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.

Mark Kobayashi-Hillary

Readers of the US newspaper The New York Times cannot have failed to notice a recent feature on the number of hi-tech businesses working in Eastern Europe.

Accenture in Prague is working on behalf of companies such as Rhodia and SAP. The newspaper piece comments: “The United States may turn to India to fill many of its call-centre jobs and the like. But Western Europe is turning more frequently these days to its own backyard, transforming a few urban centres of the former Communist bloc into the Bangalores of Europe.”

One might question whether Bangalore is actually the kind of city any European would aspire to emulate. Ask any Indian who is not from Bangalore what they think of the southern hi-tech hub and they will tell you that the weather is nice, but you have to tolerate horrendous traffic, an airport that is miles from the city with no rail link, and sky high restaurant and bar prices.

IBM, Dell, and Morgan Stanley have all outsourced functions of their business to Eastern Europe too – ensuring that this is not just about Western Europe sending work to the East. The Americans are also working with Eastern Europe.

The New York Times spoke to Robert H. Brown, an outsourcing analyst at Gartner Dataquest, who expects growth in Eastern Europe to outstrip the rest of the market in the next four years, expanding close to 30 percent by 2010, compared with 25 percent for the global market. Those are exciting growth figures. This is a market not only growing steadily out of the recession; it’s growing faster than anywhere else in the world.

And what’s the key difference in this region compared to India? European business culture, political stability inside the European Union, and the ability work in English, German, French, Russian, and any other local language. You can’t find that in Bangalore. I should know. I once worked for a French company in Bangalore and we struggled to even find a receptionist who could answer the phone using French.

When the A8 nations joined the European Union in 2004 – expanding the union to the east – it was expected that many would migrate west in search of work. Many people did, but now many have gone home because high quality work in technology industry has come to them. The New York Times reports: “In the Czech Republic, unemployment fell by the start of this year to 7.1 percent from 7.8 percent in 2002; in Poland, joblessness dropped to 13.4 percent from 20.2 percent five years ago; and in Slovakia, to 11.6 percent from 19.7 percent, according to Eurostat.”

That’s positive news. The brightest and the best companies in Eastern Europe have been trying hard to alert those thinking of working with India that there is a more local alternative. If a heavyweight paper such as the New York Times is now shining a light on the region then hopefully more senior executives will come to see what is on offer.

IT Services: Three Major Trends

The past couple of years have been a trying time for anyone involved in IT services in all parts of the world. The global economic slowdown has affected most sectors, leaving few end-user companies in a strong position, spending on IT for the future. Most have just been focused on budget cuts and strategy reviews.

The growth of IT services being delivered from central and Eastern Europe (CEE) boomed almost in parallel with the growth of delivery from more remote locations, such as India, but can the troubles faced by India help European technology firms? Outsourcing slipped down the management agenda during the recession and is now becoming a popular recovery strategy, so this combination could mean the CEE region has far more to gain from the recovery.

And even now some growth has returned – albeit still fairly weak – can the IT industry just deliver ‘more of the same’? The reality is that the IT services industry has to change if it is to grow and succeed in the long term. There is an emergence of some important new markets, being driven by what might be termed ‘mega-trends’ in society. While service sector firms can sit and wait for a recovery in retail or banking, it’s going to be these mega-trends that really shape the future of the industry.

First, the ageing population in developed ‘western’ societies. By the middle of this century it is estimated that fewer than half of all Germans will be economically active. The majority will be either elderly or children, neither contributing to government finances. So how can a developed country like Germany continue to expect economic growth at the same time as maintaining the existing social welfare standards – all with fewer people working and contributing to the economic welfare of the nation? They need to partner with local expertise to succeed.

Second, sustainability is back on the agenda. European governments are implementing a system of carbon reduction commitments in 2010 that will force companies to audit and reduce their carbon use. This push from government will change corporate culture across the entire European region – and beyond. Large European firms will need to partner with local expertise to succeed.

And security is becoming more important, with governments launching national identity schemes and improved border controls – all these new security systems are based on some form of technology. Large European firms will – once again – need to partner with local expertise to succeed.

These three major trends are going to change the shape of IT services in future. But how many executives on the buy or sell side of the outsourcing equation have considered just how much their own marketplace might change this century, especially in Europe?

Welcome

Welcome to the new IBA Group blog. I’m Mark Kobayashi-Hillary, a writer and blogger based in London, UK, and I’m going to explore some themes related to the global IT services industry on this blog. You can find out more about me and my books and blogs on my website.

Let’s start by exploring the idea of Central and Eastern Europe (CEE) as an outsourcing destination. It’s only natural to ask if the region is still attractive? IBA Group is headquartered in Prague, but they have most of their resource in Belarus, so they do have experience of several CEE markets and therefore some insights into the benefits of working in this region.

But naturally, one of the first questions asked with IT outsourcing is around the cost. And places like the Czech Republic or Belarus can’t compete with the low cost resource available in markets such as China, but then outsourcing your IT is about a blend of attributes, value, not just cost. The countries where IBA operates can compete at around a similar price to India, so that’s a good benchmark to start with, and being in Europe the resource remains local to European companies.

There are some other factors that make this blend of EU and non-EU delivery attractive. Resource in Belarus costs less than in the Czech Republic, but the Czech facilities are covered by international legislation such as the EU Data Protection Directive – essential if you want your team to handle any customer-sensitive data. And having the ability to blend EU and non-EU teams by allowing the EU-based team to anonymise data gives a real cost advantage, with the security of European legislation.

Belarus is not a regular holiday destination for many western Europeans; in fact it remains a bit of a mystery to many. But this can be countered by thinking back a few years to how Eastern Europe has opened up to people from all parts of Europe in general, since liberalisation two decades ago. The Czech Republic is now a common destination for tourists from across Western Europe, making it a comfortable and familiar European city. It’s only a matter of time, and perhaps a budget airline route, before Minsk enjoys the same popularity.

In fact, Belarus offers some of the best technology scientists in the world. The former Soviet Computer Research Institute and Computer Production Association founded the IBA Group (in 1993, after the end of the Soviet Union), and though the Soviet empire has long crumbled, there remains a legacy of gurus and expertise in areas such as IBM mainframes – the classic legacy technologies still used by banks and insurance companies the world over. Many of the gurus from the Soviet research institutes came to work at IBA.

This blog is published by IBA Group, but if it were just a regular advert for the company then it’s unlikely you would return to read the second one. The aim is to engage and educate, to offer some new opinions on IT services and outsourcing, and in particular on the eastern European market. It’s clear from just thinking about what to enter in this first blog that there is still a lot to learn from the CEE region.

What are your questions? Let’s start a debate…