The Continued Threat of Outsourcing

IBA Group
Mark Kobayashi-Hillary

HR magazine published a feature earlier this month titled “lower-skilled jobs still threatened by outsourcing to Europe” – the kind of headline that compels a reader to read on, but the story isn’t quite as described.

The feature is extremely confused for a number of reasons. First, the writer is not just talking about low-skilled jobs – he uses the comparison of experienced IT industry workers to contrast different salaries across Europe. Then secondly, he talks about how salaries in Germany, France, Belgium, and Ireland are up to 57% higher than in the UK.

This confuses me. IT professionals on £42,000 per year are not low-skilled workers and if there are many countries in Europe paying higher salaries than the UK then surely those are the places where most skilled workers will go anyway?

And I would question this data. I have a lot of Irish friends and they are almost all figuring out how to leave Ireland. It is impossible to believe that pay and conditions are better there than in the UK.

The most confusing thing is that this is now 2013. Europe expanded to the east in 2004, almost a decade ago. It feels very strange for the media to be talking about how jobs are threatened by outsourcing when Europe itself is a free trade area that encourages businesses to work across borders – with the free movement of people a key part of the union.

I was recently in a bar talking about the continued expansion of the EU to two senior executives from Austria. I asked them how they felt about Bulgaria and Romania joining the union – they immediately responded enthusiastically and suggested that it will make business with these two important markets a lot easier.

This is the complete opposite of the British reaction – where a fear that thousands of people will flood to London from the new EU member states is still the normal reaction. Only the British press appears to be still fearful of the European Union, with this ‘jobs threat’ headline just the latest example I have read.

There are more British people living and working across Europe than Europeans working inside the UK. So why does the media fear this European jobs threat? It seems that many British people are capable of venturing into the world to find where the opportunities exist.

The East is Rising

IBA Group
Mark Kobayashi-Hillary

International analyst firm Gartner recently suggested that IT Outsourcing this year would be worth around 697 billion Euros. That’s an enormous amount of business and IT service companies are all keen to find a way to enjoy taking a percentage of that global spend for themselves.

While countries like India, China, and the Philippines have dominated the international outsourcing market, there are many locations in Central and Eastern Europe that are now snapping at their heels. Serbia, Romania, Albania, and Croatia are all examples of locations where many IT specialists are located and yet their cost is lower than experts with the same skills in Western Europe.

A recent report on the software development and IT outsourcing industry in Ukraine determined that over the last eight years, the volume of software development and IT outsourcing services in Ukraine has grown by a factor ten.

According to the research findings, in 2011 the volume of IT outsourcing and software development services provided in Ukraine reached US$ 1.1 billion and the number of IT specialists working in the industry reached 25,000 people with 20% growth.

But in many cases, many small companies with no international footprint are located in these countries, ready to do business, but unsure how to find clients in the west. It’s no good just being a lower cost if you have no way to develop relationships with potential clients in the west of the continent.

The East may be rising in importance and certainly worth a look if you are considering outsourcing your IT services, but the companies that are based in the CEE region need to build better relationships with the clients in the west. Without this, they will forever be seen as just a lower-cost alternative to local IT experts and that is a long way from the truth.

Tholons Top 100 Features Many CEE Cities

IBA Group
Mark Kobayashi-Hillary

The latest Top 100 Outsourcing destinations research published by international advisory firm Tholons makes for good reading if you want to explore Eastern Europe. No fewer than sixteen different cities in the region are described in a report that covers the entire globe.

Kraków in Poland was described now as an ‘established’ location for offshore outsourcing, with the rest described as emerging, aspiring, or on the radar. Kraków and Dublin were the only European cities in the top ten on the Tholons list – with the other eight all being from Asia.

This is a great result for the CEE region in general. Tholons lists many cities across Asia and Latin America, but to find so many cities of interest to the outsourcing community all clustered together in Eastern Europe does demonstrate that a cluster of expertise is developing.

All the cities listed have the great advantage of being close to potential clients in Western Europe and being close to other great delivery centres in the CEE region. With some locations better at ITO and some better at BPO, it’s encouraging to see so many cities all in one single region.

With experts such as Tholons shining a new spotlight on Eastern Europe, it cannot be long before many other cities in the region start being recognised for their delivery capabilities too.

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

Installation

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?

2012 is Going Mobile

IBA Group
Mark Kobayashi-Hillary

When a company like Intel reorganises itself around mobile technologies, it is clear that something has changed.

And this is no surprise. Take a look around at how IT is being consumed today and it is clear that there has been a mobile revolution. According to the latest Gartner forecast, worldwide tablet sales will reach 63.6 million units in 2011– a 261.4% increase from its 17.6 million sales in 2010. Tablet sales are expected to reach 326.3 million units by the end of 2015.

So the world is organising access to computing power through tablets and smart phones much more than ever before – not through desktop PCs or even laptops.

The smartphone and tablet revolution may have started with consumers, but it is moving into the corporation. Many businesses are actively exploring how to increase productivity through the use of tablets – and they are about to become more popular than the regular PC.

Gartner estimates that the combined sales of smartphones and tablets will be 44% greater than PC sales this year, and by the end of 2014, the installed base of computing devices running mobile operating systems will surpass the total installed base of all PC systems.

That’s just two years away – more mobile devices than traditional PCs installed around the world. With such a change in hardware there is also a need for new software too and experts who really understand how to write code for tablets.

Porting old code can work, but doesn’t exploit the power of the tablet. The real winners will be the companies that realise not only what the hardware can do, but how to write new forms of code that take advantage of this new mobile business paradigm.

Companies explore Eastern Europe for IT and software development

IBA Group
Mark Kobayashi-Hillary

In my last blog here, I outlined how a need to spread risk has led to a marked increase in companies exploring the CEE region for their IT and software development needs. But the growth in outsourced services available from the CEE region is not restricted to IT alone.

The region has highly educated people working within the service sector meaning that there are many BPO opportunities in the region. Many organisations – such as international giants like DHL – have setup very large operations serving the whole of Europe from a CEE base in a variety of different business processes.

But now there are even international lawyers exploring the region for Legal Process Outsourcing (LPO). This story in The Lawyer magazine about US law firm White & Case exploring the relative merits of Poland, Hungary, or the Czech Republic is just such an example.

White & Case already have resource in the Philippines, but are worried about their entire back office being located offshore in a single location – just like many of the IT firms that have explored a risk diversification strategy.

Every executive responsible for outsourcing needs to consider both natural disasters and political risk when locating a function offshore. Though many companies explore outsourcing as a means of reducing cost, if the offshore function fails entirely then it won’t be cost savings that are under discussion, it may be how to save your company.

It is clear that the IT sector in CEE has expanded allowing entrepreneurs to start offering many IT-enabled BPO services. All these new services help the local CEE economy to develop as well as offering a great place for companies to locate new services and to reduce their own risk.

CEE is more attractive than ever as uncertainty looms

IBA Group
Mark Kobayashi-Hillary

When the global financial crisis struck the world in 2008, many predicted that there would be a boom in offshore outsourcing. It didn’t really happen.

Why? Because at that time most companies slashed all project budgets and retrenched employees. It was a time when nobody was certain of what the future would bring and it costs money to run outsourcing projects – even if they can create longer-term savings. Nobody wanted to invest all that money in setting up in a remote location hoping for gains in the future.

We are once again in an uncertain time, but this time there is a far more mature option for sourcing in the central and eastern European (CEE) region. The setup costs for running a project in the CEE region are far lower than for a full-blown offshoring programme where work needs to be transferred to India or China.

So there is a much more credible alternative available if companies in western Europe are seeking to stabilise costs in the short-term and build a pan-European delivery model for the long-term.

The CEE region has never tried to compete head on with countries like India in terms of absolute labour cost, the advantage has always been the cultural compatibility with Europe, the expertise, and the ability to be close to the customer – it’s possible to make a day trip to a development team from any other place in Europe.

And now, with the economy looking uncertain once again in both the US and Europe it seems that the nearshoring option is looking far more attractive than the full offshore model, because much less initial investment is needed to make it happen.

We have been talking about the advantages of CEE for a long time on this blog, but it is interesting to see that the issues in the wider European economy are making it even more attractive to work with the region. Have you taken another look at how nearshoring compares recently?

The age of the CIO as IT leader is over?

IBA Group
Mark Kobayashi-Hillary

IT is changing fast and it can be hard to keep up, but companies in the IT services business know that one thing is certain, the role of the Chief Information Officer (CIO) is changing fast.

The Chief Financial Officer (CFO) is becoming more involved in technology decisions in many companies as IT moves itself more closely to the business across all industry sectors.

It’s no surprise. Think for a moment about the big difference between Business Process Outsourcing (BPO) and IT Outsourcing. With BPO, the person commissioning the work is a business leader, the head of finance, the head of HR, the head of operations… they don’t really care about the underlying technology. They just want to buy a solution that works for their business.

Now think about IT services. IT suppliers have worked with the CIO for many years – selling solutions to the technology head. Yet the role of the CIO seems to have changed during the economic slowdown. Companies require their CIO, CFO, and business leaders to work more closely than ever in ensuring that the business benefits from the decision made by all the executives.

Take a look at what IT expert Angelica Mari says in her book ‘Reboot: Leading IT in the information age’: “The CIO is quickly losing their traditional power base focused on the ownership of physical assets. The basement stuffed full of ‘kit’ is no more. In this environment, only the fittest – or smartest – will survive.”

But why has this change taken place? The past couple of years have been tough for everyone. The role of the CIO has evolved and changed because IT has become more important than ever – in all industries.

In travel, it’s probably CRM that is the most important investment right now. In government it is technology that can reduce transaction costs… In most industries, IT has become so pervasive that the companies could not operate without it. So, with IT becoming more strategic than ever, how come many industry analysts believe that the age of the CIO as technology leader is over?

Outsourcing to help Europe return to growth?

IBA Group

Mark Kobayashi-Hillary

In the past three years or so, since the initial credit crunch and then global economic slowdown, outsourcing as a business strategy has taken a knock.

It’s not that there is anything wrong with it as a strategy. It’s just that outsourcing usually involves change, some change in processes and the way things are done. That needs planning and transition, so even if the future state saves money, many firms have declined to go through the process of getting there while survival has been the priority.

If you look back to the time around 2008/2009, most firms were probably focused on budget revisions, retrenching people they cannot justify keeping, and targeting business activities to those that create the most immediate return – completely focusing on getting through the recession.

But talk to most firms today and there is a more interesting and positive picture emerging. There remains the fear of a double-dip recession in countries such as the UK, and Germany is starting to struggle under the weight of supporting the Eurozone, but the major economies of Europe have been growing again – albeit slower than we used to enjoy. There is certainly a growth in business optimism and a greater desire to spend on improving company operations.

Firms are exploring how best to ride the growth when it comes, and that does involve a large amount of planning how to work with partners. The focus is now on positioning a trusted group of partners together and aiming for growth over this decade.

The biggest change in behaviour will be the desire to leverage existing assets over the next couple of years. When firms have already sunk cash into developing expertise and systems in-house, they won’t just discard that knowledge overnight.

It’s been a tough time over the past couple of years, but the new decade looks like an exciting place to be and outsourcing within Europe is going to be an important business strategy that helps us all return to growth.

IBA Gomel celebrates 10 years

On July 27, 2011, IBA Gomel, the second largest software development center of IBA Group, celebrated its 10th anniversary. Numerous guests gathered in the Belarus Railway Sports & Cultural Center to wish all the best to IBA Gomel management and employees.

Igor Khobnya, Director of IBA Gomel, opened the event, saying: “We are celebrating our anniversary with a big family. Today, they are all here – our employees, their families, our clients, and our partners. All of them together have been creating our company during these ten years.”

See video (Russian only)

Sergei Levteev, IBA Group President, went on to say: “We are all a unified team that works for the common cause to implement projects for our customers. That is why the today’s anniversary is not only a holiday for IBA Gomel. It is a holiday for all of us. I would like to congratulate you – us – on this anniversary and to wish your commander the same confidence that he had all these years and I am sure will have in the future, and to all of you, to your families health and prosperity.”

See video (Russian only)

Valentin Kazan, IBA Group Vice President, added: “In my view, to open a development center in Gomel was a great idea. It decorated the region, and made Gomel an interesting and attractive city for young people to work here, to get pleasure, to work with their families. We receive lots of positive references from customers and I see that there is a sort of competition between Gomel and Minsk teams, and Gomel never loses and in some cases performs even better than Minsk.”

See video (Russian only)

Matthias Karius, Supplier Relationship Manager at IBM Germany, recalled a project that was implemented for a Swiss customer. IBA Gomel was able to deploy a team of 50 people in a very short time. “Ten years? Looks like it was yesterday,” he said.

See video

Winners of the online Quiz (Викторина) received prizes.

IBA Gomel celebrates 10 years IBA Gomel celebrates 10 years
IBA Gomel celebrates 10 years IBA Gomel celebrates 10 years

Miss IBA was announced.

Miss IBA

Thinking of security

When you think of security, what image do you think of?
A large secure fence around the office? Or perhaps you imagine a big dog and security guard patrolling that space between the office building and fence?

But what about cyber-security?

A few days ago British newspaper, ‘The Sun’, was attacked by international hacking group Lulz Security – the front page was replaced by a notice proclaiming the death of News Corporation CEO, Rupert Murdoch.

The same hackers destroyed almost all the main government websites in Brazil last month.

And as networks and systems get more international, with service providers operating in one country, delivering to clients in another, who may be serving end users in another, how can you begin to protect the systems that are vital to your company?

Fraud, organised crime, electronic espionage, IP theft, terrorism, activism, and even warfare can call fall under the wider label of cyber-crime and all can be perpetrated without much risk if you know how to cover your online tracks. And criminals know how to cover their tracks.
If large governments and major corporations cannot withstand sustained attacks then there is a temptation to give up and feel that it is not possible to protect your company. If they can’t do it, then who can?

But companies can be protected from all but the most sustained attack through a rigorous security audit that examines every possible opportunity for a network attack.

However, companies today are really just loose networks of partners. A large company may have a supplier for the IT network, another for the phones, another for the broadband pipe, another for the local hardware security…

For any security policy to work, all these suppliers need to be considered as genuine partners. Perhaps a deal was entered into in the past as part of a cost-saving outsourcing strategy, but when you consider how important every link in the chain really is, perhaps you need to review your outsourcing relationships if you can’t already call your suppliers true partners?

Is ‘outsourcing’ dead?

IBA Group

Mark Kobayashi-Hillary

After all, what is outsourcing? It is just the purchase of a service from another company. It could be catering, it could be plumbing, or it could be IT. So, outsourcing has taken place for as long as companies have bought services from experts.

In the past decade, many in the media have declared ‘outsourcing’ itself as an industry, but I think we have moved on from this broken jargon. The time has come to stop thinking of outsourcing as something good or bad, and to just accept that all companies use outsourcing to some degree.

There are two key points to remember.

Most companies are not vertically integrated. They don’t do everything in-house. They don’t do their own payroll, or accounts. The Apple computer company may design new products in California, but a contractor assembles them in China.

Companies now sit in the middle of an ebbing and flowing supply chain that is maintained by contractors, temporary workers, internal staff, consultants… all working to steer the company in a single direction. But though the end result is the same, the way people are paid for their work is entirely different to earlier models of work where everyone is an employee of the same company and is paid according to their grade, or the time they put in.

So outsourcing is no longer the scourge of the media, the stealer of jobs. It is merely one more business strategy that allows a company to access resource in a flexible way – usually more specialised than the people on the payroll.

The concept of outsourcing is alive and a part of 21st century business, but perhaps the word outsourcing is about to die quietly.

We are about to enter a new era of mainframes?

IBA Group

Mark Kobayashi-Hillary

Ask a computer science student in the US or Western Europe what technologies they are studying, and what they want to work with in future, and it is almost one hundred per cent certain they won’t say mainframes.

The mainframe computer – bedrock of the computing industry – has been apparently in decline since the IBM PC invaded desks with DOS, and subsequently Windows, from Microsoft. Yet, though consumers don’t use mainframes and students have no interest in them, it does not mean their use has ceased entirely.

Mainly large organisations with complex legacy systems, such as retail banking or life insurance, have extensive mainframe estates. And even where the hardware itself has remained unchanged for many years, the software continues to require updates due to product changes, new regulations, and changes in the law.

So if nobody is studying how to maintain these systems, or the programming languages used to modify them, then how can those important industries still rely on the mainframe?

There are several strong pockets of mainframe resource located around the world. Eastern Europe, and particularly the former Soviet bloc, has a deep pool of expertise in both the ongoing maintenance of these systems – and developing new software for them.

This is a classic example of how outsourcing to an offshore service provider can be about more than just the cost of service. If your legacy systems are running in COBOL on an IBM mainframe, yet the people cannot be found locally to modify the code, then outsourcing is the natural solution. Forget cost; go offshore for access to the skills you need just to keep your business running.

Mainframes are not going to die just yet. Many large organisations have systems that cannot be wound-up quickly, and as applications move further into the cloud, perhaps we are about to enter a new era of mainframes?

South Africa to rival Eastern Europe in outsourcing?

IBA Group

Mark Kobayashi-Hillary

I was down in Cape Town, South Africa, last week. This is a market that was very strong about five years ago – they really were the place that everyone was exploring for European call centres, but then for some reason they went off the radar.

That was partly through a combination of the government reviewing how much money they spend on promoting the region, and a dearth of really good local players that could promote their offering without government money. But regardless of what happened then, it seems they are back with a bang.

South Africa is positioning itself, once again, as a key player in the BPO market with a focus on customer service, but this time exploring new areas that are different to more traditional outsourcing – social media support and agents that are working entirely off-script, with autonomy to just do what is needed to keep the customer happy.

You might ask what this has to do with Central and Eastern Europe, the general focus of this blog?

The key target for the South Africans is directly to their north, Europe. They are on the same time zone as continental Europe, and have a strong cultural and business affinity with several western European countries. They also use English as standard for education, so kids grow up using English, but other European languages are not hard to find.

So if they re-emerge from the shadows and start winning a number of BPO and IT deals that support business processes in Western Europe, it will remind many that they are still around. Some big names, such as Amazon, have shifted German and British customer support down to South Africa only recently when this might have been expected to stay in the CEE region.

It looks like the football world cup in 2010 has woken the business community to the opportunities in South Africa and the CEE customer service players are going to have to fight a little bit harder to compete.

Want to improve communication between business and IT? Use ITIL

IBA Group

Mark Kobayashi-Hillary

I used to manage the equity trading technology for the French bank SG. It was a pretty big job, with business analysis and support teams in all the major equity trading locations around the world, as well as a development team over in India.

We had a bespoke system built in Lotus Notes to handle change and service requests from the business. As each bug or request was found, the business analysts would assess the importance of the change, along with the business people assessing the priority of their service requests.

So as each version of the trading platform was released to the users, a list of service requests soon built up. The problem was that to the business people, everything was a high priority. They always felt that the system should be more malleable. They never had any concept of how IT systems that are endlessly changed can also become unstable – even more difficult to manage in a globally connected bank trading system that has to operate across time-zones stretching from Japan to the USA.

At the time, we tried moving to an Agile methodology where the system was being updated with fewer changes, but on a much more frequent basis. It helped to give the business users the impression of constant progress, but it never helped with the fact that a service request that was not considered urgent might sit at the bottom of the list for months, or even a year, never touched because it is always replaced by more urgent requests.

By using ITIL my team could have improved this service desk considerably. Less important changes would no longer languish unloved, they would have been highlighted and alternative solutions or workarounds proposed. Even a less important request is still a request that needs to be addressed and the single-point-of-contact rules within ITIL help to avoid it getting lost between teams of business analysts, programmers, and project managers – all tied up trying to deal with urgent enquiries.

The real difference is that in my old company, the IT department controlled the process of listing and prioritising the service requests. Within ITIL, the focus of the change and service request process is always the business user. By adhering to the ITIL guidelines:

1.     It would be the business user that asks for changes

2.     The business user would be updated on progress without the need for status review meetings – it would be a function of how the IT team works

3.     The business user could directly handle queries about their request – without ‘assumptions’ coming from the IT team

In this sense, ITIL is not just a conceptual list of service practices; it is a common sense package of processes that ensure the business user builds confidence in their IT team through open and transparent communication.

Nasscom report from India

IBA Group

Mark Kobayashi-Hillary

Another Nasscom conference is over. This annual event in Mumbai, India, has grown into the largest and possibly most important outsourcing event in the world, with over 35 countries represented and promoted – much more than just an India-only event.

 There were several formal presentations representing the advantages of a number of different world regions. These included: Colombia, Poland, Germany, UK, South Africa, MENA (Middle-East and North Africa), and Africa in general.

The conference was organised some time ago, so it was interesting to see how the political changes in the news were affecting presentations that were supposed to be only positive. The MENA presentations in particular suffered from the various democratic challenges sweeping the region. But what was interesting to note was how presentations from established regions such as South Africa were so negatively received.

South Africa made a strong play over accent. They claimed to have the most attractive accent for voice agents in the offshore outsourcing market, yet there was very little else to support their claims. Even academics were leaving their session wondering what happened to the previously significant contact centre industry in that region.

Though Poland was the only Central and Eastern European nation actually presenting on the main agenda, they became grouped with both the UK and Germany. All EU nations and all focused far more on the availability of skills, flexibility, and knowledge than just low-cost workers.

The market for offshore outsourcing has changed and matured, so it’s good to see regions such as Poland now aligning their offering with Western Europe. The wider EU has a strong case when pitching for hi-tech work – customers and suppliers have moved on.

Danish Journalist Speaks about Belarus

From February 17 to February 18, 2011 Karim Pedersen, Technical Editor of the Danish IT newspaper ComOn, visited IBA Minsk.

Karim was in Belarus for the first time in 2006. The visit resulted in a series of articles, including IT Giant in Belarus. This year, he came again to see what has changed and what is going on.

Karim concludes: ”The big lesson from my visit here is that we are very much the same and we are very much alike. We have the same dreams, we have the same aspirations and working hard is the way to get to that future”.

Karim shares his impressions in the video clip below:

View also at IBA Group’s Youtube channel.

We look forward to a new series of articles about Belarus by Karim and to his future visits to IBA.

About Karim Pedersen

Karim Pedersen is the founder of the largest IT news website in Denmark, ComON.dk, writing about technology and telecommunications for readers in Denmark. Founded 14 years ago, ComON has grown through a range of partnerships with other Danish news media, and today the articles are syndicated to a number of other media, reaching a broad segment of the Danish population. ComON has also for four years published a print newspaper for IT managers and is closely linked with other properties at the publishing house, Mediaprovider, such as the monthly gadget magazine Gear and the photography magazine Zoom. Before starting ComON, Karim has published more than 30 books on IT in Danish and worked freelance as a software developer and web designer. Karim has travelled extensively, both in his professional and private life. Writing about IT outsourcing and globalization for ComON, he visited India, China, Japan, Korea, Taiwan, Vietnam, Bangladesh, Belarus, and Russia.

IBA Group wins European IT Excellence Award 2011

On February 11, 2011 IT Europa, a leading European IT publisher and market intelligence organization, announced the winners of the European IT Excellence Awards 2011 – the pan-European awards event for IT and Telecoms channels. The winners and finalists were honoured at a celebration dinner at The London Marriott Hotel, Grosvenor Square, London.

IBA Group became the winner in the category Relationship Management. Alexander Derkach, IBA Group representative, collected the prize.

See video:

Award-winning IBA team
Award-winning IBA team

Crisis in Egypt: political risk back on the outsourcing agenda

IBA Group

Mark Kobayashi-Hillary

The crisis in Egypt continues as economists and political analysts attempt to predict where the air of revolution sweeping across North Africa and the Middle East will continue to next.

But, in the past month major analysts, such as Gartner and AT Kearney, have published reports naming Egypt as one of their most recommended offshoring destinations. AT Kearney even placed Egypt as the fourth most attractive location anywhere on earth. How could they have got it so wrong?

That’s a little unfair to the analysts. They have judged Egypt and other countries on fundamental measures such as population, education, and infrastructure. On all those measures Egypt should rank highly. But does the failure of the analysts to predict a wave of civil unrest demonstrate that many commentators in the offshoring industry are ranking political risk as a less important measure than others?

Even the darling of the offshoring community, India, has had a tough time over political risk. It is only a few years since a million troops lined the India-Pakistan border and the talk was of possible tactical nuclear strikes.

India has moved beyond those fears, but the question might be asked whether there has been any fundamental change in their relationship with Pakistan. Could another conflict blow up as quickly again?

Back in Egypt, questions will be asked about how major telephone operators could find their service switched off overnight by a despotic government. And if a government with such absolute control can switch off all telephone and Internet services overnight then surely the same could happen in many of Egypt’s neighbouring countries. Many of those countries are also appealing to the international community for outsourcing contracts. But how safe does it feel now we have seen what can happen?

If political risk is back on the agenda as a key issue in offshoring then working within the European Union will be the safest option for European companies. Other than keeping everything in-house, there can’t be a safer approach to offshoring than working with neighbours who respect the same laws, the same separation of the state from private sector enterprise, and the same respect for democratic representation.

Key outsourcing trends taking place in Great Britain in 2011

IBA Group

Mark Kobayashi-Hillary

This blog usually explores opportunities in Eastern Europe, but given that it is the first month of 2011, it’s worth exploring some of the key trends taking place in the most mature European outsourcing market – the United Kingdom.

Outsourcing advisory firm Equaterra just published their key trends for the UK market in 2011, based on examining 650 outsourcing contracts with over 200 companies, worth around £14 billion. Given that so many UK contracts have been examined, it was possible for the Equaterra researchers to draw some conclusions about how Western European customers are behaving, and what they will want in 2011.

Trend 1: Economic conditions are still tough, forcing companies to consider more offshore outsourcing. Eighty-seven per cent of companies will continue offshoring at present or higher levels, but sixty-one per cent will increase offshoring.

Trend 2: Cost reduction continues to be the key driver for offshoring, but financial flexibility is becoming far more important – up fifteen per cent on the previous year.

Trend 3: Global sourcing of services is far more accepted – with over seventy-five per cent of all companies using outsourcing applying some kind of offshore delivery model.

Trend 4: Multisourcing is increasing – with large-scale single-supplier contracts usually linked to low satisfaction with the contract.

Lee Ayling, EquaTerra’s Managing Director, IT Advisory UK, commented: “As in previous years, the 2010 study provides deep insights into the changing dynamics of the UK outsourcing market. One of the many points of note is that outsourcing contracts which deliver cost savings alone do not lead to higher client satisfaction. But successfully delivering cost savings plus another driver, such as access to skills or time to market, does positively impact general satisfaction – highlighting that both end users and service providers should not focus on price alone before and during an outsourcing relationship.”

For the European supplier community, the message is clear, cost remains important, but flexibility is the key. If outsourcing can create more flexible service levels and improve cash flow through more flexible financial models then it will be regarded a success.

CEE Countries Included in Gartner’s Top 30

IBA Group

Mark Kobayashi-Hillary

The analyst firm Gartner has just published new research on the top locations for offshore services in 2010, based on their analysis of the past year watching the offshoring market. The top thirty countries for offshore services were rated according to 10 criteria that will help determine which locations are right for individual organisations. The 10 criteria were: language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy. The rating scale was “poor”, “fair”, “good”, “very good” and “excellent”.

So, with five possible scores across ten criteria the results are fairly comprehensive, and so it’s interesting to note that only fast-growing developing economies feature in the top thirty:

Americas: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Panama and Peru.

Asia/Pacific: Bangladesh, China, India, Indonesia, Malaysia, the Philippines, Sri Lanka, Thailand and Vietnam.

Europe, the Middle East and Africa (EMEA): Bulgaria, the Czech Republic, Egypt, Hungary, Mauritius, Morocco, Poland, Romania, Russia, Slovakia, South Africa, Turkey and Ukraine.

Seven highly developed countries have moved out of the top thirty this year – Australia, Canada, Ireland, Israel, New Zealand, Singapore and Spain. Clearly these locations remain important as nearshoring destinations, but their value compared to other regions is fast declining.

Another interesting fact is that almost a third of all the top thirty countries in the Gartner list are from the Central and Eastern European region – demonstrating that this region is not only important as a nearshoring destination, but is also developing the expertise to sell services to the world.

Additional information is available in the report entitled “Gartner’s 30 Leading Locations for Offshore Services, 2010-2011”.

2011 to be Crucial for the Sourcing Industry in Europe?

IBA Group
Mark Kobayashi-Hillary

A new report, titled Europe’s Global Sourcing Market: Trends Growth and Prospects, has just been produced by research firm Everest in collaboration with Egypt’s IT development agency ITIDA. Naturally enough there are several mentions within the report of how suitable Egypt is as a destination for IT outsourcing, but there are many useful observations on the growth of the entire sourcing market within Europe.

Everest noted that there are many concerns from organisations about outsourcing beyond the EU because of the perceived lack of political stability and risk of sending services beyond the EU. This risk factor is also compounded by the national infrastructure of locations such as Egypt and India. Poor roads and a requirement to have electricity generators at the office all add to the cost of service.

Everest point out that IT sourcing is currently 61 per cent of the entire European market and their estimates of growth are quite aggressive. In the decade to 2020, sourcing from the UK is expected to grow 600 per cent, and from the other western European nations by over 1,000 per cent – they are less developed in this area than the UK.

But issues such as economic uncertainty means that all this expected growth may take some time to happen. Eric Simonson, managing partner, Everest Group said: “Volumes of work are currently static and companies remain reluctant to launch transformation programmes when they are nervous.”

The example of Ireland suddenly hitting a debt crisis and needing a bailout from the EU and IMF is sending a shudder of uncertainty through European companies. Though growth is still expected across Western Europe there needs to also be confidence in future growth for companies to invest in the transformation programmes that drive further outsourcing.

The next year will be crucial for everyone involved in the sourcing industry in Europe.

New Opportunities Open for Outsourcing in the Government Sector

IBA Group
Mark Kobayashi-Hillary

I found myself featured recently in the pages of the Financial Times talking about offshoring to various locations, particularly when the British government is the client.

Naturally enough, as the government is undergoing a large-scale austerity programme and working hard on cost reduction across all services, the offshore outsourcing of services such as IT is being discussed far more than it was a year ago.

There are several dynamics at play in the British example. The emphasis on cost reduction rather than service innovation, a need to focus on security and risk of delivery failure, and a potential emphasis on the EU being the location of choice for many services.

The government CIO, John Suffolk, recently tendered his resignation and a replacement has yet to be announced. Suffolk was focused on changing government IT services to be more like the Apple App store, more like a cloud of public sector services. Many in government felt that these conceptual ideas for IT services would never work on such a grand scale in the public sector, and his resignation is a surprise to those who thought he was now in a strong position to change IT across the entire government.

It’s clear that the emphasis of the politicians is certainly on cost reduction for the foreseeable future and many analysts have commented that there is distaste for many of the usual suppliers, seen as bloated and too expensive. With a new vista of opportunity and a readiness to explore new partners, but a requirement to almost certainly only engage with services delivered from within the EU, this surely opens a new range of possibilities for the technology firms from Eastern Europe. If they can build the right relationships in the UK then they will find a rich seam of opportunity awaits them.

IBA Group VP Speaks at Gartner Outsourcing & IT Services Summit

London, September 21, 2010

IBA Group
Mark Kobayashi-Hillary

I was at the Gartner Outsourcing Summit in London last week and during the conference I met Dr. Valentin Kazan of IBA Group. I asked Valentin what he was doing at the summit in London.

He explained: “We came here to London under the Russoft umbrella to participate in the conference. The idea was to show that Eastern Europe is ready for business in outsourcing. We have great experience in this area and so we are now delivering this message to the conference audience here with Gartner.”

I asked Valentin what he thought of the analysts he had met and what information he had taken from the conference so far. He said: “The Gartner analysts are very pragmatic. They deep-dive into the companies they work with so there are very good examples of what we are doing in this marketplace.”

When I asked Valentin to give me a single reason why Gartner delegates should pay more attention to Eastern Europe he said to me: “Yesterday I saw a presentation saying that India can produce graduates each year that would be a quarter of the population of Finland. We can’t match that scale, but we do have a lot of highly skilled people who can solve any problem – particularly mathematical and scientific problems.”

You can see my conversation with Valentin Kazan on Youtube here:

Attrition returns to bite the unwary

IBA Group

Mark Kobayashi-Hillary

I remember talking to Dr Phanish Puraman at London Business School some time ago about the ‘war for talent’ – the need to search the world for hard-to-find skills. This applied particularly in such fast-growing industries as IT.

The tremendous economic crash over the past couple of years changed all of that. The big IT firms over in India went from hiring tens of thousands of people a year to layoffs. It was an immense shock to the entire industry.

But there is now a double-whammy taking place. Most developed economies are recovering, somewhat slowly, but they are growing.

This means that companies across many sectors and industries are freeing up budget again. They are entering a growth cycle and investing to help sustain that growth and also releasing frozen projects that could not be worked on during the slowdown.

So there is a large amount of IT work coming through in the form of RFPs, and new contract wins being announced in the media.

For those of us working in the IT industry that’s all really positive, but are we going to learn from the lessons of the past?

The IT players in Eastern Europe have started maturing, including Czech Republic, Russia, Belarus and Ukraine. Brazil is becoming a serious player, and other nearshore (to Europe) destinations such as Malta and Egypt are marketing their regions to decision-makers in the IT industry.

I hope that we do see regions developing centres of excellence and an end to the tendency to just lob all projects over to India. The IT firms there are already witnessing a decrease in employee loyalty as people start jumping ship in a more positive market, leading to the same old attrition and wage hike issues that existed before the crash.

This is Cloud Computing

IBA Group

Mark Kobayashi-Hillary

Do you use Facebook to keep in touch with friends and family, or YouTube to upload your personal videos and to watch movie trailers and music videos? Are you using Flickr or Picasa to store your personal photo collection – after all, when was the last time you took photographs using film that needed to be developed?

This is cloud computing.

Forget the hyperbole you read in the media about the future of computing. For most of us, it’s already here today. We are already using the cloud. Just it’s mostly personal, rather than business related. Our personal use of technology systems and the infrastructure used to deliver those services is far more advanced than that used in almost any organisation.

So how do we move from a situation where our personal IT footprint can almost entirely exist in the cloud – using tools such as Google Mail, Google Docs, and photo, video, and document sharing sites – to a point where this is accepted business practice?

It’s a tall order. IT leaders have a different focus to personal end users, particularly when it comes to availability and security. These are particularly important factors when the IT service is purchased from a supplier and will translate into key performance indicators applied to a service level agreement. The small print of the publicly available services does include information about service levels, but it will just excuse the provider from any responsibility to give you a reliable service.

If Google Mail was never available when you wanted to use it then it would be abandoned and never used, but it’s reliable enough for most people. However, a regular user doesn’t have much control. I can only stamp my feet in anger if I need to send an urgent email and Google has decided to take the service down for an hour for maintenance. But Google does offer a paid-for version, with SLAs in place for availability.

The cloud is confused as it refers to many areas of IT, in particular, infrastructure as a service, software as a service, and utility computing. Can the cloud model offer a future scenario for IT leaders where capital expenditure is almost zero because the back-end, and front-end of almost all business applications can be purchased and paid for only when needed?

And what does all this mean for the clients of IT services, or the IT supplier community itself? The world is about to change in a number of ways.

First, the business users can very easily benchmark the cost of the systems they use. If the CIO is asking the business users to pay $300 a month for CRM, yet they know they can use Salesforce.com for less than a third, then why would they use the internal systems?

Second, the systems integrators who rely on customising and installing major systems may need to think of what customisation can be performed in future. It’s very difficult to change cloud-based systems, and if office services like email, CRM, and word processing all move into the cloud then there is no longer a need to install, upgrade, and maintain those systems.

There is a big change ahead for the people using corporate IT, and the companies who maintain those systems.

British people voted for a new government. More outsourcing is on the horizon.

IBA Group

Mark Kobayashi-Hillary

Last month the British people voted for a new government. It was not a straightforward operation because no single party achieved a majority vote. The ruling Labour party were eventually ousted and a coalition of the Conservative and Liberal Democrats took over, with the Conservative leader David Cameron becoming the new Prime Minister.

But what does any of this have to do with the IT services industry in Europe? Well, the previous British government spent a lot of money to save the banking industry and stimulate the economic recovery after the crash that began in 2007 with the US credit-crunch and then swept the world.

In fact, the British government is running a deficit this year of about £180bn. That’s an enormous amount of money to find and so the new government is reducing spending in all departments. As soon as they took office there was an announcement of an immediate £6bn saving. Just this week, further initiatives were cancelled, saving another £2bn, but these are only small amounts compared to the total deficit.

Without a doubt, there will be a shift to more outsourcing and shared services to encourage further efficiency and savings. There are many experienced suppliers with a long history of supplying services to the government, but this is a new era. There is a hunger for innovation and new types of service and charging.

You need a near-death experience if you are going to change the way a large organisation operates and the British government has suffered something very close to that. They are exploring new ideas with new partners and more outsourcing is on the horizon.

Suppliers in Eastern Europe are well positioned to offer greater efficiency, but importantly to be able to offer a service located within the European Union. It’s possible for non-europeans to win business from the government in the UK, but in the present age of austerity, Europeans have a huge advantage.