Outsourcing in 2013

IBA Group
Mark Kobayashi-Hillary

The analyst firm Horses for Sources is conducting their annual survey on the state of outsourcing in 2013. You can participate in the survey here and I would recommend adding your voice because this is one of the best annual summaries of what is going on in the sourcing industry.

One of the biggest changes I have observed over the past few years, and one that is accelerating at present, is a reduction of the offshoring concept – meaning that the world feels a lot smaller and that it is now normal to perform various tasks for a company in many locations.

If you go back a decade or more, an offshore IT delivery centre felt very much like it was in another location, a place where you might not expect senior executives from the client firm to be based. India is a good example – it was a low cost software production centre and executives only ever visited on business trips.

Eastern Europe is the same. There was a clear divide between where the clients were located and where the delivery centres were being developed. But this has all changed and Eastern Europe has changed much faster than locations like India.

It’s still a big journey for an American or European executive to get over to India and despite offshore delivery from India becoming common, there is still a clear divide once you arrive in the country and see a shining new software factory right next door to a slum.

It’s almost a decade now since countries like Poland and the Czech Republic entered the European Union and all these nations to the east now feel like an integral part of the continent – even more so now that the Eurozone is struggling. Ukraine grew over 5% last year and the Czech Republic almost 2% so these places to the east are really helping Europe as a whole.

We are already seeing a situation develop where Eastern Europe becomes a market for Western Europe to work with, rather than a place to locate lower-cost services. How long before it looks far more attractive to invest in the east?

Ukraine Steps Up the Heat

IBA Group
Mark Kobayashi-Hillary

New data from real estate experts Jones Lang LaSalle has indicated that Romania and Ukraine are becoming far more important players in the Central and Eastern Europe outsourcing market – challenging the more traditionally dominant Polish market.

Ukraine was highlighted in the research — the value of its IT outsourcing market hit $1bn in 2011, the Financial Times reported earlier this month, up tenfold in the last decade.

Among those major companies setting up in Ukraine, according to Kyiv Post, is Nestle, which recently opened a service centre — right across the border from Poland in Lviv.

You might ask why a real estate company is releasing data on the ITO and BPO industries and how they could be offering analysis on the growth of the hi-tech service sector. Growth in these markets needs people and offices and so one of the business areas with their finger right on the pulse of which region has the most interesting growth prospects is the commercial real estate sector.

They know where companies are investing before the companies themselves make a big noise about their own success – so markets like Ukraine are clearly now developing a momentum worth watching closely.

Poland may remain dominant in the BPO and call centre market, but this enormous growth in IT spending further east is a sign of where the smart money is heading.

Outsourcing and the US Presidential Election

IBA Group

Mark Kobayashi-Hillary

For the past few US presidential elections, outsourcing offshore has been a major topic of debate. Usually the rhetoric revolves around which potential president will be tougher on offshoring than the other.

At the last election there was talk of new tax hikes for companies purchasing services from other overseas companies – but of course nothing happened, this really is just electioneering.

The USA remains the most powerful economy in the world even after the financial meltdown starting reshaping world finances. American products produced by companies such as Boeing and Microsoft sell all over the world. These products are also developed all over the world – business today is a global network of companies selling products and services across borders.

The offshore outsourcing debate during US election campaigns has always been full of hot air, playing to a domestic audience that likes to think of American companies employing only American workers, but the world economy is no longer just concerned with domestic politics.

If Dodge wants to sell cars outside the USA they need to employ people in the markets where they want to sell. If Microsoft wants to ensure their products work correctly across all the major markets of Asia, they need to employ people in those regions.

And when it comes down to IT expertise, the USA has plenty of that – it’s the birthplace of every modern giant in technology from Google to Apple, but that doesn’t mean there is not technology expertise outside the USA. If an American company wants to employ the services of an IT expert outside of the USA then that’s their choice – it’s a straight decision based on competition.

And the USA remains a powerhouse so they should welcome international competition – it will only help them to raise their own game.

Is It Time to Stop Using the Word ‘Outsourcing’?

IBA Group
Mark Kobayashi-Hillary

Technology industry analyst HfS Research has launched a survey asking whether they should stop using the word ‘outsourcing’ in their coverage of the industry – and even whether the technology services industry should entirely stop using the word. Is it a dirty, tainted word?

Most involved in technology outsourcing have moved on from the old days of labour arbitrage or augmentation. Service providers like IBA don’t just pitch themselves as the cheapest offshore service providers; they position themselves as the experts in whatever they do. They promote specific areas of business and expertise.

The buy-side clients commissioning work (or outsourcing the work) from the service providers know that they are buying in expert services, usually services they could not perform in-house. They don’t want the cheapest provider – they want the best for their business.

But the political rhetoric has barely changed. As the US presidential election approaches, outsourcing is still considered a dirty word for politicians and a way to score a few cheap votes by patriotically insisting that they would ban it forever. But we all know that US politicians say this at every election.

These same politicians probably calculate their budgets using Microsoft Excel and broadcast information using Cisco services. They fail to see that any large technology company is already working with global resource and any company starting today with a need for some technology development will consider hiring suppliers from all over the world.

It’s not that outsourcing is about shipping work off to cheap economies; it is that the Internet has created a global marketplace. If the marketplace is global then that can create both problems and opportunities back at home, but how come the politicians rarely focus on the opportunity of small niche companies being able to reach a bigger market?

So do you agree with HfS? Is it time the industry stopped using the term outsourcing and if so, what would be better word to replace it?

Texting in the UK

IBA Group
Mark Kobayashi-Hillary

The British communications regulator Ofcom just published a new analysis of telecommunications in the UK and there were some interesting results. After years of constant growth, Britons are now making fewer calls on their mobile phones, but the number of text messages sent has increased dramatically.

So the British are texting more and speaking less – is it significant?

It shows a marked change in the way people are communicating today. For instance, the survey notes that 58% of British adults send at least one text message a day, yet only 49% engage in a face-to-face conversation on a daily basis.

The argument for texting is easy – it is an asynchronous mode of communication. In short, I can send a text and not worry about disturbing the person, they can respond in their own time. A call is intrusive – it demands immediate attention. I personally ignore my telephone if I am busy with work because to endlessly be picking up the phone each time it rings would mean I never actually achieve a thing – other than answering calls from people who assume I am free to talk.

But it is significant to see that the number of calls is actually dropping and it is a worry for the mobile phone industry. They don’t make much money on texts – they are usually bundled into a contract, so voice calls are dropping and many are learning how to use their 3G connections to make a call bypassing the phone company.

But the most shocking news from this survey has nothing to do with phones at all. Can it really be true that half of British adults do not have a conversation with another person for an entire day? Maybe they should pick up the phone and call a friend…

Everest Research Says Eastern Europe Is the Place to Watch

IBA Group
Mark Kobayashi-Hillary

The research and analysis company, Everest Group, just published their latest Market Vista: Q1 2012 report – a quarterly focus on global outsourcing and offshoring activity and it shows that despite troubled times in many business markets, outsourcing is holding steady.

First quarter global transaction volumes reached about US$3bn in annual contract value (ACV), an increase of 11 per cent over the previous quarter. Compared to Q4 2011, the global market saw a 9 per cent increase in Business Process Outsourcing (BPO) transactions while IT Outsourcing (ITO) transaction volumes remained about the same.

83 per cent of the deals signed were new transactions showing that there is still plenty of business coming through – it is not just about companies renewing their existing outsourced contracts.

Some key points noted in the new report include:

• BFSI (banking, financial services and insurance) sector leads the market in transaction volumes with an increase of 12 percent while the MDR (manufacturing, distribution and retail) vertical saw a 9 percent increase. Transaction increases also were recorded for public sector, energy and utilities, and telecom verticals, but the healthcare vertical saw a large drop in deals signed during the quarter.

• Transaction volumes decreased in North America, held steady in the United Kingdom and increased significantly in Rest of Europe.

• Offshore activity saw 30 delivery centres established across captives and service providers in the first quarter compared to 29 in the previous quarter. With significant activity occurring in Latin America and Eastern Europe.

This latest research shows that the offshore outsourcing market remains strong, despite economic and business uncertainties in the market today. It is also worth noting that Everest see significant activity in Eastern Europe – this is a key region to watch at present.

IBA Choir Performs at Minsk Philharmonic Society

On June 3, a joint concert of the IBA’s choir Concordia Chor and the Swedish choir Boo Cantabile was conducted at the Minsk Philharmonic Society. The concert was organized within the framework of the 3rd international festival of amateur choirs Guki Leta (Sounds of Summer), and with support from the Embassy of Sweden in Belarus and the Belarusian Union of Musical Workers.

The concert consisted of two parts. In the first part, the Swedish choir performed under the management of Helena Engardt and in the second, the IBA’s choir conducted by Galina Kazimirovskaya.

See video of Boo Cantabile

See video of Concordia Chor, solo by Grigory Zasmuzhets

See video of Concordia Chor

See video of Concordia Chor singing with Boo Cantabile

IBA Choir Performs at Minsk Philharmonic Society

IBA Choir Performs at Minsk Philharmonic Society

IBA Choir Performs at Minsk Philharmonic Society

IBA Choir Performs at Minsk Philharmonic Society

IBA Choir Performs at Minsk Philharmonic Society

See more pictures at IBA Group’s Facebook page

The Technology Olympics

IBA Group

Mark Kobayashi-Hillary

It is a mere two months to the start of the London Olympic games, an event that has cost at least £9bn to stage, with a large part of that budget taken up in infrastructure costs, including technology.

But one of the most interesting technological aspects of this event is that it will be the first ever Olympics where social media is a part of the event and will help to form the opinion of a global generation.

It is true that tools like Facebook and Twitter were around for Beijing 2008, but they had not reached the ubiquity of today and tools like the iPhone were still in their infancy. Right now you can use Twitter to follow the chairman of the London 2012 Organising Committee. You can follow the athletes as they train for the games and even ask how it is going. You can ask the pundits for their predictions and get involved in planning how you are going to watch the games – whether it is the big screen in Hyde Park or down the pub.

Can you just imagine how many smart phone photographs are going to be uploaded on the 3G networks around the London Olympic stadium in the seconds and minutes following the 100m sprint final? I guess there will be at least a million photos of that single event uploaded – how many more photos and video from London can we expect during the games itself?

London is going to be special for this reason. It is going to be the first truly interactive games where the people will broadcast the event – not just a presenter in a TV studio talking to passive viewers. This will be the biggest backchannel of conversation, speculation, and debate ever witnessed – and it’s all going to be driven by London, showcasing our capital city to the world.

Although we often think of the technology around the Olympics in terms of contracts to big companies to build communications infrastructure, at this event it is going to be all about the people watching the games, rather than those on the track.

IBA and Modern Art Museum Launch Exhibition of Collages

On May 2, IBA Group and the Modern Art Museum of Belarus opened an exhibition entitled Hanns Baum: 18 Years in Belarus. Collages. Assemblages. The exhibition features selected works by the German artist Hanns Baum who spent 18 years in Belarus working as IBM coordinator at IBA Minsk, the largest development center of IBA Group.

See a series of video clips (in Russian and German) of the opening event and the press conference.

Valentin Kazan, IBA Vice president, introduces Hanns to journalists at the press conference.

Natalia Sharangovich, museum director, says that Hanns’ works are a reflection of Belarusian reality and introduces Sergei Levteev, IBA president, who recalls the changes that have happened at IBA since Hanns first came to Belarus.

Hanns Baum describes his works and creative process.

Zinaida Britch, a veteran of IBA, speaks about the influence that Hanns’ creative work had on IBA employees.

Hanns speaks about Minsk when working on assemblages.

Hanns gives a master class 🙂

Hanns gives portraits to IBA co-workers


Press conference

Valentin and Hanns

Press conference

Sergei Levteev

Hanns Baum

Zinaida Britch

Natalia Sharangovich

See more pictures of the event and Hanns’ works at IBA Group’s page on Facebook

IBA outsourcing and the crisis in Europe

IBA Group
Mark Kobayashi-Hillary

Back when the global economic crisis started, many industry commentators declared that this would be a boost for the international IT outsourcing market. With companies in Europe and the US struggling to ride out the downturn, there would be strong growth in offshore outsourcing.

But things never really played out like that. Outsourcing usually needs a big upfront investment in training, knowledge transfer, and additional management to make the transition run smoothly. Many companies just decided to avoid that short-term investment even if it was clear that there would be benefits in the long-term.

We are not out of the woods yet, but there is more stability. The US is growing slowly now and many countries in Europe are seeing promising growth – though the uncertainty of the Euro is still causing many to fear for the immediate future of the Mediterranean economy.

Research and consulting company, Everest Group, in a recently published research suggested that outsourcing in Europe was worth €180-200bn in 2010. Their latest research for 2011 is not published yet, but estimates suggest that this figure will have increased to about €220bn. This is about a 10 per cent increase in demand even in quite an uncertain economic climate.

Industry observers suggest that much of this new demand is because companies in France and Germany are starting to explore a more global delivery model. In the past they were far more resistant to offshoring, but today it has become a strategic necessity, regardless of the global economic situation it is just how technology is delivered today.

All this is good news for those of us who have been delivering remotely all along, right through the economic crisis. Whether companies are exploring offshore outsourcing because they need to reduce their cost, or they just need to find more expertise and faster, we know exactly how to help.

The power of Tivoli

IBA Group
Mark Kobayashi-Hillary

The IBM Tivoli Management Framework (known as the TMF) is a systems management platform from IBM. It was originally a separate company and product, but IBM purchased Tivoli in the nineties and the product has been developed extensively since then within IBM’s software division.

The TMF is designed using a CORBA-based architecture and its real strength is that it can be used to manage a large number of remote devices in a very robust way.

Tivoli is an entire framework of tools that can be linked, rather than just a single software product, so it is very powerful and can be used in many ways. There are endless different ways in which the tools can be integrated to deliver a solution.

At IBA, we recently delivered a solution to a client that involved us connecting these tools together to create a fully integrated system:

• Tivoli Network Manager; the tool to help visualize and manage a complete network.
• Tivoli Netcool/OMNIbus; the tool that provides a complete operations management infrastructure, including the ability to identify and correct critical network issues.
• Tivoli Netcool Impact; an intelligence tool that adds context to events, helping you to manage events on the network and using intelligence to determine whether an event is critical or not.

Even this short example alone gives you an idea of the power of Tivoli. It is not just about visualizing your network with a series of graphical representations, but about adding a layer of intelligence into the network itself – almost like a self-healing network so your team only needs to manage the critical issues.

To those not involved in managing networks all this might seem quite dull, but every company needs their network to be up and running and as reliable as possible, business doesn’t happen without it, so the team keeping the network running are really ‘keeping the lights on’ at your business. Do they have the right tools for the job?

IBA Group Wins European Software Excellence Award 2012

On March 1, IT Europa announced the winners of the European Software Excellence Awards 2012 in Berlin, Germany. IBA was selected the winner in the category Database Solution.

IBA Group entered the contest for the fourth time and won for the second year in a row. In 2011, the award was in the Relationship Management category.

We were pleased to be in the same company with world IT leaders. The recepients of awards in other categories were Oracle, Fujitsu, and other reputable companies.

Watch a video clip of the award presentation.

IBA's Soupeev gets prize from sponsor - FujitsuYauheni Soupeev, IBA department headEuropean Software Excellence Award. IBA's trophyAward-winning IBA team

Mobile Applications

IBA Group
Mark Kobayashi-Hillary

Mobile devices are exploding in popularity – tablets and smartphones are now outselling the regular PC. But the consumer, not the enterprise, has led this revolution in how we consume computing systems.

The growth in popularity of the app store concept – initially dominated by Apple, but now with Android also being important – has changed our expectation of what it means to use a computer. The system must be easy to use, to configure, and to maintain. Remember when installing applications was something that had to be planned? Now you can just do it to try something out and then delete it if it is not useful.

The phones and devices running these tools feature a number of sensors and gyroscopes – they know exactly which way up they are and where in the world they are being used. This has opened the world of computing far beyond what anyone could have imagined – even just five years ago. Imagine trying to describe the Google skymap application to someone five years ago – they would never have believed that a mobile phone could be capable of complexities like augmented reality – that kind of technology was only for the military.
But how is all this changing life inside the company? There are two major problems for the CIO or technology leader:

• People have better technology in their pocket than the PCs supplied by the company. Why would they want to use an old desktop PC running Windows when their phone or tablet has better applications and is easier to use?

• If people have better technology of their own, and would prefer to use it in the workplace, then how can all these mobile tablets, phones, and applications be managed within the regular enterprise network?

Not only is there a problem of work culture developing in many companies, but also there is a security risk. Staff insisting on using their own technology need the support of a CIO who puts realistic governance plans in place to secure the company network, without preventing them from using the tools they prefer.

The company that gets this right will not only have happier staff, but also more productive and efficient – and why not give the staff a cash bonus for using their own technology too?