trying different approaches to keep up with higher growth rates. The Mumbai-based firm introduced its artificial intelligence (AI) platform, Ignio, which identifies, diagnoses and learns from issues in the IT infrastructure and automates basic technology work, thereby doing away with the need for engineers.

TCS set up a new business unit called Digitate dedicated to its recently launched Ignio platform and other next-generation products, and believes it has the potential to become a multi-billion-dollar business. The move makes TCS the second IT firm globally to carve out a separate unit focused on products using disruptive technologies; International Business Machines Corp. (IBM) set up IBM Watson, an AI supercomputer system, last year.

“TBRI expects TCS’s Ignio AI platform to impact revenue growth positively in the next 12 months as the platform will play a core role in process automation within the company’s infrastructure services unit. Ignio had a sixfold increase in paid pilot client projects, from three to 18, in the past six months,” said Amy McLaughlin, another analyst at US-based research firm TBRI.

Chandrasekaran for now declined to share by when Digitate can become a billion-dollar business for TCS. However, executives at TCS believe that Digitate should become a $1 billion annual business by 2019-20.

Infosys and Wipro, in addition to investing in these new-age technologies, are also giving a fillip to its client mining or ability to generate more business from their existing clients, through a clutch of measures. This has started showing early benefits. Infosys managed to increase business from its top 10 clients in April-June by 5.7% from the January-March period; during the second quarter, too, the share of business from its top 10 clients was the same as in the first quarter.

Although Wipro’s two largest clients outsourced less work to the IT vendor, the company managed to increase business from its next eight largest clients by 2.8% during the July-September period.

Two of the biggest challenges ahead of Indian IT firms remain in areas where all of them are renewing their focus—re-skilling the existing workforce and how many IT firms are able to monetize their new products and platform offerings.

“Talent management, including both training and re-skilling existing employees, will remain a key investment initiative as the development and delivery of new technologies require different skillsets compared with legacy outsourcing services,” said McLaughlin of TBRI.

As more outsourcing deals have elements of digital technologies, Indian IT vendors need to evolve from back-end outsourcing firms to “thought leaders”, says Wang of Constellation Research. “They have to change how they engage with customers by being proactive in solution design vs reactive, and they can do this by hiring more digital artisans.”

According to Thomas Reuner, managing director of IT outsourcing research at HfS Research, supporting clients in their digital transformation requires broad investments in skills and capabilities.

“Indian providers remain selective, if not coy, following the likes of Accenture (Plc) and IBM in their investment strategies,” said Reuner. “The likes of IBM and Accenture have broader and deeper industrialized vertical assets while Indian providers are more selective in terms of verticals and assets. Hence, there are no simple answers as to the winning strategies. Much will come down to balancing transformational capabilities and commoditized delivery of services. Crucial will be devising new governance and management approaches to help clients in their digital transformation.”


Survey highlights post-election surge in IT outsourcing

November 6th, 2015

Outsourcing spend more than trebled between July and September compared to the second quarter of 2015, with £1.77bn committed to IT deals alone, according to new research.outsourcing16

The UK Quarterly Outsourcing Index found the total value of contracts agreed during the quarter was worth £2.21bn, when other deals such as business-process outsourcing were factored in.

It said the majority of the spend had come from central government, with departments agreeing seven contracts worth a total of £1.73bn for a mixture of multi-scope IT infrastructure deals and shared-service agreements for back-office services. According to the index, the spending figure marked a 69 per cent increase in government outsourcing spend year-on-year.

The total value of agreements signed by local authorities represented a 67 per cent year-on-year increase, with councils largely procuring a mixture of multi-scope IT outsourcing contracts focused on new infrastructure, along with deals for revenues and benefits, customer-services and payroll.

The research, compiled by IT analyst Nelson Hall for outsourcing provider arvato Financial Solutions, also found that that the length of contracts agreed during the July-September quarter had increased by more than one-third compared with the previous three months.

Bryan Mouat, UK and Ireland chief executive officer at arvato, said “political certainty” following May’s general election had clearly had a positive impact on the industry.

“With market confidence returning, organisations across the private and public sectors are continuing to turn to outsourcing partners for the expertise and technology to help them achieve their objectives,” he said.

Debra Maxwell, arvato’s chief executive responsible for the public sector, said that new funding cuts expected later this month in Chancellor George Osborne’s spending review would drive further outsourcing growth in local government.

“Councils are increasingly looking to change how they operate and deliver services to leverage significant savings,” she said.


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