Regionalisation Beats Globalisation After Election Surprises

by IBA Group for IBA Group
Posted on January 16, 2017

IBA Group
Mark Hillary

There was an interesting analysis of the trend towards regionalisation published in business magazine Forbes just before the recent holiday season. It explored how the Brexit vote in the UK and the election of Donald Trump as the US president might change business behaviour.

Politics went through something of a shock in 2016 and 2017 may hold further surprises in Europe with elections in the Netherlands, France, Norway, the Czech Republic, and Germany all coming soon…

But what does Forbes mean about a change in business attitudes and how does it affect those in the IT business?

The answer lies in the growing nationalism seen in the USA and many European countries. There is a growing desire to show that jobs are being created and managed close to home, or at least closer to home than before.

In European technology circles this is likely to manifest itself with less trust in technology suppliers from Asia – particularly China and India. Many of these companies are highly professional leaders in their industry, but as consumers start becoming more wary of strategies such as outsourcing and offshoring, it is likely that managers buying IT services will look closer to home. As Forbes suggests, the trend will be towards European regionalisation, not globalisation.

It is unlikely that markets such as the UK or Germany will create enough new technology professionals to ensure all work can be performed locally – and the cost would be prohibitive for most organisations anyway – but these consumer attitudes will favour technology companies in Eastern Europe.

The Central and Eastern Europe (CEE) region has long marketed itself as a European alternative to China and India. Allowing European companies to work with partners that are close enough for a day trip to be possible. Now they will have an additional advantage, the growing political and social unrest about long distance offshoring.

It’s good news for European technology companies as Europe remains close – organisations in Europe buy 69% of their goods from other European companies. The USA may be a more complex scenario as President-elect Trump has already talked about scaling back drastically on the H1B visa that most foreign IT professionals use when working in the US.

Whatever happens with the politicians, the direction of travel is clearly towards nearshoring as a preferable solution. The era of the world being completely flat appears to be over. Welcome to an era of regionalisation.

How IT Leaders Can Learn From Big Data Industry Changes

by IBA Group for IBA Group
Posted on December 19, 2016

IBA Group
Mark Hillary

The Big Data market has transformed how most IT services are bought and sold. Often the customer is a business leader, rather than the CIO, and services are already available, rather than needing to be designed from the ground up.

IT leaders often look at other companies to see what they are doing, it’s usually known as best practice, but what if the entire market is in a state of flux? Some IT companies are now delivering radically different solutions to others. Innovations like the app store concept and cloud based solutions are changing the way that IT services are delivered globally, so how can changes in the Big Data market change how the entire IT industry behaves?

Techrepublic magazine recently outlined some important changes in how IT leaders think about their marketplace. Think of these 5 different changes as examples of what is changing and how it can influence the behaviour of IT leaders:

1.    Off the shelf analytic solutions like Watson from IBM have been customised to be used across many different industry verticals. It’s the same system, but modified for different environments and it can therefore offer immediate results. Everyone is looking for a rapid return on investment today.
2.    Commodity hardware offers a great platform for storage if you are going to keep your data and analytics system internal, rather than in the cloud.
3.    More companies are relying on their suppliers for expertise and innovation today. These are true partnerships now, not just outsourcing arrangements where the cheapest supplier gets the project.
4.    Analytics reporting systems like SAS are still important because they have been tested and developed over so many years, but also because the users are really familiar with the way these systems work. Familiarity is important.
5.    Real time processing systems are changing the way that physical infrastructure is designed and deployed. Look at SAP HANA for an example of how systems using memory in new ways are now feeding back into the design of the physical servers and databases.

What do you think about the lessons from Big Data? Have you seen other ways in which IT is more generally changing because of the way that Big Data is influencing IT strategy? Please leave a comment here.

How is The European Nearshoring Market Changing?

by IBA Group for IBA Group
Posted on December 12, 2016

IBA Group
Mark Hillary

Is there a new world of nearshoring emerging in Europe? A recent feature by Ilan Oshri of Loughborough University in Computer Weekly has suggested that the market is changing fast, in particular as a reaction to every country sounding the same when making their sales pitch.

We have all been to those conferences where one country representative is talking about the advantages of their region over others, but when several regions do the same type of talk they do all sound the same. We have great people, we have universities, we have great companies. The same check-box of advantages is always ticked for every presentation about outsourcing to a particular region – so what is changing?

First, there is a big wave of repatriation taking place. Projects that were outsourced to far off locations are coming much closer to home so nearshoring is becoming a much more important strategy for European companies.

Second, a wider array of services can be delivered by suppliers today and this is especially true when the supplier is relatively close to the customer, so the range of services offered through nearshoring deals is becoming more diverse.

Third, companies are increasing their expectation on suppliers. A supplier is no longer just the lowest cost way to get a job done. Many suppliers are the expert in their field and are delivering a service that the client simply could not perform internally anyway. The clients are now expecting suppliers to offer ideas and new innovations. Nobody is talking about innovation as a nice to have function these days, it is becoming an expectation of nearshoring that the supplier can come up with ideas on how to do business better.

Professor Oshri raises some very interesting points in his article. He believes that nearshoring locations still attempting to compete on labour price are thinking with a very short term view of the world. The ability to offer expertise and advice to clients will become the single biggest advantage and this may also require clusters of expertise to develop. He cites some examples of regions where competing firms are operating in the same physical location, so even if it does not sound logical, it does mean that for each specialist activity there are areas where clients can go and confidently find the expertise they need.

I believe that we are seeing a new type of nearshoring emerging and all three of the points raised by the professor are playing out across Europe today. The final point is the most important though. Clients used to be so powerful that they could pick and choose and drop suppliers at will. Now the suppliers have some very detailed knowledge that the clients cannot manage without. Real partnerships are developing and that will lead to genuine innovation.

What do you think about the ongoing development of nearshoring in Europe? Please leave a comment here.

IBA Group Wins Second Place at IT Spartakiada 2016

by IBA Group for IBA Group
Posted on November 30, 2016

On November 27, the organizers of the 13th sport competition among IT companies IT Spartakiada 2016 announced the results of this year’s tournament. IBA Group won the second place, following their successful performance in 2015.

Sixteen teams participated in the competition this year. For the first time in its history, IT Spartakiada was held in two stages, with the tournament starting in spring and finishing in autumn. In its spring stage, the participants competed in laser tag, swimming, poker, and indoor football. In autumn, the teams clashed in karting, kicker, bowling, table tennis, volleyball, and basketball.

IBA won the tournaments in kicker and bowling and occupied the second place in laser tag, poker, and swimming. The karting, table tennis, and indoor football teams finished fourth, while the basketball team ended the competition at the fifth place. This allowed IBA to finish at the second place in the overall standings.

Winners of IT Spartakiada are determined by the minimal sum of points scored by teams in their top seven sports. EPAM was the winner of this year’s competition, while ISsoft won the bronze.

Congratulations to our colleagues! We are proud of their success and wish them many more great achievements in the future.

IBA Group Wins Second Place at IT Spartakiada 2016

The IT Customer Is Changing Fast, But Are They Happy?

by IBA Group for IBA Group
Posted on November 15, 2016

IBA Group
Mark Hillary

I have read several studies recently that explore the strengthening connection between how companies use technology and how satisfied their customers are. Traditionally the CIO in a large organisation might be focused on processes, supply chain technology or managing systems used by employees – this is changing fast because of three important trends:

1. Consumer tech; look at the mobile system consumers are used to using today. They can compare prices, talk to friends globally, check customer reviews, and do all this while in your store or on your website. It’s not possible to charge more than the competition today because customers will see it immediately.

2. Tech platforms; the major systems applied inside companies used to be custom-built. Armies of analysts would design the workflow and another army of developers would build the system. Now it’s far more common to buy a system that can be deployed in the cloud and paid for only when it is used. This means that business divisions inside companies are buying major IT systems and deploying them possibly without even involving the CIO or IT team.

3. Blending customer responsibilities; all those clearly defined departments like sales, marketing, customer service, advertising, or PR, forget it. They need to start working together because customers have redefined how they interact with organisations and the companies need to reform and catch up – customer service IS now marketing.

There is a connection here. As the various research studies suggest, companies need to review how they are using technology, and in particular how this improves their connection to customers. Whether you are involved in IT department tasks or CIO-level decisions, or you are part of the business function within an organisation, there is a revolution taking place in the way that customers interact with your business and it is being driven by the technology being used both inside your company and by the customers.

More IT Expertise In Eastern Europe Becoming Visible Globally

by IBA Group for IBA Group
Posted on November 8, 2016

IBA Group
Mark Hillary

Global freelancing platforms, like UpWork and JobRack, are becoming an increasingly important source of IT talent. These sites have been really popular with freelancers in many countries in Asia for some years now. It’s become quite normal to hire a contractor in India or Bangladesh to perform defined jobs, such as setting up a WordPress server, but JobRack has recently noticed something interesting about the people on their site.

Many of the new experts arriving on the site are from Eastern Europe. This is demonstrating that there is not only a large amount of technical expertise in Eastern Europe, but also that these people are available for short contracts.

On the surface this may not seem important at all – you can find IT expertise all over the world – however I think that we are observing some big changes in the way that IT services are deployed and managed and this growth in the availability of expertise in Eastern Europe is just one indication of that change. Summarised, I think there are three big changes taking place:

1. Big IT Brands Focused on Customisation and Configuration; rather than trying to deliver enormous bespoke software systems, the larger IT players are becoming experts at bolting together various Big Data or CRM platforms to create entire systems for customers based on existing systems or toolkits.
2. App platform is global; software companies releasing apps can go global instantly. There is no real focus on where a product was developed as the app store is global and customers rarely ask where a product was developed.
3. Global talent pool; as the JobRack numbers suggest, it is becoming easier to recruit globally for short or long-term projects and areas that are full of technical expertise, such as Eastern Europe, are included in this.

The JobRack data indicating a growth in Eastern Europe technology expertise is interesting, but is just one component of a wider picture in how technology services are being delivered today. It’s clear that Eastern Europe is becoming more highly regarded as a leading area for IT development projects – large and ongoing or small and temporary.

IBA Group
Mark Hillary

One of the manufacturing myths common in the UK is that nobody builds anything any longer – it’s popular to suggest that the UK used to manufacture products such as cars, but today that business has all vanished. However the numbers make the situation look rather different. Last year around 1.6m cars were manufactured in the UK, which was the highest figure for a decade.

But 2016 brought the Brexit vote and some potential changes to the auto manufacturing industry in the UK. The recruitment company DHR has suggested that auto manufacturers are shifting high-end work such as research and development over to Eastern Europe. Their data is supported by the news that companies such as Jaguar, Audi, and Renault have all recently invested in Eastern European expansion plans.

However, I believe there is more at play here than just the Brexit vote changing how cars are designed and manufactured. What we think of today as a car is changing faster than ever and the research function is about more than developing the next generation of sound system. The entire auto industry is being redefined around technology and the car makers that get this right will win a substantial market share.

There are three areas where I think technological research is redefining the entire auto industry and this summarises why the locations where the R&D take place will be at the heart of planning the future of this industry.

1. Electric vehicles; Tesla has shown that electric vehicles can be popular, but the price is still out of reach for regular consumers. As the regular brands invest more in R&D and battery design we will see an enormous change in this market.
2. Internet of things; cars just becoming a part of your home network will be normal. This will allow cars to self-diagnose problems and talk to the manufacturer without the owner being involved in addition to synchronising to your home – perhaps something as simple as playing the last song you had on in the house when you start the vehicle.
3. Self driving cars; we have seen that it is mainly tech companies that seem to be progressing in this space, but if the mainstream auto brands want to define the future then they need to also be investing in this space.

All this shows that the future of the car industry looks more like the technology industry with integration into networks, the Internet of Things, new battery technologies, and the ability to function without human interaction. There will be a strong crossover between the IT business and the auto business in the near future and it looks like a lot of this work will be taking place in Eastern Europe.

IBA Group
Mark Hillary

Outsourcing has never been a business strategy with much prestige. Often seen as a way of handing over business problems to a partner or slashing costs, it is a strategy that has always had an image problem.

In recent years this has improved. As many processes have become far too complex for companies to manage in house there has been a rebalancing and outsourcing is more often seen as necessary – it’s just one business calling in the experts in the same way that you would call in an electrician to rewire your entire house rather than attempting it alone.

But the role of the service provider is changing and although it might sound a bit like the tail wagging the dog, there is a likelihood that the only way many companies will change quickly enough to survive in the present environment will be if they can trust and work with their suppliers in a new way.

In a recent blog Phil Fersht of HfS Research published some research from his company that outlines how suppliers and clients see their roles in the future. Barely half of all clients are looking to their suppliers for any value in their relationship beyond the business support that is contracted.

But this is highly likely to be a mistake. Outsourcing to expert suppliers and only ever using them for the business processes you have contracted means that you miss out on their vision of how your industry is changing. Look at how fast fintech is changing financial services. If an app is released offering a financial service more easily and at a lower price then that can fundamentally change how the industry operates.

Doing business today is not just about doing what you did yesterday a little cheaper or faster. It is easier than ever for competition to be created and new companies often just tear up the rule book and deliver services in an entirely new way. The big difference is that new companies are usually designed around the needs of the customer from day one. They are able to offer better services at a lower price – this is going to affect many industries and yet a new approach to outsourcing could help mitigate the risk of it happening to your business.

As the HfS research suggests, there is a role for outsourcing to support and enable disruptive business models. Incumbent companies have the advantage of brand recognition and many years of working with customers. New disruptive players can change the market, but if the incumbent innovates first then they have distinct advantages in being able to offer better services with a large existing customer base.

But it needs a new approach to outsourcing. Suppliers need to be considered genuine business partners and trusted to have vision and ideas – the ability to combine innovation with technical expertise. If suppliers are only ever treated as a cost centre then this approach will be lost and many large companies will find that the app-based startups eat their lunch.

IBA Group
Mark Hillary

Europe is in a state of flux at present. British people recently decided that they should leave the European Union – now known as Brexit – and the latest book from Nobel prize-winning economist Joseph Stiglitz suggests that the Euro currency will tear the rest of the union apart.

In this uncertain environment, does the old idea of European nearshoring still work? There are many countries within the EU block and part of Western Europe that now have very high unemployment and low labour costs – look at Greece, Portugal, and Spain for examples. Is it still valid to think of Eastern Europe as a supplier of technology skills to the rest of Europe?

I was thinking about some of these uncertainties when I read an article on the GSA Sourcing Focus site. The article explores some of the issues around Brexit and how it might affect outsourcing relationships.

The three main issues mentioned by Sourcing Focus are:

1.    The cheap pound; it’s no longer so cheap to buy services from outside the UK so with the economic advantage eroded will more UK companies buy services locally or look beyond Europe for better value?
2.    Legal situation – data transfers; The UK enjoys the protection of the entire EU regarding company law and international agreements protecting issues such as data privacy across borders. How will this change if the country has to legislate for every possible situation individually?
3.    GDP collapse; if the UK becomes a much smaller economy as many economists suggest then how will this affect the relationship between UK companies and suppliers across Europe? It doesn’t look good.

The fears raised by Sourcing Focus are valid. It’s clear that the UK market in international services could change dramatically in the next few years, but I think that it is premature to start defining issues just yet. The UK government has not even triggered Article 50 of the Lisbon Treaty yet. This would indicate the formal request to leave the EU and begins a two-year process of negotiating how to leave.

At present the situation is that the UK population voted to leave the EU and the government has said that they will follow the wish of the people, however they are now engaged in a process of negotiation before any formal negotiation begins. Nobody really knows what will happen to the UK at present.

The issue for UK companies at present is this uncertainty. Any UK company bidding for business internationally cannot predict what kind of tariffs or taxes might be applied to their services in a few years and therefore they are at a disadvantage. This could lead to a reduction in international services being delivered from the UK and therefore it could be advantageous for Eastern Europe, but if UK customers suffer in this environment and they are already working with suppliers in the CEE region then this would not be such a great situation.

The real problem now is the uncertainty. The UK government should take action as quickly as possible so that however this story plays out, at least there is more certainty about how the UK will interact with the rest of Europe in future.

IBA Group
Irina Kiptikova

On October 6, the Global Sourcing Association (GSA), formerly known as the European Outsourcing Association (EOA), held the Global Sourcing Leadership Summit and announced the winners of the 2016 EOA Awards. IBA Group was selected the winner in the category Award for Corporate Social Responsibility (CSR). The news is really exciting. The project that earned the award is really special.

IBA Institute, a member of IBA Group, trained 120 disabled people in system administration. Entitled Promotion of IT in Belarus among People with Disabilities, the award-winning project was the first IT education project for disabled people in Belarus.

As many people with disabilities were unable to attend in-class trainings, IBA Group conducted distance training. The students could see the teacher’s desktop, ask questions, make presentations, and prepare lab works on network behavior in Cisco Packet Tracer.

Following the training, IBA Group organized a contest among the graduates of the course to attract employers’ attention to the newly educated system administrators. The idea was to show that people with disabilities deserve praise and well-paid jobs.

The contestants were to troubleshoot network connection problems and to get access to web resources within two hours. The winner solved the task in one hour. Alexander Makarchuk, a completely paralyzed resident of Borisov, left behind the runner-up by 40 minutes. From an outsider’s viewpoint, it looked like he was singing canticles: e-e-e and the curser jumps up, a-a-a and it moves to the right…Technically speaking, Alexander manages the cursor using the software Vocal Joystick that ‘memorizes’ the entered words.

It was the first project in Belarus to socialize people with disabilities through IT education. As a result of the project, a community of learners with an immersive environment was created. Six project graduates, including the contest winner were offered IT jobs!

students

In addition to CSR, IBA Group submitted Belarus in the category Outsourcing Destination of the Year. Although Egypt was selected the winner, it is a big boost for Belarus to be shortlisted in this important competition.

As for the Global Sourcing Leadership Summit, it was held in Sophia, Bulgaria. Rosen Plevneliev, President of Bulgaria, opened the summit. After Bulgaria was selected the Outsourcing Destination of the Year in 2015, a letter of the Bulgarian President came to Kerry Hallard, NOA and EOA CEO. He invited the association to organize the 2016 summit and awards in Sofia. It goes without saying the invitation was accepted.

Bulgaria boasts the same competitive advantages as Belarus or Czech Republic. President Plevneliev mentioned qualified resources and political stability, calling Bulgaria “an island of stability” in Europe. People of different religions and politics co-exist in the country.

Kerry, now the CEO of GSA, announced that after 29 years the NOA brand stopped its existence and the NOA was transformed to the Global Sourcing Association (GSA). The new association signed cooperation agreements with Russian and Chinese outsourcing associations and adopted its Global Sourcing Standard.

The most popular discussion topics at the summit were gender equality, robotic process automation (RPA), digital technologies, and the meaning of Brexit for the European sourcing market.

See the full list of 2016 GSA European Award Winners