Posts Tagged ‘Outsourcing’

TCS focuses on the ‘digital transformation’

September 23rd, 2014

Tata Consultancy Services is ramping up its offerings in big data and analytics, looking to increase its competitiveness in IT consulting and services as communications service providers try to get a handle on the opportunities and challenges that cloud, mobile and social technologies are bringing.Outsourcing18

“CSPs find themselves at a crossroads,” said Seeta Hariharan, general manager and group head of TCS’ recently formed Digital Software and Solutions group. “The ones that we see as the winners are those that make data a substantial part of their strategy.”

Hariharan said that CSPs are looking for new revenue sources and new business models, and that the new group was formed within TCS about 16 months ago to take on the challenge of helping businesses cope with the digital transition going on that is being heavily driven by mobile technologies, social technologies and the cloud as well as big data analytics.

TCS was named a leader in business process outsourcing for business analytics by IDC earlier this year, and announced in August that it is partnering with Cloudera to certify both its professionals and its products for big data and analytics.

In a blog entry earlier this year, Hariharan wrote about what she called “a gap between the vision of digital transformation and what is actually delivered today in the market.”

She said that “one group of vendors provides broad-based technology platforms like cloud, mobile, social, and big data. When a customer asks for a solution, the vendors say ‘we will pull the technologies together for you’. This approach is cost-prohibitive and time consuming.

“Another large and disparate group of suppliers offer narrow, non-integrated point solutions aimed at solving isolated issues such as web analytics or cross-channel management.  This approach requires clients to integrate with various technology platforms and other point solutions to solve problems posed by digital transformation, which is also time-consuming and expensive,” Hariharan wrote.

Hariharan said that while communications is the backbone across every industry, CSPs are under particular pressure to figure out new ways to leverage technology to better understand their customers so that they can deliver customized products and improve profits, as well as improve their own operations.

Successfully navigating this digital transition is crucial to businesses, Hariharan said — and those that don’t manage it well are likely to not continue to be in business.

“In my view, it’s not a choice — it’s an imperative,” Hariharan said. “The time to address this is in the next 18 to 24 months.”


Banks warned on IT risks

September 23rd, 2014

EU supervisory authorities are warning banks to reinforce IT controls and audits on third-party technology providers and to ringfence budgets related to operational risk. The Joint Committee of the European Supervisory Authorities (ESAs) says that concerns over the persistence, intensity and sophistication of information technology-related operational risks and cyber risks at financial institutions have increased since its last biannual report on financial stability issues.Outsourcing17

It suggests that IT risks in banks and other financial institutions do not yet appear to be sufficiently understood.

“Institutions should give increased priority to related risks and reinforce IT controls and audits covering all parties along the value-added chain of IT (IT-service providers, third-party providers and IT-outsourcing providers)” states the study.

The report also calls on supervisory authorities to factor the mitigation of IT-related risks into regular risk assessments, to ensure that financial services providers devote sufficient resources and due care in the proper management of their digital environment and risks.

In this respect, financial firms must safeguard budgets devoted to handling operational risk issues during times of lowered profitability.

“It is important in such an environment to ensure that IT systems and related internal controls are safeguarded against budgetary pressures and remain robust,” states the report. “A strong, professional risk culture which can swiftly react to new threats and deliver appropriate levels of employee awareness about evolving risks is needed.”

With a nod to the increased attention on cyber-risk, the ESA says that banks and regulatory bodies should ensure adequate financial provisions to cover any litigation-related costs that might arise in the event of successful systems breach.


IT veterans from Infosys and Wipro to help Dell treble services revenue in few years

September 23rd, 2014

Michael S Dell wants to more than treble the software services revenue in a “few years”, an ambition that the entrepreneur is betting on his team of leaders handpicked from Indian outsourcing giants such as InfosysBSE -1.36 % and Wipro. Outsourcing15

Significantly, the founder, chairman and CEO of the Texas-based computer hardware and services firm believes ever since going private, Dell has been able to focus more on clients without being distracted by “activist shareholders” and invest in some of the long-term strategies, including investing in cloud, security and analytics space.

“We want to double, triple, quadruple our (services) business,” Dell said in a phone interview last week, outlining his ambitions on services play for the first time. “There are 10 companies which have 1% of the $3 trillion IT industry, we have about 2%. We would want to have 3-4% in the years to come,” he said from Brussels where he’s been meeting customers. To be sure, Dell had a services unit in addition to selling desktops before it was taken private earlier this year.

The company first handpicked WiproBSE -0.70 % veteran Suresh Vaswani in December 2012 to steer its services business, who since then has aggressively built a core team by poaching executives from Infosys, Wipro and Hewlett Packard. “(But) remember the IT industry itself will be more than $3 trillion in years to come, and with internet of things (IoT), industry will grow beyond $3 trillion and we would want to bring solutions to capture a bigger share of the growing pie,” Dell said.


The centerpiece of Dell’s turnaround strategy is based on combining existing IPs within to create software platforms and build newer solutions around disruptive technologies in IoT. Dell’s chest thumping on IP hinges on its aggressive play in acquiring companies — it has bought over two dozen firms in the last five years, from StatSoft in advanced analytics to SecureWorks in security space, thereby helping it provide end-toend solutions to its customers.

Over the past one year, Vaswani has been able to convince top Indian IT executives such as Anand Sankaran, a Wipro veteran, Prasad Thrikutam, a high profile Infosys leader among others, to join Dell — “the world’s largest startup” as described by its founder.

“If you look at the industry, it needs some freshness, and I will say we are providing that freshness,” Vaswani told ET in an interview. “Indian IT services come from a particular angle and HP, EDS are monoliths so to speak. We say a different story, and we don’t have legacy. And we have lots of IP.”

Thrikutam, who was hired by Nandan Nilekani in 1995 at Infosys, joined Dell last month. “Most companies have a constraint on which path they can take because if they are a public company, they have to follow quarterly targets. Michael said I can choose the path I want, so I have control over my destiny — that was the clincher for me to join,” Thrikutam said.


IT provider Pinnacle needs more time for turnaround

September 22nd, 2014

The chief executive of IT and telecoms provider Pinnacle Technology Group has warned his turnaround programme to return the AIM-listed business to profit will take time to bear fruit.Outsourcing13

Nicholas Scallan took charge in early March and believes the firm is now moving in the right direction.

Mr Scallan came into the role after Pinnacle founder Alan Bonner announced at the end of 2013 he wanted to step down.

The group’s half-year results to March 31 this year, which were published in June, showed a dip in revenue from £5.36 million to £4.29m with its loss before tax widening from £1.1m to £1.2m.

Mr Scallan, a former director of customer solutions at Virgin Media Business, was bound by stock market rules and was unable to talk about the specific financial projections at the company.

However even six months into the post he reiterated the turnaround process will not be a quick fix.

He said: “We have made progress with it and we are making some headway which is good.

“We are pointing in the right direction but it is going to take time.”

Mr Scallan’s plan involves narrowing the focus of the business to concentrate more closely on managed IT services and cyber security although it will still provide services such as broadband and telecoms.

There has already been a step-back from its one-off events business which saw Pinnacle provide telecoms and broadband infrastructure to major events ranging from the Alfred Dunhill Links golf championship and London Marathon to music festivals and the Queen’s Jubilee celebrations.

Alongside that Mr Scallan has continued to trim costs “where possible” while aiming for profitable revenue growth.

He said: “In terms of growing the business clearly we need to acquire new clients as well as maintain the ones we have got. We have got a good track record of recurring business, it is about 88 per cent of customers staying with us and we have started to try and grow again.”

Mr Scallan pointed out Aberlour Childcare Trust as a new client while also stating recent renewals included Glasgow Chamber of Commerce and United Utilities.

He was also keen to note that while Pinnacle is trying to keep a lid on costs it continues to invest, particularly in its Glasgow office.

He said: “We are continuing to take cost out where we think it is the right thing to do. That is balanced by selective investment.

“We put some investment in Glasgow and brought on some additional technicians and engineers.”

According to Mr Scallan headcount in Glasgow is now at 16 and he would be happy to add to that.

He said: “When I did my review of the business I saw that our Glasgow operation was one of the best bits of the company and has the capacity to grow.

“I thought we could make the customer experience in Glasgow better by adding some new tools.

“My view is that success breeds success. As we attract new clients then we will continue to grow the operation. It is a question of the team having the right tools to deliver customer service and having the right skills in the business.”

Mr Scallan, a chartered engineer who graduated from Strathclyde University, confirmed there were no plans for the company to invest in infrastructure such as data centres as he feels it is better served by outsourcing services of that type to specialists like Scolocate.

As well as that he indicated the public sector procurement process is becoming increasingly difficult for small and medium businesses to compete in.

He added: “This is increasingly challenging as the frameworks which public sector (contracts) are being procured under, while ostensibly inviting small and medium businesses to be part of it, actually have quite a high degree of overhead associated with them.

“So while we are continuing to explore (public sector)we are also exploring solutions where we are part of a consortium or solution.

“This collaboration approach is increasingly important as the public sector is obviously cost conscious but equally strict in terms of the procurement process. It can be quite challenging for a company like ours to produce something to the standard they would need on our own two feet.”


IT Outsourcing Market Far From Stable

September 22nd, 2014

IT services deal activity was steady in the second quarter, but the IT and business process outsourcing industry is undergoing significant shifts as customers fire existing providers, ink shorter deals and embrace emerging technologies.Outsourcing9

The demand for global IT and business process services remained steady in the second quarter of 2014, according to a recently released report from outsourcing consultancy Everest Group. A total of 416 outsourcing deals were signed during the period, almost unchanged from the 415 signed in the first quarter of this year.

However, the IT and business process outsourcing market is far from stable, say the report’s authors.

Most notably, the report points out a continued and strong “anti-incumbency” sentiment among IT service buyers. During the first half of this year, companies terminated approximately 27 percent of their existing IT infrastructure deals, for example. And Salil Dani, practice director of the global sourcing group at Everest Group, expects that trend to continue throughout the year.

Factors Driving Provider Switching

Key factors driving the provider switching activity include disappointment with service delivery, the desire to unbundle IT services, and the anticipation of next generation technology needs that current outsourcers may not be able to provide, Dani says. In addition, providers eager to take over deals are making investments to reduce the cost traditionally associated with changing vendors, according to Dani.

Shorter and smaller contracts are also increasing, both on the infrastructure and application services sides. The share of IT deals with three- to five-year tenurres has steadily increased from 26 percent in 2010 to 31 percent in 2013, according to Everest Group. During the first half of this year, more than a third of new contracts (35 percent) were three to five years in length. And the percentage of very short-term contracts less than three years in duration increased from 10 percent in the first quarter of 2014 to 15 percent in the second quarter, according to the report. “This trend is one of the contributing factors towards anti-incumbency but is not the strongest driver,” Dani says.

Meanwhile, some customers may be showing old IT service providers the door as they Increase their adoption of technologies such as cloud, mobility, analytics, and robotic automation, according to the report. For example, the share of IT outsourcing deals with a cloud component nearly doubled from 5.8 percent in 2011 to 10.5 percent in 2013, according to Everest Group, and initial 2014 data indicates a continued increase in inclusion in outsourcing deals.

“There is increasing adoption of disruptive technologies in outsourcing contracts,” Dani says. “This adoption of disruptive technologies is leading to buyer organizations rationalizing the scope and scale of their outsourcing portfolio. They are also carefully evaluating service providers with distinct capabilities in disruptive technologies while making outsourcing decisions.”

IT service providers are increasing their capabilities and expertise in the areas of cloud, mobile, analytics, and robotic automation, but “there have been limited instances of service providers perfecting the art,” Dani says. Specialty providers have an opportunity to sweep in and take advantage of that fact.

“Disruptive technologies have the potential to fundamentally alter the traditional delivery constructs and provide opportunities to niche providers for more-than-normal growth and market share,” says Dani.

These combined trends are likely to intensify through the remainder of this year, according to Everest Group. To date, “any of these are limited to specific buyer geographies and type of providers,” Dani says. “Going forward, we see these impacting a broader and more expansive set of stakeholders than before.

How IT Outsourcing Customers Can Prepare

There are a number of steps outsourcing customers and providers can take to prepare for continued shifts in the IT outsourcing market.

Dani advises buyers to continuously evaluate outsourcing portfolios to identify opportunities based on provider capabilities and expertise, delivery rationalization, and newer technologies. And services providers must come to terms with an anti-incumbency bias that is likely to grow strong in coming months. Vendors must make greater investments in strategic relationships as they near the ends of their terms and further develop their cloud, mobile, analytics, and automation capabilities “given impact on non-linear growth,” Dani says.


TCS leads Indian peers, says global survey

September 19th, 2014

Clients see Tata Consultancy Services (TCS) as the only local information technology (IT) company strong on two important parameters, implementation and innovation, said a study.Outsourcing8

It was conducted by America-based HfS Research and KPMG last month. The annual survey, state of services & outsourcing, covered 312 global clients, 347 advisors and consultants, and 420 participants from the companies that manage IT and business operations.

“IT-outsourced service providers, such as TCS, are leading the way in terms of buyer perceptions, both on innovation and execution, relative to their peers,” said Charles Sutherland, executive vice-president of research at HfS Research.

The country’s second- and third-largest in the sector, Infosys and Wipro, respectively, were seen as strong on implementation but weak on innovation. This could mean if their areas of execution become less significant, these may become candidates for churning, the report added.

Smaller companies iGate, Xerox, Fujitsu, Unisys and CSC scored low in the survey. “For these, the task ahead is to increase awareness of their capabilities and, in particular, to highlight investments in innovation,” said Sutherland.

Almost half the survey participants said they would look at switching their existing IT service providers for several reasons. While 15 per cent said they planned to do so at the renewal cycle, 12 per cent said they planned to move some or all of the outsourced work in-house. As many as 23 per cent said they wanted to switch their provider but were still working through the practicalities of doing so.

“Some of this (dissatisfaction) may be the result of long-standing contracts where it is harder to repeat the level of savings initially achieved and booked for first-generation contracts,” said Sutherland. “But when combined with the results of a perception study of the IT outsourcing service providers, it may be that the larger issue is the market is increasingly fragmenting and certain providers (specially some entrants like Amazon and Google) are just changing the market at such a speed, that a new level of dissatisfaction with the previous status quo is setting in.”


The benefits of outsourcing for a small business

September 19th, 2014

So your business is flourishing, and you’re taking on an increasing workload; the question is, how do you maintain this steady growth without compromising its core values and quality of service? There comes a time in every business’s life cycle when the issue of staff constraints begins to raise its head, and the question of outsourcing becomes a serious consideration.Outsourcing7

Firstly, why do businesses outsource? One of the main reasons is simply time – or lack of it. Small businesses, ones that are growing quickly and juggling lots of plates, simply cannot afford to have key members of staff overstretched to the point of ineffectiveness. Outsourcing offers a spare pair of hands to help manage busy periods, bringing in specific skills on a temporary basis, to help support the company and maintain the success it has built from the launch onwards. Using expert outsourcing organisations essentially frees up your staff to concentrate on the core of the business and to concentrate on developing their own skills.

Outsourcing can provide further multiple benefits. It can also help control capital costs by reducing overall spend on staff; hiring a full time specialist is much more expensive than using a freelancer to do the same job, who can be hired on and off dependent on the needs of the business.

Outsourcing also allows companies to turn on new projects quickly, reacting to market demands and fulfilling customers needs much more effectively. Customers can often request work that the core business might not be able to provide – outsourcing can help to meet this demand and draw in new revenue streams, which might not have been part of the existing model in the first place.

Further benefits which are important for all businesses, not just those at the early stage of their lifespan, are the expertise that outsourcing tasks can bring, and the risks it can mitigate respectively. Utilising external specialists can help breathe fresh life into a venture and offer a different perspective to a particular challenge, which can be vital when maintaining growth in a small business. In terms of mitigating risk, take hosting or working in the cloud for example; if you’re a small business utilising sensitive data, it can be much more effective to use an expert cloud hosting provider to look after it. Not only will they have the skills to do this effectively, they will also be much more aware of regional regulations and legal requirements, which in turn reduces the legal risk that could threaten your company in the case of a data breach.

Pitfalls of outsourcing
So now that we’ve covered some of the benefits of outsourcing, what are some of the pitfalls that can be encountered when working with external partners at this stage in the business?

One of the first points I would raise is the loss of control to an extent. When outsourcing to a partner, you are placing a huge amount of trust in the ability of their team to deliver on your brief. If the brief is poor, misunderstood, or the team working on it are not the strongest, then you run the risk of results being delivered that are not up to par. And in many cases you will still have to pay for these. This can be hugely damaging, especially in the early stages of a business when budgets are tight.

The second are hidden costs. When outsourcing, especially to service providers, there will be a limit to the amount of work that you are paying for, and so anything extra that arises will often be subject to further outlays. Being at arm’s reach with your external partner can often mean costs are not necessarily transparent when you first begin working together.

And finally, confidentiality can be an issue. No matter how much you trust an external partner, if you share data with them then essentially you are increasing your risk by relying on their security systems. In most cases this is never an issue, but as soon you share your data with another organisation the likelihood of a breach increases as it’s now in a location that is not under your immediate control.

While outsourcing can offer risks, for most businesses in early development stages it is a vital ingredient to success. Every business needs support at certain times in its life cycle, and so choosing the right partner can be the difference between triumph and failure.


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