Outsourcing To India or Europe – The Debate Goes On

IBA Group
Mark Hillary

There has long been a battle over the best international locations for IT and Business Process Outsourcing (BPO) locations. Analysts in this area long ago stopped arguing about the merits of specific countries and started looking at cities and regions instead, with one of the constant comparisons being India compared to Central and Eastern Europe (CEE) for clients based in Western Europe.

At times the debate has been rather tired. It’s obvious that Europe and India both have their advantages and disadvantages for outsourcing service delivery, however a recent editorial feature in IT Pro really backs the case for working with companies in the CEE. In fact, IT Pro goes so far as to suggest that for IT and BPO services, the CEE region “is a nearshoring Mecca.”

According to research by Deloitte, working with partners in the CEE region, rather than China or India, helps to avoid problems such as:

poor supplier performance; it’s hard to effectively control your supplier when they are so far away. Each problem may require a very expensive and long journey to visit in person – or you need to expatriate teams to oversee the supplier.
inability to realise cost advantage; cost advantages in low-cost locations are often overstated because they don’t account for errors, mistakes, and the cost of increased oversight.
time zone considerations; it can be difficult to manage a team when you only get a small window of time together each day. Emails may take a day or more to be answered and calls are very difficult.
social beliefs; especially true if your remote team is customer-facing. It’s far easier to work with Europeans if you are a European company buying services – even if they come from a different country the team will broadly have the same European cultural values.
government incentives; China and India are mature markets and the real incentives were on offer around 15 years ago – now there are more interesting government incentives in other markets.

Not much of this is new information. European companies have long weighed up the value of paying more to work with European partners they can be close to, both physically and culturally, but there is a strong emphasis on the gap getting wider. The BPO and IT companies are innovating at present and developing new delivery and payment platforms and this is where many Indian companies are getting left behind – relying on the same methods of IT sourcing that were in vogue a decade ago.

How do you think the India v Eastern Europe argument has developed recently? Will this change in 2018 and does the IT Pro analysis reflect what you see in the market at present? Please leave a comment here with your thoughts.

How Is Outsourcing Being Redefined For The Future?

IBA Group
Mark Hillary

Outsourcing has changed so much in the past decade. When my first book about outsourcing appeared in 2004 the emphasis was largely on the cost of delivering a service. Outsourcing was a strategy used mostly to reduce the cost of doing business.

That changed over time with flexibility and access to skills becoming as important, if not more, than the cost of service. But beyond this outsourcing has changed dramatically in the past decade. The way that companies work with each other, charge for services, and the way that services are delivered – it’s all dramatically different now compared to the last decade.

Yet, when I browse the news I still run into articles like this. Here there is a comparison between nearshoring to Eastern Europe and offshoring to India. There are differences between Europe and India, but the arguments in this articles don’t really explore anything beyond saying that the IT companies in Europe are better, closer, and more reliable. It’s the same argument that has been made in favour of nearshoring for about 20 years.

Now think about these three trends that are redefining how outsourcing really works:

1.    Delivery options; are you delivering services via the cloud? Are you creating an app? Are you using Agile to create frequent upgrades?
2.    Payment options; are you offering a freemium model where the client only pays for upgrades from a basic service? Are you offering a pay as you go model where the client can ramp up and down as they choose?
3.    Partnership; the client is becoming the user and this changes the relationship from one with a master and servant to a much more equal need for partnership.

These are just three key areas of change, but they are important. The delivery model, the payment model, and the relationship between client and supplier are all dramatically changing from the types of outsourcing being described in the article I mentioned. Most IT suppliers are changing fast. They have seen this change taking place in the market and they are working with their clients to deliver services using new methods. It’s a shame that many in the trade and business press seem to still be talking about outsourcing as a way to save money, rather than a way to run your business.

Which 2017 Outsourcing Predictions Actually Happened?

IBA Group
Mark Hillary

Where did 2017 go? We have just entered Q4 and the budgets for 2018 will now be in progress – or possibly already be ready. What were the analysts predicting for outsourcing in 2017 and were they right?

I took a look back at a good list created by Stephanie Overby in CIO magazine. This was focused on ten key predictions for the year ahead in IT outsourcing, rather than BPO or more general non-tech predictions, however because most services are now delivered using technology the line is becoming far more blurred. IT outsourcing is no longer just focused on software development – it covers a wide range of technology-enabled services.

So let’s consider 3 of the 10 points that really did hit the target, especially when considering the European nearshoring market:

  • Security is top of mind; this is especially important in Europe now because GDPR enforcement will commence in less than a year. This is a huge change to data privacy across Europe and will affect how many companies do business.
  • Suppliers will pivot; suppliers that focused on a single area, such as software, are creating complete solutions and even branding solutions differently to emphasise that this is something new. Solutions not individual services is the answer now.
  • Cloud as normal; this has been a game-changer. Companies no longer need convincing that cloud-based services are the way forward, they are seeking out services that need no infrastructure and can be paid for only as they are used.

But the list also mentioned that call centres will fade into obscurity as automation and artificial intelligence replaces the need for human agents. This has not happened – yet. In fact the way that most companies appear to be using AI for contact centres is to enhance the performance of agents – so the agents are still integral to the call centre experience. I do expect that as voice recognition improves, we will see many more customer service calls answered directly by the AI, but it requires a very natural interaction to work well and we all know that our present-day conversations with Siri are not there yet.

In addition, I would add that a major outsourcing trend that has been developing over the past couple of years was not mentioned at all. That is the focus on partnership. Partnership used to be one of those terms thrown around by sales teams and forgotten about once a contract was signed, but times are changing.

Many of the services offered by IT suppliers today are incredibly complex. There is no question of comparing in-house against outsourcing because outsourcing to experts is the only way to deliver many solutions today. One analogy would be to ask, if you had more free time then would you service your own car? Almost certainly the answer would be no, because you don’t have the tools or expertise to do the job well. This is now the case in many areas of IT – it’s just not possible to deliver solutions without calling the experts and that is a big change from just a few years ago.

Outsourcing Is Business As Usual

IBA Group
Mark Hillary

I was looking at the agenda for the Shared Services Outsourcing Network (SSON) Eastern European conference, which is taking place next month, and I noticed how one of the opening sessions is focused on business transformation. In particular, the session is exploring the Global Business Services model that is now so familiar to any executive familiar with outsourcing as a business strategy.

The conference looks interesting, but in my opinion the focus on outsourcing and the idea of global business services as anything other than business as usual feels a bit dated. Look at the rebranding of Professional Outsourcing magazine into Intelligent Sourcing for an example of what I mean. There is no longer anything special in deploying a global network of services or in the use of specialist suppliers. Sourcing expertise really is now just business as usual.

A decade ago things were rather different. Outsourcing was a strategy that demanded attention and endless books were published. I even wrote several of them myself. But if a major conference is devoting a 40-minute opening keynote session to talking about global business services then surely it must be important?

Forget business and think about your personal life. Have you ever questioned where Waze came from? Or Angry Birds? Or Skype? When we use software or tools in our personal life we don’t think about it as global services, yet these systems originated from Israel, Finland, and Estonia.

Tablets and phones from all over the world use software and applications from everywhere. The App store allows anyone to create tools and to make them available to a global audience. However, we rarely stop to think about this as a triumph of global services.

So why do we need to be talking about it at a business conference? If I need a partner with CRM expertise I will find the best company regardless of where they are based. Companies today are structured very differently to those of twenty, or even ten, years ago. Many people may be located in the same office, working together to the same targets, but receiving pay from different organisations depending on their expertise and role in the team.

What has really changed in the past decade is this concept of the edge of the organisation – in-house employees and contractors. Today it is far more fluid. You don’t work for the company or work for an outsourcing contractor. You all work together.

Most managers that need to lead teams already understand this. We don’t need a conference keynote to explain the obvious.

Brexit And Trump: Outsourcing In An Uncertain World

IBA Group
Mark Hillary

We live in a world of political uncertainty. The British are heading for Brexit regardless of their recent general election and the American President surprises everyone on an almost daily basis with his early morning tweets. Does outsourcing continue to work as a business strategy in such an uncertain environment?

John Buyers from legal experts Osborne Clarke recently wrote a feature in Computer Weekly breaking down all the various international risks and his conclusion is that there is more stability than might be obvious at first. The analysis explore five key areas related to the present use of outsourcing as a strategy:

1. Brexit; IT spending continues to rise in the UK so there is confidence in the outsourcing market despite Brexit and the election, but it’s worth monitoring the British approach to migration. Preventing skilled labour from reaching the UK might have a negative or positive impact on how outsourcing is used – at present it is unclear.
2. Europe; The Macron victory in France appears to have halted the decline of Europe into instability that might threaten smaller economies and the viability of the Euro currency. Germany is the next big election to watch for, although there is less fear of extreme parties in Germany, compared to what happened in France.
3. Trump; The Trump dogma is focused on local jobs and big international sourcing giants will need to create more local US jobs if they want to avoid being frozen out of the American market. However, who knows how long he can last in office when so many problems are circling him after just a few months in the job.
4. India; Especially with regard to the British market, some commentators are suggesting that the tried and tested outsourcing to India model might be more popular when business with Europe becomes more expensive. Personally I doubt that any tariffs involved in EU business will outweigh the costs of doing business with India.
5. Data; Tough new data protection rules (GDPR) come into force in Europe in 2018 and this means that British companies will need to follow the rules regardless of Brexit – the earliest the UK can leave the EU is 2019. Pricing and tax of outsourcing contracts in Europe may need to take all these new procedures into account.

I certainly agree with the analysis. These five key issues could be expanded once you consider industry verticals – look at the enormous changes happening with European open banking regulations in 2018 for example – however as a summary of where outsourcing managers should be looking it is a good start. For Europeans doing any business with the UK Brexit will be a key challenge of the next two years. Companies are still investing in outsourcing partnerships so confidence remains and that’s still more important than anything the politicians say or do.

Outsourcing Isn’t A Bad Word – Despite What Some People Say

IBA Group
Mark Hillary

Use of the word outsourcing has declined in recent years. In fact, if you compare searches on Google now to five years ago then there has been a 100% decline in how often people search for the word. However, this doesn’t mean that it has gone away.

In fact, although organisations like the National Outsourcing Association and Professional Outsourcing magazine have all rebranded to focus on partnership and sourcing in their names, there is really nothing new about what companies are doing when they work together.

A recent feature in The Next Web suggested the companies – especially smaller ones – shouldn’t fear the word outsourcing for a number of important reasons:

1. Brings familiarity to the unfamiliar; bringing in large experts in specific areas, such as IT, can be reassuring for your business. You might not understand how to deliver a global Big Data solution, but they have done it for many other clients and know exactly what to do.
2. Lowers the burden of bureaucracy; buying expertise as you need it with a service contract is much easier than hiring a large number of new recruits.
3. It keeps you local; dealing with multiple countries and multiple languages in a market like Europe can be difficult, but a partner with a multilingual workforce can make your business feel very local to your customers.
4. It impacts your bottom line; this improvement to your business will impact on revenue and profits – almost certainly!
5. Access to talent; accessing the best people where are when they are needed is possibly the single most important reason to use outsourcing as a strategy.
6. Staying lean; you can focus your own team on core competencies and buy in the additional expertise you need – important for staying focused on what is important for your business.

It’s true that many organisations have started dropping the term outsourcing in favour or partnership and there is a reason for this. Many new outsourcing contracts really are much more about corporate partnership, rather than just a client and supplier. There is still a client, but they really need their expert supplier. The supplier needs clients, but now they are working much closer to clients and creating innovative solutions now just agreeing a specification on day one and delivering the same thing forever.

I like this exploration of outsourcing in The Next Web. It’s a title that usually explores innovation and start-up culture so to see that they accept outsourcing as a part of the start-up environment and managerial toolkit is interesting and reassuring.

Access To Skills And IT Expertise Driving European Outsourcing

IBA Group
Mark Hillary

I saw some research published on IT Pro Portal that compared the pros and cons of British companies outsourcing IT processes to India and Eastern Europe. As might be expected, the arguments are generally around the cost of doing business in each location and the available skills, but it was interesting to see some references to the AT Kearney 2016 Global Location Index.

This research focuses in detail on the best locations, focusing on cities and clusters of cities rather than just comparing one country with another. At a broad level the Eastern Europe destinations do extremely well when compared to all other locations globally. Five out of the top twenty best locations globally for IT services are located in Eastern Europe.

In my opinion this underlines an important point. Many journalists writing these comparison stories focus on cost, particularly when they explore the cost of doing business in Asia. However, as the AT Kearney research demonstrates there are many more reasons that these locations in Europe excel in IT services – to reduce everything to cost alone is far too simplistic.

At present I can’t see an update to the AT Kearney research for 2017, but I’m sure it’s coming soon. When I look at the data for 2016 though I can see three stories emerging:

1.    Companies are using outsourcing as a strategic tool specifically to access skills, not to reduce costs.
2.    Companies are using outsourcing and partnership with IT experts because they need to explore automation and industrial developments such as Robotic Process Automation (RPA).
3.    Companies are finding that they need to offer cloud-based services that are charged as they are used and this requires extensive IT expertise to deliver successfully.

The India vs Europe comparisons don’t generally appreciate that the way business is delivered has changed dramatically in the past decade. Working with IT experts today is essential if companies are going to be able to deliver successful digital transformation programmes – skills and expertise are driving outsourcing programmes today.

Despite Brexit Uncertainty UK IT Outsourcing Is Growing Fast

IBA Group
Mark Hillary

Although outsourcing as a business term has generally been replaced by strategic partnership, there can be no denying that it is being used more and more by European companies. Recent research from the UK shows that companies are exploring IT outsourcing as a business strategy more than they have been for at least five years.

In fact, the latest data on UK spending on IT outsourcing shows that British companies spent £1.74bn ($2.26bn) in the first quarter of this year. 68% of this spending was on launching new IT projects.

The strong data is encouraging, especially with such a large proportion of new project launches. The Brexit process in the UK has caused uncertainty for any businesses that need to interact with European partners, but this data shows that at present there is still a clear appetite for technology improvement.

If Business Process Outsourcing and Customer Experience outsourcing is added into the picture then there is an even stronger message of growth coming from the UK. Q1 featured £2.73bn ($3.55bn) of overall spending on outsourcing of IT and services enabled by IT. That’s growth of 13% on the previous year demonstrating that businesses in the UK are investing heavily in IT and the services that IT supports.

The UK general election will take place in June, but it is generally assumed by most analysts that the incumbent Conservative party will continue to lead with their focus on delivering Brexit by 2019.

Although British politics appears to be confusing at present, with an election and the process of leaving the European Union all filling the headlines, it cannot be denied that executives are investing in technology. This implies that there is some confidence in the UK economy over the next few years and with growth at around the 13% mark that looks good for IT specialist partners all over Europe.

5 Tips For Increased Outsourcing in Europe

IBA Group
Mark Hillary

The Netherlands Foreign Ministry funds an organisation called The Centre for the Promotion of Imports from Developing Countries – or CBI for the short name. CBI facilitates trade between Europe and developing countries as a way of stimulating those economies. It’s the old argument of ‘trade not aid’, but now as government policy.

CBI recently published research on the outsourcing market in Europe and how attractive it is for companies to work within at present. It’s interesting because they are focusing mainly on demand – are more companies likely to outsourcing inside Europe and if so, how would they do this?

They identified five key factors. This is advice to supplier companies who want to win business from customers inside Europe. They are quite insightful comments and especially when this is a government research project – not private sector companies already involved in outsourcing.

1.    Innovation; I was surprised to see this in a government report, however they are correct that the client and supplier relationship has moved on. Companies are not looking to just outsource business-as-usual, they want a partner who knows their processes inside-out and can offer new ideas and ways of improving those processes.
2.    Focus on Verticals; don’t claim you can offer solutions to any business. Choose the verticals you know and focus on marketing in these areas. Service providers are now expected to know far more about the business than ever before – you need to be suggesting better ways your client could be working.
3.    Open Standards; use very open publicly available delivery methods such as the app store and cloud-based systems. This makes it extremely easy for your clients to find solutions and install them – without the need for complex installation and maintenance.
4.    Smaller customers; it is not only big companies looking to outsource today. Actively targeting smaller companies with automated solutions can be a great way to tap into new business.
5.    Output based pricing; don’t charge by the number of employees you put on a project. Charge the client based on outcomes. Their success is your success.

CBI noted that nearshoring is a much more popular strategy than outsourcing across a long distance. There is a lot of opportunity for companies to engage more in Europe and this advice really demonstrates some good ideas about how to improve the client and supplier relationship. You can read the entire report here.

What Are The Biggest Trends in Outsourcing Today?

IBA Group
Mark Hillary

A recent Raconteur report explored some of the key trends driving outsourcing today. The six key trends identified are:

1. BPM not BPO; Business Process Management means taking over entire services for clients and working as partners, not like a supplier.
2. New Frontiers; many new markets are offering services, particularly in African countries that have not engaged much with global IT in the past.
3. Local Government; a wave of global austerity is forcing governments globally to explore outsourcing.
4. Changing Contracts; the long-term 20-year deals are over.
5. Cyber Security; Companies need more help than ever protecting their information and their supply chain.
6. Transformation; more than ever, outsourcing is being used to completely change companies and to help them explore new business models.

These are good observations, although it is not mentioned that both IT outsourcing and Business Process Outsourcing have been dramatically changed by innovations such as cloud based services and the app store culture. Delivering IT services today is far closer to offering products to customers than it used to be – bespoke development still exists, but is far less common.

However, the problem I really have with the six trends is that the report appears to give them equal weight. They are all listed with an appearance of the same importance, whereas I believe that the first point is entirely reshaping the outsourcing market.

Many technology services are so complex today that large companies will almost certainly not have expertise in-house. Think about complex Big Data analysis as a good example. Designing and building the database systems is hard enough, but to make sense of it you need data scientists. Most companies don’t have any of these skills just sitting around waiting to be used.

The Customer Service marketplace is another good example. Customer Service used to mean managing a contact centre. It was quite a dull and repetitive process and could easily be managed in-house or could be outsourced to a service provider that could provide the service at a lower cost. Now there is an enormous amount of technology involved in managing customer relationships – ERP for supply chains, CRM for managing interactions, Big Data for analysing trends and social interactions. Managing customer relationships now is far too complex for almost any company – other than the biggest – to handle without going to an expert.

Outsourcing is becoming an essential strategy for this reason. Companies need to hire expertise. These clients really need the expertise of the supplier to help build their strategy. The days of lining up three similar suppliers and then asking which one will offer a service at the lowest price are largely over. Supplier relationships now are far closer to partnerships where both companies want the business to succeed.

We all know this from our personal life. You know that there might be a cheaper plumber or a cheaper car insurance company out there, but you also know that if you go for the cheapest then the service will not be good. This thought process has now entered into the enterprise outsourcing space. In fact, the term outsourcing no longer really reflects the partnership nature of these corporate relationships today.

Perhaps it’s time to say that outsourcing is dead, but partnership is alive and well?

Global Skills – What Happens to IT When Migration Stops?

IBA Group
Mark Hillary

If there is one thing that global business hates, it’s uncertainty and with all the political changes of the past half year there is plenty to go around. President Donald Trump is making endless policy pronouncements on Twitter, the UK plan for Brexit appears to be a process that will take years to resolve, and with several major European elections this year we may see even more populist leaders emerging.

One thing for sure is that the global IT and IT outsourcing business involves the movement of skilled people to places where contracts are operating and the movement of projects to people. For years there has been a constant flow of both. Sometimes the work itself can flow from a client to supplier in a remote location. Sometimes the IT supplier needs to send teams to the client. There has been a two-way flow of skills and work for many years that has created a global industry with several international clusters of expertise.

The approach President Trump is taking in the USA may give an indication of how many countries want to operate in future – with a drastically reduced inflow of people, no matter how skilled they are or how required those skills are.

In the first instance this appears to be a big concern for the Indian IT companies who account for over 70% of all H-1B visas in the US. The H-1B visa is used to allow highly skilled workers to temporarily work legally in the US. 85,000 visas are available each year and 230,000 applications are made. At present they are randomly allocated, as all valid applications are from highly skilled people anyway. Trump plans to make it much harder for companies to get the H-1B, although the exact criteria change remains undefined.

Similar fears exist for companies operating in the United Kingdom. It is clear that the free movement of EU nationals will end as Brexit is agreed, but it remains unclear how EU nationals already living in the UK will be treated. Will they be allowed to stay in return for the right of UK nationals living inside the EU to stay there? At present nobody knows and it is this uncertainty that is bothering many inside industries such as IT, that are used to a steady flow of skills across borders.

There could well be an upside for companies that specialise in nearshore IT services, if the Indian IT players find that they are going to start being seen as too far away from their customers, but for now the future remains uncertain. What is clear is that some of the largest companies in the world depend on sourcing IT expertise globally, yet some of the biggest governments in the world don’t appear to be listening to the companies that create the jobs.

The Biggest Trends in IT Outsourcing in 2017

IBA Group
Mark Hillary

CIO magazine is usually a good place to explore future trends that will affect the global IT industry and right at the end of 2016 they published a good list of issues affecting IT outsourcing. We are already a month or so into 2017, but it’s still worth taking a look at this list of ten key trends that anyone in the IT outsourcing area needs to be aware of.

From the ten, the three that really stood out for me were:

1.    Security; more than ever, security is a major concern. Companies can fail because of security breaches and with links between companies under scrutiny this requires a strategy that explores people, processes, and technology.
2.    Automation; more services are being delivered automatically and more customers will expect to see IT costs reduced with an increased delivery because of automation.
3.    Cloud; it’s about far more than just raw power and storage. Entire critical services are now cloud-based and it’s becoming unusual for companies to want anything other than a cloud-based solution now.

The CIO list also suggested that IT suppliers will pivot and start offering additional services, such as consulting, but I would suggest that this is just part of a wider change taking place.

We are moving on from a traditional client and supplier type outsourcing arrangement to partnership or co-sourcing. I know that suppliers have talked for years about partnership, but I mean genuine partnership where the contract between companies is not strictly about what can be delivered, it includes provisions for how to innovate and how to make the deliveries better. If the two companies start working together, rather than one just selling a service to the other, then we are no longer talking about pivoting services, there is the potential to build new products and services together – as if the two companies are functioning as one.

That’s going to be one of the biggest changes in IT outsourcing in 2017 and I’ll comment more on how this might work in one of my next blogs.

Regionalisation Beats Globalisation After Election Surprises

IBA Group
Mark Hillary

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

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

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

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

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

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

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

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

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

More IT Expertise In Eastern Europe Becoming Visible Globally

IBA Group
Mark Hillary

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

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

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

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

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

New Approach To Outsourcing May Define Future For Many Companies

IBA Group
Mark Hillary

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

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

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

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

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

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

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

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

GSA Shortlists Belarus For Best Outsourcing Location Award

IBA Group
Mark Hillary

I blogged several encouraging reports from my visit to Belarus a couple of months ago including an interview with Valery Tsepkalo from the Minsk Hi-Tech Park (HTP) and Sergei Levteev, the IBA Group Chairman, however there is now some exciting news that verifies what these experts have been saying for years – Belarus has been noticed and recognised by the Global Sourcing Association (GSA), previously known as the European Outsourcing Association (EOA).

GSA Awards

Specifically, Belarus has been shortlisted as one of the best outsourcing destinations in Europe and IBA Group is shortlisted for the best European Corporate Social Responsibility programme.

The final decision will be announced at the awards ceremony in Bulgaria tonight. Whatever happens at the awards ceremony it’s a big boost for Belarus to be noticed in two important awards categories in this way. The best location and the company that is most responsible – all important, but given the information supplied by Valery and Sergei in those earlier interviews I’m sure that Belarus has a serious chance of winning the best location in Europe category.

Belarus has big local companies offering complete end-to-end solutions and expertise in systems integration, but the local startup scene is also extremely strong too. Companies like Viber and Wargaming are innovative and are defining the markets where they operate. Many services are now distributed via the app store for Apple and Android users and therefore the country of origin is noticed less than before – local players can quickly become global in this environment.

Government tax breaks and services such as the HTP are showing that even smaller nations can make a big impact in the global technology marketplace. Shortlisting Belarus as the best place in Europe for IT outsourcing is just one more step towards a more general recognition that this is a great place for running technology projects – good luck to everyone in the Global Leagership Summit & Awards tonight!

CEE Trends For An Emerging Europe

IBA Group
Mark Hillary

An interesting video series on the website of Emerging Europe magazine recently explored some of the new trends and opportunities for IT and outsourcing in the Central and Eastern Europe (CEE) region.

The 8-part video series looks at various aspects of outsourcing in Eastern Europe, but I found it particularly interesting to see that there was a strong focus on emerging locations and current Business Process Outsourcing (BPO) trends in the CEE region.

Many new locations are developing as the larger CEE cities find that their BPO industry matures. With strong competition between service providers it makes sense to explore smaller cities, especially those where universities provide a strong flow of talented people ready to work in the BPO industry.

BPO itself is also undergoing a change of attitude. Previously BPO was associated only with contact centres and many graduates are no longer interested in those jobs, however the more complex BPO being undertaken in CEE today comprises a wide range of business services – this is much more attractive than contact centres alone.

Complex industries, like financial services, being supported by suppliers in the CEE region are finding that they are developing new solutions and systems rather than taking existing processes from another region and copying them offshore. This is because many entire industries are changing fast and sourcing services from the CEE region helps them to perform in a more agile and competitive way.

This also creates a learning culture in the CEE companies where people are not just expected to copy processes from western Europe and the client companies. They are expected to anticipate how industries are shifting and to then meet the new needs of their clients – a much bigger and more exciting challenge.

The huge mega-deal of the past is less common today thanks to smaller teams of best-of-breed suppliers that can work together on deals.

The entire CEE area and the type of services being provided is dramatically evolving. I recommended watching the entire video series from Emerging Europe to get some great advice on what’s really happening.

The Changing Nature of Global Outsourcing

IBA Group
Mark Hillary

The traditional drivers or outsourcing are factors such as availability of talent, flexibility of a supplier to provide expertise, and a reduced operating cost, but a recent feature in CIO magazine showed that the situation around the world is changing. Many regions are seeing unusual changes that are sometimes beneficial and sometimes problematic.

IBA is focused on the Central and Eastern Europe region (CEE) and there are changes taking place in many of these countries that are not usually picked up by commentators who merely talk about rates being lower than western Europe. The conflict in Ukraine is a good example.

All organisations want to operate in a stable political environment. Armed conflict is not going to help any business function smoothly and it is interesting to observe how the CEE neighbours of Ukraine have all benefited from the conflict. Many IT and BPO companies with operations in Ukraine have shifted their teams west into neighbouring countries and many individuals with skills have just moved, seeking work nearby. In some cases (like Lithuania) the local government has made it easier for foreigners with IT skills to come and find a job.

These unusual changes in outsourcing attractiveness are repeated in several other places around the world. Brazil and Colombia have both seen currency depreciation over the past year that makes their services at least 20% cheaper than a year before – for companies using US dollars.

Even inside the US there are changes that are not reported so often. The government offers many incentives for companies that hire military veterans and as the USA winds down various overseas operations there are many veterans starting service companies and using their veteran status to win contracts with companies that want to hire locally, but also see that they get tax benefits in doing so.

What’s interesting about all these cases is that they show how complex the outsourcing decision process is becoming. This is no longer about selecting a nation or individual company, many other factors are in play and can affect how a corporate relationship works.

CEE Looks Strong For IT Outsourcing But The Market Is Changing

IBA Group
Mark Hillary

Earlier this year the management consulting firm AT Kearney released their latest IT Global Services Location Index. This research shows where they believe are the best locations for IT outsourcing globally.

The first thing that is interesting about the report is that a quarter of the top 20 countries are all located in Central or Eastern Europe (CEE). It’s clear that locations such as India or China will offer lower cost IT services, but based on a wider variety of factors the CEE region performs extremely well.

The CEE countries featured in the AT Kearney top 20 are Poland, Bulgaria, Romania, Latvia, and Russia. All these countries, except Latvia, improved their position in the top 20 year on year so there is not just a large proportion of CEE countries in the top 20, there is a trend towards this region becoming more attractive too.

But there is also a big shift taking place in IT outsourcing. The AT Kearney research also describes how Business Processing As A Service (BPaaS) is poised to reshape how outsourcing works. Outsourcing is not just about a client commissioning IT work from a supplier in another country – the entire process of buying IT systems is changing.

This is an important point and echoes what we have seen in the consumer market. Think about how you use software on your own computer or phone. Either there is an easy to install app available from the app store or you can use a service within a browser. There is no installation or configuration required to use your own personal technology systems and enterprises are mirroring this behaviour.

The cloud was originally popular with companies that wanted flexible access to computing power or storage, but it has matured into a strategy that allows systems to be centrally installed and configured and accessed remotely. The client can then only pay for the time they are using the system, blending IT systems with BPaaS.

The real winners in IT outsourcing in future will not necessarily be the companies in the lowest cost location or with the most technically gifted employees, it will be the companies that can plan for cloud-based services with pricing plans that make sense for companies that do not want to pay up front for technology services.

SSON Celebrates Ten Years of Focusing On Eastern Europe

IBA Group
Mark Hillary

It’s great to see that the Shared Services and Outsourcing Network (SSON) is now celebrating ten years of activity in Eastern Europe. SSON has long been a source of useful research and information on outsourcing and over the past decade their research has formed a useful body of knowledge on nearshoring in Europe.

To celebrate the tenth year of activity there will be a conference in Hungary in October featuring over 65 speakers all focused on the opportunities available within the European nearshoring environment.

Typically with these regional-focused conferences there is a competitive element to the talks, where one region will compete with another to describe how they have more graduates each year, or more skilled IT personnel. This approach is rather tired and ignores the wider benefits of working across many European countries as a whole so it’s great to see that the SSON conference is looking at the big picture for nearshoring in Europe and how it affects different industries, such as finance and HR.

I was particularly interested to see that there is also a focus on how the millennial demographic is changing business in Europe today. This is something I have often spoken about in recent years. The millennials (those born from 1980-2000) have a very different attitude to work and technology because most of them grew up in a post-Internet era – they have only ever known a connected society so they are different as both employees and customers.

Many of the people in this age group are now in managerial positions and are determining where their company should invest. It is therefore extremely important for companies aiming to work with other companies B2B to understand this changing dynamic.

It’s great to see that the SSON understands this change in the outsourcing client and supplier relationship and in particular how this can affect European nearshoring. I look forward to hearing more from the event in October.

Building The Next Generation of IT In Eastern Europe

IBA Group
Mark Hillary

ZDNet published a recent focus on Eastern European technology outsourcing because the recently published AT Kearney 2016 Global Services Location Index suggests that 5 of the top 20 countries of the world for IT services are now inside Eastern Europe.

The top three countries globally are India, China, and Malaysia, but Eastern European countries doing well in the report include Poland, Bulgaria, Romania, Russia, and Latvia. Prague also stands out as one of the cities in Eastern Europe singled out for praise.

There are a couple of very interesting features in this report. First is that the countries and cities mentioned are clearly competing on what they can offer to clients. The focus is on cost-effectiveness and proximity to customers, so these regions are far more worried about how they can add value than offer a low price service.

Second is the awareness from many of these regions that nearshoring may not be enough to sustain a long-term IT industry. There is a clear focus in countries such as Poland, Romania, and Bulgaria that they need to build a complete start-up infrastructure if they are to create long-term success.

This approach acknowledges that new IT companies need to be nurtured and many delivery mechanisms today – such as the app store – bypass the traditional way that IT companies have operated. IT companies can often become product companies rather than just offering a pure IT service.

It’s exciting to see the European technology marketplace maturing and to see that Eastern Europe is doing so well even when compared to global competition.

Gartner Highlights Advantages of IT in Belarus in New Report

IBA Group
Mark Hillary

The analyst firm Gartner recently published their latest evaluation on offshore outsourcing for the EMEA region in 2016. The report paints a positive picture of nearshoring within Europe with labour rates substantially lower than most western European countries.

Gartner found that the Eastern European countries can also compete on their geographic and time zone proximity to other nations within Europe, and on the availability of language skills beyond just English. Countries such as Poland, Czech Republic, Hungary, Romania, and Bulgaria also offer political and economic stability through EU membership and close cultural affinity with Western Europe and the U.S.

What is interesting for companies such as IBA Group is that Gartner did explore the options further east. When commenting on countries such as Russia, Belarus, and Egypt the report says: “[these countries] offer lower labour rates, but entail higher risks concerning legal maturity, intellectual property protection, security and ease of doing business.”

Belarus scores well on several measures that Gartner mention in their analysis, particularly the high level of government support for business and the low local labour cost. The Belarus government has invested in education to create a workforce skilled in IT – it has been growing at 35% per year since 2006. Some of the government incentives include a 0% corporate tax rate and a flat 9% income tax rate – for companies using the Hi-Tech Park Initiatives.

Gartner cites the Payscale index and suggests that a software developer in Belarus earned $14,000 to $16,000 per year based on data from last year. The labour inflation in Belarus is 5% per year and employee attrition/turnover rates are also around 5% per year – both figures are relatively low compared to other European countries.

Most IT activity in Belarus is focused on Minsk, but other locations are rapidly growing and also featuring technology parks, such as in Gomel, Grodno, Brest, Vitebsk, and Mogilev.

The Eastern European nearshoring is well known already, but it’s exciting to see that companies such as Gartner are now seriously covering locations such as Belarus.

Nearshoring Back On The European Outsourcing Agenda

IBA Group
Mark Hillary

The debate over nearshoring and more remote offshore outsourcing has rumbled on for years in Europe. The debate over voice contact centres was fairly conclusively resolved a while back, with it becoming clear that most clients prefer their contact centre to be closer to home, but the broader IT and IT services market has still embraced all kinds of outsourced model.

However in all the outsourcing predictions for 2016 I have seen the resurgence of the European offshoring model several times. For example, a recent report by the analyst Global Remote Services says:

“Nearshoring will continue to gain momentum in Eastern Europe – nearshoring is fast becoming an option which is seen as being more skill specific for businesses with a mixture of complex, high-end projects as they realise the value in keeping outsourced work close to where the business generally is. Nearshoring in Eastern Europe will continue to grow as it becomes attractive and competitive to the UK market, and also much ‘nearer-to-final-customer’ and ‘easier-to-manage’ versus far-shoring.”

We all know the typical arguments when comparing Eastern Europe to a more remote location, such as India, but I think it’s important than advisors are now focusing heavily on skills availability.

Outsourcing has long been considered a “lift and drop” business strategy, which is how it got the reputation for being all about saving cash. Let’s take a process, lift it out of the business and drop it completely into a supplier and get the same work done for less. That’s the old approach, but times have changed.

The boundary of organisations has become more blurred, particularly when expert skills are needed. Organisations are hired to provide those skills, but they work in the office of the client, with the client team. The client and supplier merge together to create a solution today, rather than the client firing an entire department and dropping those processes offshore.

Outsourcing has become a more mature business strategy and with a greater value placed today on skills and partnership, it’s no surprise that nearshoring is returning to the boardroom agenda.

Is This A Resurgence In Status For Nearshoring?

IBA Group
Mark Hillary

New data published this month in Logistics Manager magazine has indicated that nearshoring is a strategy that is gaining in popularity – particularly in Europe. In their data, 56% of respondents indicate that they favour “rightshoring” over offshoring to the lowest possible cost location.

The Logistics Manager data is focused mainly on manufacturing businesses ensuring that their manufacturing facilities are as close as possible to the end customers while also balancing production costs, but the strategy can be applied equally to other industries. The reason for this is that what is actually changing is the way we manage supply chains.

Any hand-off of a process between different departments, or from one company to another, takes time and involves risk. This is true of services and manufacturing. When a process is passed between teams internally there is a risk of failure during the transition. This risk is multiplied when offshore outsourcing means that a process has to be handed to another organisation in another location – often far away on a different time zone.

The traditional metrics that decided how to organise an outsourcing strategy focus on three areas; what is the cost? Can the quality be maintained or improved? Can the time required to deliver be reduced so factors such as time-to-market can be improved?

Nearshoring has always had an advantage over more general offshoring in all of these metrics, except for the cost. But with a renewed emphasis on the supply chain, it may well be that the correct focus is the quality of the team, or service, anyway.

Low cost services are no good to any company if they don’t work. Imagine a luxury goods retailer using the cheapest possible contact centre company for the customer service? How would that reflect on the brand? Likewise, an innovative drug company would not want the cheapest, least innovative, technology service. What companies really need when they outsource today is a partner.

Partnership is what sales teams used to talk about before the sale, but it’s become a reality because what has actually happened is that companies providing different services into a supply chain have really become a part of the team. Outsourcing has become a standard strategy and companies have got so good at doing it they slot in and work as if they were a part of the client.

This means that nearshoring – as opposed to focusing on the cost only and offshoring – takes on a renewed importance. If you want a better price for services, but not necessarily the lowest, because the quality and time factors are most important then European companies working with partners in Europe becomes the ideal business solution.

What has really happened as outsourcing has matured is that the boundary of the organisation has become flexible. Instead of thinking of the client with a supplier, it’s better to now just think of the client having flexible organisational boundaries that include some of their own team and some suppliers – but whoever actually does the work, they all exist within the organisational boundary of the client.

This is a big change and it certainly makes nearshoring an attractive option. Have you considered the differences between nearshoring and offshoring in the context of the way that company supply chains have changed in the past few years? Please do leave a comment with your own ideas here.

IAOP Recognizes IBA Group in New Global Outsourcing 100

IBA Group
Irina Kiptikova

On April 16, the International Association of Outsourcing Professionals (www.iaop.org) released the second blog article devoted to The Global Outsourcing 100® list. This article recognizes companies for innovation programs.

The Programs for Innovation category of the IAOP’s Global Outsourcing 100 focuses not just on specific examples but on the programs that service providers and advisors have in place to identify and implement innovative solutions.

Today’s customers demand innovation from their providers and the outsourcing industry is looking for new ways to meet this growing demand. IAOP evaluated programs for innovation in The Global Outsourcing 100 for the first time.

IBA Group earned the highest 8 points in this category. The company received a full star recognition and its achievements in innovation were marked as the ‘Highest Rated’. This accomplishment looks especially impressive because the average score for innovation of the participating companies was 3.52.

IBA Group showed in its application that innovation is not a one-shot job for the company. IBA Group set up a Committee for Innovations headed by the IBA Group Chairman and created a company-wide Registry of Innovations. A special procedure on how to apply and approve or reject the ideas was implemented in the IBA intranet and a special venture fund was formed to finance the innovation procedure.

IBA Group implemented many successful initiatives through this procedure, including a mobile version of the IBA’s enterprise content management system and an Automated Fare Collection (AFC) system that earned a European IT & Software Excellence award for IBA Group.

IAOP Recognizes IBA Group for Delivery Excellence

IBA Group
Irina Kiptikova

The International Association of Outsourcing Professionals launched a series of blogs devoted to The Global Outsourcing 100® list that recognizes the world’s best outsourcing service providers and advisors. The blog articles are focused on the four judging categories of The Global Outsourcing 100 and on what it takes for companies not only to make the list, but to achieve distinguishing ‘stars’.

“Hip hip hooray…it’s not the New Year but it sure does feel like it around here with the buzz and excitement of IAOP’s 10th edition of The Global Outsourcing 100®!” – This is how IAOP opens its first series of blogs on The Global Outsourcing 100.

Each organization completed a rigorous, opt-in application to compete for inclusion in The Global Outsourcing 100. The achievements were assessed based on the following four distinct areas: Delivery; Programs for Innovation; Corporate Social Responsibility (CSR); and Size & Growth. Those companies that have distinguished themselves receive half or full stars in one or more specific judging category.

IBA Group has been enrolled in the rating, which is actually organized as a contest since 2006. The list has been evolving and the rules have been changing, but IBA and other outsourcing providers keep applying to be among the best 100. It is not only a good chance to receive exposure. It is also an opportunity to see how the company is doing against others and to set targets for improvement.

The first blog article by IAOP is devoted to the Delivery Excellence judging category. The category includes company recognitions, customer references, company certifications, and the number of Certified Outsourcing Professionals on staff.

Delivery Excellence is a strong area for IBA Group. This year, the company received the score 7.25 for delivery excellence of the highest 8 points. It is a distinguishing accomplishment, given that the average score of the participating companies in this category was 5.86. IAOP awarded IBA Group a half star for Delivery Excellence.

Crowdsourcing and Big Data Can Come Together

IBA Group
Mark Hillary

Could Big Data help the buses in New York run on time? That’s what one city politician is hoping for. New York City Council Member Ben Kallos has campaigned for the Metropolitan Transit Authority (MTA) to openly release all their data on bus arrival and departure times.

Kallos is convinced that the buses never run on time. When he has complained in the past to the MTA they have always suggested that he is wrong. He managed to obtain three months worth of bus data and with the help of some data analysts he proved that the buses only ran on time 58% of the time.

The MTA has pleaded that the data is in a difficult format for it to be quickly released to the public so his project has not moved further than this pilot stage, but this demonstrates the power of citizens and politicians understanding how much data is available from public bodies.

London has released live position data for their buses for several years now. Anyone can create a Google map like this, showing the real-time position of all the buses in the city.

Some of these online maps may appear to have no purpose other than to astonish the viewer – look at how much data is available! However, when politicians start using Big Data projects to help citizens then the value of Big Data is clearly going mainstream and being understood by the general public.

Will a Skills Shortage Threaten the Future of Big Data?

IBA Group
Mark Hillary

As the economy develops, old jobs vanish and new ones are created. This process has always taken place as technology creates new needs and old skills are replaced. Just consider how important the blacksmith used to be before cars were commonly used and if someone described themselves as a blogger or flash developer in 1985 it would have made no sense – times change.

Big Data is another of these major changes. Not just in the sense that we are becoming able to analyse larger sets of data thanks to the technology becoming faster and more powerful – especially with more memory being available, but because the ability to do this work is now a skill itself. Understanding Big Data and being able to manipulate and analyse large sets of data is a popular skill to be exploring now as every analyst predicts that Big Data use is set to explode in the coming years.

The analyst firm IDC wrote a study in 2012 that predicted the amount of data available to analyse would increase 50 times by 2020. This prediction remains true – if anything it may be even more by 2020 as new applications that create data are launched all the time – from smart watches to other wearable technologies.

All this has led to a fear that there will not be enough people available to work on Big Data projects. McKinsey believes that the US will need almost 200,000 new data scientists by 2018 and the British Royal Academy of Engineering has predicted a need for 1.25 million graduates in science and technology subjects by 2020.

A recent column in the British ‘Daily Telegraph’ claimed that this shortfall in data scientists might even be a threat to the future of business. But what all these concerns in the UK and US often fail to acknowledge is that there are many other countries with an abundance of data scientists.
Offshore outsourcing has been long proven as a strategy for software development and other IT requirements. It will be exactly the same once data science becomes a mainstream part of every business. And companies like IBA Group are already doing it today.

Is Jargon Preventing an Acceptance of Big Data?

IBA Group
Mark Hillary

The Smart Data Collective blog recently published a view that there is too much jargon circulating in the industry related to Big Data. In fact, as I mentioned in my last blog, Big Data is itself a term that is often misunderstood and needs more clarity.

The blog is interesting because the author takes a good example of an over-used business term, ‘digital’, and explores what we mean when we read and use this term. Many of the definitions from the dictionary have nothing at all to do with the definition of digital business you might expect – modern, hi-tech, and connected.

In fact, many more terms are taken from the dictionary and bent and shaped into something new by technology companies. Innovate, disrupt, and thought leadership are all terms that mean something different if you are not working for a technology company, but how can we improve the use of Big Data as a term?

The advantage we have is that Big Data is a genuine and meaningful area of data science. It’s not just jargon created for use by MBA students as they discuss their plans for ‘wealth-generation’.

Big Data needs to be understood by the general public and by the company leaders that have never really felt that they had to understand technology before. But almost everyone has now used Facebook, or contacted a customer service centre, so it is becoming easier to connect the theory of how Big Data can be used to the ways in which people see it every day.

Big Data and Cloud in decision-making

IBA Group
Aleš Hojka, CEO of IBA CZ
Vitězslav Košina, Business Consultant at IBA CZ

It is a reality today that organizations have to deal with a multitude of unstructured documents and other data. These data have true value, if they are properly and timely processed and extracted, and also are supplied with really useful links.

Almost any business has in some way implemented a data management system (DMS), a content management system (CMS) or a business intelligence (BI) solution. Unfortunately, a new system often provides a very low added value, especially when a large amount of data is involved. Getting reasonable output from unstructured data is problematic. Why is it so?

DMS, CMS, and BI systems can be really effective, if they meet two essential requirements. The first is a sufficiently flexible environment and quick access to information complemented by strong information security. A really flexible environment shoul be able to respond to resource and computing requests in a very short, practically in real time. This can be easily achieved by using a cloud-based solution. As these requests are dynamic and cannot be easily predicted at the time when the system is designed, cloud can be very instrumental. In addition, keeping resources for a «rainy day» is not an effective allocation of resources.

Therefore, cloud is a prerequisite for dealing with big data, but it is not the only one. In some cases, data and documents are not available anytime and anywhere without limitations, though we have an environment designed for large amounts of data. This is true.

It should be noted that effective decision-making involves an increasingly growing amount of information. As the information should be available on mobile phones and tablets, an information management system cannot transfer huge amounts of data and should have short response time. If we meet these two basic requirements, then we are poised for truly efficient extraction and processing of large amounts of data, which can be further aggregated and analyzed to make a grounded decision, deal, and etc.

For many companies, using Software as a Service (SaaS0 is a problem, because they have to do with sensitive commercial information or client data. From the perspective of a cloud-based solution, a dedicated cloud is needed as apposed to shared capacities.

Many organizations outsource only the infrastructure, while we recommend to outsource the entire solution. With a cloud solution, the issue of security is solved to the extent that is normal for corporate clients. In this case, only the needed capacity is commissioned and there is no need to reserve resources for the team that takes care of the infrastructure and applications. The organization can thus focus on business and management objectives, as well as provide added value to the clients.

With mobile devices, security is a very thorny issue because attacks on their security are more likely than on the computers that are located in the company’s premises, where they are protected physically. The good news is that these devices are so powerful that allow for implementing the strongest encryption and other elements of modern security.

Taking into account the links between documents and their associated metadata, as well as other data sources, cloud computing is the best solution one can choose. It is however possible, if needed, to move from SaaS to the model, in which the solution is managed by the customer and yet not loses the flexibility that cloud offers us in terms of resources. Using cloud is much cheaper than building one‘s own infrastructure. Moreover, it enables organizations to concentrate on their requirements and business needs instead of specific software or infrastructure.

Offshore Outsourcing is About Finding the Best Talent

IBA Group
Mark Kobayashi-Hillary

Offshore outsourcing (often called offshoring) often gets a bad press. Many people assume that offshoring must be all about finding the lowest cost service and therefore the world is engaged in an endless race to the bottom, searching for lower and lower costs.

It’s not like that at all. An interesting article in the business magazine Forbes challenges the conventional wisdom on outsourcing. For instance, even though the US and Europe account for about half the economic activity of the entire world, only about 10% of the global population lives in these two regions.

This means that there are an enormous number of highly skilled people outside the wealthiest nations on earth. Working with this talent is essential because of the difficulties involved in finding these people locally.

And many companies are more globally oriented today. If you wanted a new logo designed in the past then it would be done by a local designer, now it’s done anywhere in the world based on finding a designer you like. Any intellectual task can now be performed anywhere in the world so the issue today for companies of all sizes is that if you are not working globally then how are you finding enough skilled resource to keep you ahead of the game?

And finding the right talent to support your team back in headquarters is only half the story. If you want to expand to new markets, what could be better than working with a team of people in those new markets to give you a footprint and a first step into the new region?

Offshoring has often been misrepresented, but it is now an essential part of corporate strategy that aims at making the skills of the entire world available to clients, wherever they are located.

German Outsourcing Association Research Promotes Eastern Europe

IBA Group
Mark Kobayashi-Hillary

The Outsourcing Journal published a research paper last year focused entirely on the merits of ITO and BPO in central and Eastern Europe.

Organised by the German Outsourcing Association this is an interesting paper with contributions from across the CEE region, including those of particular interest to IBA, such as Belarus and the Czech Republic.

Stephan Fricke, CEO of the German Outsourcing Association wrote about the future for outsourcing in the introduction to the paper: “The future looks bright for CEE IT and business process service providers. Why? Because, speaking for our home market Germany, the demand for IT skills and business process knowledge will not decrease. Quite the opposite is predicted, which is not difficult to explain. The current situation in Germany, where companies are unable to fill desperately needed positions in IT and higher qualified jobs as engineering is caused by failed educational policy and there are no signs that the government has efficient tools to manoeuvre against.”

Fricke went on to add: “So German companies will be forced to look outside their borders for IT-project support and the most accessible destination for that is the CEE region.”

Once again a major trade association has pointed out that far from sourcing being just a low-cost way of doing business, companies in Western Europe need to look beyond their own borders to grow quickly and expand. CEE-based companies like IBA are well placed to work with companies in countries such as Germany – to help them succeed as Europe enjoys economic growth once again.

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.

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?

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.