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Tuesday
Aug022011

Global IT & Outsourcing for the Legal Sector

Neil Cameron Consulting & Telstra International recently released a whitepaper which looks at current challenges and emerging strategies for the legal sector. This may also be interesting background reading for anyone involved in global IT & outsourcing.

Link:White Paper on the future of Law.

Wednesday
Jul132011

Quality vs Cost or Quality & Cost

Interesting article in Business & Finance magasine archives regarding public sector Outsourcing. Its worth dusting off and ready again.

"One of the most common mistakes, particularly in the public sector, is to overly prioritise cost over quality when outsourcing ie, go for a cheaper solution for what is a critical public service. This has been a key factor for many of the larger public-sector outsourcing failures and it is therefore essential that the supplier selection criteria is fully consistent with the reasons for outsourcing."

 

http://www.businessandfinance.ie/index.jsp?p=378&n=384&a=1854

 

Monday
Jun202011

Who are the champions?

 

EUROPEAN BUSINESS

European business seems stuck between awesome America and low-cost Asia. In fact it is doing surprisingly well, says Iain Carson

Howard Read

Feb 8th 2007 | From The Economist print edition

IT IS not difficult to be pessimistic about the future of European business. Compared with the awesome strength of America and the raw power of emerging Asia, Europe is sometimes portrayed as a has-been, excelling in luxury goods, fine food, wines and fashion but weighed down by too many old industries and old ideas. From microchips to microbes, poor old Europe seems to trail in America's and Asia's wake.

America enjoys awesome advantages over Europe. It is a huge, truly single market with a relatively youthful, growing population. It is the world's economic superpower, with much higher productivity than its competitors (though productivity growth has recently been disappointing, and last year was slightly below Europe's). It has world-class universities that work hand in glove with business. Americans have not only won more Nobel prizes, they have turned more scientific advances into profitable businesses than anyone else. Many of these firms have gone on to become the giants of modern business.

It may have been a British scientist, Sir Tim Berners-Lee, working at a laboratory in Switzerland, who invented the world wide web, but America is the home of the internet and all the business sectors it has spawned. And even where Europe is holding its own against America, it seems unable to retain its advantage. Boeing drifted badly in the 1990s as Europe's Airbus made strides, but having merged with McDonnell Douglas the American giant bounced back. It is now taking market share from the Europeans.

America's economic growth, averaging 2.5% a year since 2001, has reflected this dynamic business culture, whereas Europe has managed an average growth rate of barely 1.5% over the same period, though the pace has picked up in the past year. Europe's sluggish performance is often put down to the poor business climate. Rigid labour laws and strong unions make it difficult for firms to fire redundant workers and unattractive to hire new ones. Product markets are not as competitive as America's, and the single European market has yet to become a reality in areas such as banking and services.

Corporate governance too is variable: transparent and world-class in Britain, but often inadequate in continental Europe. In Germany workers sit on boards, and in France even small firms have to have an employees' committee that can make life difficult for management. Minority shareholders do not always get enough say.

Moreover, European governments like to meddle. France has drawn up a list of strategic industries, including casinos, that it thinks need special protection from foreign takeovers. Even Spain, with its new Anglo-Saxon business culture, tried to stop a German utility from taking over a Spanish power company. Telecom Italia's attempts to hive off its mobile-phone business became highly politicised.

Many European politicians are fearful about the effects of globalisation and the rise of China and India. France's vote against the European constitution in 2005 was partly a protest against globalisation, which is blamed for persistently high unemployment there.

Certainly Asia has been making itself more strongly felt in Europe in recent years. Japan now has car factories in France and the Czech Republic as well as in Britain, and imports from South Korea's resurgent car industry have been causing difficulties at Renault and PSA Peugeot Citroën. India's Tata Group too is planning to export cars to some southern and eastern European markets where they will provide more competition for the traditional west European manufacturers.

Europe's pride

Yet even though European business has to operate in a difficult political, social and economic environment, it has produced an impressive crop of world-class companies. An analysis by McKinsey, a management consultancy, shows that Europe has 29% of the world's leading 2,000 or so companies, broadly in line with its 30% share of world GDP. It punches its weight in most global industries except IT, where America is leagues ahead (see chart 1).

British companies were pioneers of globalisation, perhaps because of Britain's open Anglo-Saxon business culture and financial system. More recently Britain's BP bought several American oil companies, triggering a wave of oil mergers in America and Europe. But then Britain is closer than its European cousins to the freewheeling American business model, which is why this special report will concentrate mainly on continental Europe.

Over the past few years those continental European countries have been gradually shedding their old corporatism and learning new tricks from the Anglo-Saxons. Jeff Immelt, who succeeded Jack Welch at the helm of GE five years ago, is struck by the vast improvement in European top management in recent years. As he points out, most big European businesses are now successfully global. The figures bear out Mr Immelt's impressions.

Kevin Gardiner, head of global equity strategy at HSBC, an investment bank, who first spotted the Celtic Tiger miracle of the Irish economy a decade ago, has recently made another remarkable discovery: European businesses are making better profits than their American counterparts (see chart 2). He notes that “currently European companies seem to be slightly more profitable even than their American peers.” This has been achieved even though revenues have been growing more slowly than in America, which underscores Europe's growing success in restructuring and consolidation. Corporate America and corporate Europe are now neck and neck in the globalisation stakes.

Dominic Casserley at McKinsey's London office also takes a bullish view. “Write off Europe at your peril,” he says. “In many sectors European companies are clearly in the premier league. We see a generation of strong European management teams emerging who are aggressive, hungry and eager to expand.”

Some of this revitalisation of European business is due to the impetus from a more open trading system in a global economy. European companies, small as well as large, have quietly got on with moving many of their operations abroad where it makes economic sense to do so.

But two other powerful forces are also at work. One is the structural change now taking place in Germany. After years of languishing, Europe's biggest economy is beginning to feel the benefit of reforms, particularly to its financial system.

The other force is a gush of private-equity finance, much of it originating in America and landing in Europe. This started only a few years ago, but already private-equity and venture capital invested in Europe totals €173 billion ($225 billion) and is growing by leaps and bounds.

Donald Gogel, the boss of Clayton, Dubilier & Rice, an American private-equity firm, sums up the benefits: better governance; a more stable shareholder base; upgraded management talent; higher expectations; and a sense of urgency. Private equity gives the owners of the business direct control over its performance. If managers succeed, they earn a lot of money. If they fail to perform, they are replaced. Americans have known all this for a while, but Europeans are learning it fast.

This special report will ask how European companies, large and small, are coping with global competition. It will examine the boom in cross-border mergers and takeovers in Europe and look at the fundamental changes in German business. And it will argue that European business is better than its reputation.

 

Friday
Jun172011

11 Outsourcing Trends to Watch in 2011

Smaller contracts and hard lines on prices. Cloud-related commotion and back-door deals. Increased offshoring and decreased customer satisfaction. Happy New Year, outsourcers!

By Stephanie Overby

CIO — Outsourcing activity is expected to creep back in 2011, but things are hardly getting back to normal in the IT services space. The new year will be marked largely by upheaval—smaller contracts, cloud-related chaos, increased offshoring and decreased quality, for a start.

Read on for more. It's not all bad, we promise.

1. Progressive Outsourcing

The year will be marked by the inking of smaller IT services deals, many of them by first-time buyers who sat on the sidelines in 2010, say industry watchers. Providers, happy to have a foothold, will push such customers to expand the scope of their relationships over time—the old "penetrate and radiate" approach. Contract activity will "creep back throughout 2011, as the recover stutters and buyers pull the trigger on sourcing activity," says Phil Fersht, founder of outsourcing analyst firm HfS Research.

2. Diving for Dollars

Facing a slow economic recovery, IT leaders will continue to scour their existing outsourcing arrangements for savings. "There's a pot of gold in every contract, and in some cases we have found a pot worth millions," says Mark Ruckman, an independent outsourcing consulting working in conjunction with Sanda Partners. IT services customers may reconcile their invoices with their original contracts with an eye toward under-delivery or over-payment, for example, or replace contractors from large sourcing providers with IT professionals from local temp agencies.

3. Outsourcing, Meet Cloudsourcing

Even if some of the discussion of cloud-based offerings from IT service providers is largely hot air, it will continue to be a hot topic in the industry. "The emerging cloud sourcing market will cause the destruction of the outsourcing market as we know it today," predicts Ben Trowbridge, CEO of outsourcing consultancy Alsbridge. "The two markets will merge and cloud sourcing will drive the rebirth of outsourcing."

Cloud players like Amazon, Google (GOOG), and Rackspace are hitting traditional service providers like IBM (IBM) and HP (HPQ) where it hurts. "An executive of one of the current low cost leaders recently told me they're forecasting the need to be able to remain profitable while seeing the price of some of their services drop by 70 percent over the coming year," says Trowbridge.

Look for mergers and acquisitions as legacy providers fumble their way forward. Customers, too, will need help stitching together old and new. "IT is going to be coordinating an increasing portfolio of third -party applications hosted externally," says Brian Walker, managing director of EquaTerra's information technology advisory. "The theme in 2011: SaaS-to-SaaS integration."

4. Back-Door Deals Put CIOs at Risk

Many of the discussions and decisions about cloud-based offerings will be handled by business unit or function owners rather than IT, says Kamran Ozair, executive vice president and CTO at offshore outsourcer MindTree. That could pose problems down the road. "CIOs must get ahead of business users reasonable zeal for the power of focused SaaS applications that could back the enterprise into stealth architecture decisions that could be expensive to undo," says Trowbridge. "Business stakeholders want cloud, and they know smart CIOs can mitigate its risks," adds Fersht. "However, IT professionals must tool-up to deliver cloud to their business stakeholders, otherwise they risk a gap growing between business demand and IT supply."

5. The End of Customization

"Clients will be increasingly open to changing their internal processes and accepting standard 'vanilla' services in 2011," predicts Bob Mathers, principal consultant for Compass Management Consulting. "Service providers will put renewed emphasis on internal initiatives to standardize their own offerings to leverage economies of scale and stabilize profit margins." It's the stuff of benchmarking dreams, but economic conditions may turn it into a reality. Stan Lepeak, managing director of global research for outsourcing consultancy EquaTerra, also predicts more process, technology, and location standardization including platform-based solutions.

6. Prices Get Firm

Remember when you could persuade (read: bully) your provider into lower pricing? Days of auld lang syne, my friends. "Outsourcing providers have filled up their prior excess capacity and will be driving to secure higher price points," says David Rutchik, partner with outsourcing consultancy Pace Harmon. "Pounding on the table for price reduction is unlikely to be effective this year."

Customers seeking savings will have to bone up on delivery models, deal structures, and value drivers instead. And vendors will have to woo clients with performance rather than a low bid, says Peter Bendor-Samuel, CEO of outsourcing consultancy Everest Group. "As a result, we will see select players grow disproportionately, taking clients away from others."

Cloud-computing prices could also become less—well, cloudy. Pricing models will mature, predicts Dave Brown, managing director of EquaTerra's IT advisory, and buyers will better understand the specific offerings.

7. M&A: East Meets West

A merger between a major Indian IT service provider and a U.S.-based outsourcer? It could happen next year, say some industry watchers, and an Indian company may be on the buying end. Western providers have adopted the process and cost initiatives first embraced by their Eastern counterparts. Indian providers are skilling up to try to win more consulting and integration work. "The cultures are moving closer together," says Fersht of HfS Research. "2011 will see the first mega-merger between a major Indian services provider and one of the Western incumbents."

"It has long been talked about," says Joseph King, Chief Marketing Officer at MindTree. "There is no longer [cost] that CIOs can squeeze from their India partners. So for differentiation, India providers will be forced to move up the value chain."

8. China, Brazil, and Egypt Take Center Stage

"Buyers are growing more interested in offshore services delivered from locations other than India," says EquaTerra's Lepeak. And service providers will continue to shift their delivery centers to markets such as China, Brazil, and Egypt, and not simply to address issues such as wage inflation or staff attrition. They want a piece of the business in hot emerging markets. "Strong sourcing market growth will be in geographies with strong economies, led by Brazil, China, India and the Middle East," says Bendor-Samuel of Everest. "Countries with strong economies represent big markets with big demand for transformational and discretionary spend activity."

9. Protectionism Will Continue...With Limited Effect

It's practically inevitable with continued high U.S. unemployment levels that the new year will bring with it more proposals by American politicians that appear to limit the use of offshoring.

But any proposed protectionist legislation will be marked mostly by sound and fury. "Most of these measures will fail to gain traction and pass into law, and those that do will be difficult to implement and audit," says Bendor-Samuel.

The attention that such measures, successful or not, draw could put pressure on offshore companies to increase their onshore capabilities, Bendor-Samuel says. But they hardly need more impetus to do that (see prediction #7 above). Concerns about a tax on offshore call centers specifically could be an incentive to reduce call volumes through the use of more self-service and automation tools, says Compass's Mathers. But they hardly need more incentive to take more labor costs out of the outsourcing equation (see prediction #TK below).

10. Providers Embrace Mass Automation...

"It continues to become harder to turn a good profit as a third party service provider," notes EquaTerra's Lepeak. Pressure to keep costs down and rive performance up, outsourcers will rely more heavily on automation, says Rutchik of Pace Harmon, from optical character recognition to whole lights-out, employee-free delivery centers.

Providers will increasingly be slinging such automation tools as well. "Applications that reduce the labor a client is required to perform the services will be offered at lower implementation and running costs than they have in the past," says EquaTerra's Brown. "This will continue to create demand for additional opportunities and reduce the staff necessary to support critical business applications."

11. ...And Mass (Offshore) Migration

The internal corporate IT job isn't the only one expected to go the way of the dodo in coming years. IT enterprise customers arent the only Expect more vendors to make like HP and attack labor costs through layoffs and offshoring in 2011. "[HP] has emerged leaner and dramatically more price competitive, " says Bendor Samuel. "This increased competitiveness has already set off a chain reaction as competitors increasingly recognize the new competitive realities and move, in turn, to cut cost and match price." The easiest way to do that it to move large swaths of delivery personnel to lower cost locations. "This mass migration of work is and will further stretch offshore delivery capabilities, resulting in decreasing quality and communication problems," Bendor-Samuel predicts.

http://www.cio.com/article/647965/11_Outsourcing_Trends_to_Watch_in_2011

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