Posted by Global Sourcing Forum on Sun, Jul 25, 2010
from ValueNotes
There is much talk about IT and BPO industry growth, fuelled by the recovering global economy. Expected offshore business that was stalled 2009 onwards, is now on the cards again, as management focus and financial situations are more conducive. Studies have shown that organizations of all sizes are planning to outsource more in the next two years, to countries such as Mexico, China, India and Philippines. What this signals for Indian providers is that business is about to boom in the next financial year. Several analysts have forecast an industry uptick. But while the signs all point towards growth, there have been no significant new deals to corroborate this sentiment. In anticipation of the growth in business, this much has become clear for Indian IT-BPO firms: the level of scale offered will be paramount to exploiting this expected growth period. Employers have in fact realized this, and the ‘demand environment’ is already affecting the industry’s human capital.
Rise in attrition in Q1
Attrition is rising once again, across IT and BPO segments. The first quarter saw attrition rates of over 15% for many software exporters. Infosys’ Q1FY11 attrition rates, at 16%, were its highest in the last four quarters. Even TCS faced an escalation, with 13.1% LTM attrition, compared to 11.5 in Q1FY10. Attrition in the company’s BPO wing was significantly higher (at 20%), compared to IT services (at 12.3%). As the economy recovers, industry opportunities are opening up again, and attrition has naturally been higher in the first quarter. In fact, most IT-BPOs have formulated their hiring strategies in anticipation of higher attrition rates this year. Voice processes in BPOs have particularly high attrition (anywhere between 50-70%). Some of the ways in which BPOs are trying to lower attrition is by looking at Tier III cities and rural locations for setting up centers, and diverting voice processes into multi-channel contact processes (involving non-voice, email/chat/web based support).
NASSCOM has predicted a drop in attrition rates by September 2010, nearing campus recruitment time for many employers. To counter this temporary churn, retention of critical resources, coupled with aggressive capacity addition will be key for industry growth this year.
Revised hiring targets
Companies are revising their annual and quarterly hiring targets upwards. To illustrate, TCS is now targeting 40,000 new recruits, in lieu of the previously estimated 30,000. Infosys is also looking at hiring 36,000 from the 30,000 outlined in April. The majority of these will be campus recruits, and of the 14,000 to be added in Q2, the Infosys BPO itself will absorb 9,000 employees.
The capacity addition for these companies is mainly in new centers, and new markets. The reasons attributed for both upward revisions are strong deal momentum and consistent ramp-ups for both companies. While companies such as Wipro and WNS are yet to declare their Q1 results, it can be expected that aggressive human capital development will be a crucial element in their strategies as well.
Aggressive retention plans
NASSCOM believes that remuneration is extremely important in motivating an employee to continue with his company in the long run. In line with this, most large outsourcers are pre-empting the exits, and offering salary hikes as a retention strategy. Current BPO wage inflation of 10-15% is definitely increasing costs for employers. But as it is expected to lower attrition rates in the next few quarters, the costs associated with new hires will reduce significantly. Retention is being termed as a ‘major priority area’ for the industry and remuneration is one of the most important ways it may be addressed. TCS, Infosys and Wipro have introduced salary hikes of 10-20% (on average) in this year to ensure that their workforces are not motivated towards global rivals such as HP, Accenture and IBM.
To further enhance retention, IT-BPOs will have to evolve a stronger employee value proposition, with greater scope for learning and career development opportunities. These factors will be the strongest source of differentiation for employers, once the dust from the attrition settles down.
So even in anticipation of strong growth, IT-BPO companies are striving to match pace with global demand, in terms of human resources. Companies are in a bid to extend service capabilities for the expected international business, and aggressive human capital development seems to be the ace up their sleeves this year.
Posted by Global Sourcing Forum on Sun, Jul 18, 2010
New Year’s outsourcing resolutions for service providers
from Phil Fersht, Horses for Sources(and a speaker at GSF 2010)
Wouldn't it be refreshing if some outsourcing executives decided to try doing a few things differently this year? Here are some suggestions...
Stop using the word "transformation".
Start trying to be different from the rest of the pack, or at least admit it if you're not really any different (but are probably cheaper, or have a sexier brand, or something).
Stop espousing that you will bring "innovation" to a finance function when you're just lumping the invoice processing offshore.
Stop claiming you're recent infrastructure management deal was a "cloud transformation".
In fact, stop using the word "transformation".
And please stop wheeling out your only client of note as an example of "innovation" and "best practice" when:
1) You bought the deal in the first place,
2) We've heard it 20 times before, and
3) The client hates you anyway.
Stop claiming you do something, when you don't.
Stop claiming you can do something, when you can't.
Stop claiming ERP support is a "scarce expertise" that warrants a higher price-tag.
Stop copying your competitors' slideware.
Stop talking too much and actually listen.
Stop adopting other peoples' buzz phrases as your own.
Stop espousing that you will bring "transformation" to an HR function when you're just processing the payroll checks somewhere cheaper and using some limited piece of software that's only marginally better than the rubbish the client is currently using.
Start demonstrating how you actually did something unique with a client to help them be more efficient or generate more revenue.
Stop using the word "transformation".
Start being realistic.
Stop boring the living daylights out of everyone by tweeting all your press releases and thinking people actually will click on them.
And why not stop having meaningless meetings with sourcing advisors, when you're only going to talk about the same tired old deals everyone already knows about, and the client already knows who they're going to select in any case...
Hmmm... come to think of it, if everyone stuck to those, we probably wouldn't have an outsourcing industry anymore. So please ignore and carry on regardless...
Posted by Global Sourcing Forum on Mon, Jul 12, 2010
Anupam Govil, Founder-CEO, Global Equations LLC has been ranked as one of the most influential outsourcing thought leader and visionary on Americas by Nearshore Americas in its latest “Top 50 Power Ranking of Most Influential Executives”.
http://www.mynewsdesk.com/us/view/pressrelease/global-equations-global-equations-ceo-anupam-govil-among-top-50-power-rankings-recognized-as-one-of-the-most-influential-executives-by-nearshore-427775
Posted by Global Sourcing Forum on Thu, Jul 08, 2010
Posted by Pentalog High Tech
If at this point one returns to the question of how big is global production sharing, the
answer clearly is ‘very big’. (Yeats, 2001)
Historically, companies in the United States, Europe and Japan have led globalization, because those countries pushed products and services into developing countries. As the business of offshore sourcing grows, globalization is beginning to become widely accepted elsewhere. With "nearshore" and offshore sourcing, the global equation has changed.
You can't separate outsourcing and globalization anymore - they are directly connected and reinforce each other. Now it is a global job market for many types of work. Cheaper labor, more skilled expertise, freer cash flow, a more flexible working environment and the more effective use of staff has made outsourcing a global phenomenon. Industrial countries like - US, Germany and Japan are top outsourcers. Top insourcers such India, in particular, but also China and Russia are also among top twenty outsourcing countries. This shows that enterprises in developing countries and emerging markets are now reaching into developed economies, offering a talented workforce at a fraction of the price. Developed and developing economies are exploiting each other’s markets, economies and labor forces. Outsourcing is not just one way street from developed to developing countries. A new report “How America Benefits from Economic Engagement with India” shows that India has created through nearly 500 investment and acquisition deals worth $26.5 billion about 60,000 jobs in the United Sates between 2004 and 2009. Many of the countries that are witnessing an outsourcing wave have experienced rapid growth in exports of business services and information services.
Profitable global companies have good visibility into their operations across the world and with suppliers, implying a tighter, more effective relationship. These companies can determine their true distribution and logistics costs - invariably higher as you globalize - they can calculate profitability by customer and by product and they do planning across different functions and divisions in order to test the true effects of a global strategy across the company. Top companies use more IT on a global basis. They are much more likely to use e-sourcing/e-procurement, CRM, advanced planning and scheduling and product lifecycle management applications. This suggests that IT capabilities indeed matter to unlocking the value of the global corporation.
While globalization and outsourcing are fantastic opportunities for any business, they may not always be welcomed by the employees of an organization who fear change as a loss of job security. It is natural to expect that those disadvantaged by globalization — irrespective of market — will protest and make known their issues. More than trade or international financial flows, outsourcing has become the particular target of critics of globalization and some of the most frenzied defense by defenders of globalization. Likewise, local politicians and political parties may try to protect jobs and obtain votes through legislation such as the ones currently being debated in the US aimed at blocking the outsourcing of work to offshore enterprise. The positive effects of global sourcing are undeniably real and large but depend on an environment where public, business and worker relationships are fostered.
Pentalog has been for many years a driver in the globalization of many IT companies, or IT departments in various enterprises over the world and has become one of the leading players in Europe in the sector known as “offshore and nearshore”. Our Western Europe workforce is now moving forward and we have several software concepts that are being studied in order to “better exploit” and to participate in the globalization which will necessarily be a matter of collaboration. We also continue our expansion strategy with new locations - the most recent one added is in Israel. In addition, there will be not less than 3 other countries in which we are preparing to launch new operations in the near future. Pentalog is now able to generate and multiply very quickly all kinds of opportunities to produce and sell outsourcing services with high added value in the world. And it is by establishing strong partnerships in complementary geographical, economic, technical and cultural environments that will ensure further sustainability of our growth and globalization strategy.
However, the information technology sector offers an explicit example of the real and potential gains of the economy from globalization of both goods and services. This sector is one where the synergies and dynamic interaction between technological and global forces are significant and where firms are rapidly changing products and activities, with both positive and negative effects on the economy.
Posted by Global Sourcing Forum on Thu, Jul 01, 2010
Improve the 'upside' to your outsourcing arrangement and minimize the 'downside' risks
By Canda Rozier, former SVP/Chief Procurement Officer at First Data,
Regardless of the function being outsourced, there are some steps you can take to ensure a better contract, develop a better relationship with the outsourcer, and achieve better outcomes for your organization. No matter what function you are outsourcing -- IT development and programming, payroll support, call center work, facilities management, etc. -- these steps will improve the 'upside' to your outsourcing arrangement, and minimize the 'downside' risks.
Before embarking on the outsourcing journey, it is important to have planned, carefully, your strategy, defined the outcomes you want, considered the impacts of various scenarios to your business, and gained support for the initiative throughout all levels of the organization.
Here are some simple tips that can make the journey easier and more successful:
1) Do your due diligence upfront
Before entering into an outsourcing agreement, make sure you have done thorough due diligence. Obviously, the type and depth of diligence varies based on what services are being outsourced, but at the very least, you should review the financial stability of the outsourcer, talk with some of their other customers (including at least one former customer to find out why they quit doing business with them), and review their business continuity/disaster recovery plans. If your business requires SAS70s, ISO certifications, PCI compliance, etc., determine the outsourcer's credentials early in the process. In fact, this due diligence should be part of your selection criteria, and you should create obligations on these certifications in the outsourcing services contract.
2) Define detailed Service Level Agreements
SLAs should be measurable, with agreed milestones and measurement points. For example, a call center outsourcer should be held to SLAs including time to answer, dropped/abandoned calls, and resolution rates. Document all SLAs as contractual obligations. Make sure to define remedies for missed SLAs. If there's not a penalty for missing an SLA, meeting it won't be a priority! The penalties for missed SLAs are usually tiered: Initial SLAs missed might result in financial credits, whereas a continuing failure to achieve SLAs may result in termination of the contract. (But see the tip below on terminating an outsourcing agreement - the old adage 'Be careful what you want, for soon it may be yours', is all too true!)
3) Have the outsource provider 'put skin in the game'
Create a risk/reward model that incents the outcomes and behaviors you want to achieve. A tiered approach to compensating the outsourcer allows you to pay less if certain deliverables are not achieved, but pay slightly more if the outsourcer overachieves. Remember, the objective of this model is to incent the results you want -- so make sure that the deliverables you agree to pay a 'reward' for are ones that you want to achieve, and are the ones that matter to your customers and shareholders.
4) Outsource tasks, not authority
Maintain responsibility for decision-making. An outsourcer should be performing specific tasks, but not making decisions that affect your business or customers. For example, an outsource provider of business continuity services should not be able to change recovery time objectives (RTOs) without your written approval. At the end of the day, the performance of the outsourcer reflects on your business, and affects your customers; don't give up the control and responsibility that you need to manage this and ensure your company's success.
5) Communicate, communicate!
Require on-going communications with the outsourcer. Have pre-defined schedules for status meetings, and agree to the agendas in advance. Status meetings should not be optional. Too often, both sides start to delegate attendance at these meetings; before you know it, neither party has decision makers at the meetings. So, when issues arise that require decisions, they can't be made. Performance reporting should be a contractual obligation, with the basic format agreed to. If mean time to repair (MTTR) is important to your business (and perhaps is a contractual requirement you have to your customers), then specify in the outsourcing agreement how and when the outsourcer is to report MTTR.
6) Define escalation procedures
In any supplier relationship, there will be times when one party needs (or think they need) to escalate an issue to more senior management. As a part of defining communications with the outsourcer, you should determine problem escalation procedures. What issues will be escalated, to whom, and at what trigger points, need to be agreed. It is best to incorporate these escalation procedures into the contract so that both you and the outsourcer clearly understand the process. It is important that anyone in the escalation path knows his or her role, and is prepared to participate in the problem-resolution process.
7) Embrace change management
Outsourcing, by its very nature, brings with it huge changes -- functions and jobs move from one company to another, employees may be rebadged to the outsourcer, the faces and voices providing a service may be new, the way in which the function is delivered may be different, etc. You need to prepare your organization for these changes. A strong change management program is key to breaking down resistance to the changes, educating employees (and clients if they are affected) as to what the move to outsourcing means to them, and ensuring top-down management support of the outsourcing project. Without a robust change management program, the door is left open for naysayers and fault-finders to undermine the effectiveness and success of the outsourcing project.
8) Define exit provisions
Let's be realistic, all relationships end, some unexpectedly, some naturally, and some under unfortunate or unforeseen circumstances. You always should have defined exit provisions in an outsourcing contract. Some outsource vendors will balk at this, and accuse you of not being committed to the project. That's not at all the case; you are simply being realistic and preparing for that time, whenever it is, that your relationship with the outsourcer ends. The exit provisions should address various scenarios: you terminate the agreement for cause; the vendor terminates for a breach on your part; the agreement reaches its natural end and you decide not to renew, or you decide to move to another provider. There may be other situations that are applicable in your specific environments. It is important that your contract includes the conditions under which you and the outsourcer each can terminate (which will be different), the detailed steps that must occur, the timing of those events, and the responsibilities of each party. Remember, as a general rule, whatÕs not written in a contract canÕt be enforced -- so make sure the contract includes provisions that you want to be able to enforce. And the time to negotiate these terms is before you need them!
9) Require the vendor to provide transition assistance
As part of the exit provisions, it is important to include the requirement for the outsourcer to provide transition assistance. Whether you are moving to another outsource provider or bringing the function back in-house, you almost certainly will need the outsourcer to assist in ensuring that the transition is as smooth and as transparent as possible to your business. For example, a help desk outsourcer needs to transition open work orders, and break/fix statistics; a travel management service must transfer future tickets and itineraries, traveler profile data and preferences, credit card and frequent traveler account numbers; a customer-facing call center must have a requirement to route calls to the new provider for a period of time. If you don't have these transition details defined, your employees and customers will feel the pain of the transition, and your market position and reputation may be damaged.
10) Have a fall back plan
You've done your diligence; you've negotiated a thorough and detailed contract with the outsourcer; you have a strong change management program in place. You are ready and the outsourcing partner is ready. You embark on the outsourcing journey. And then the unthinkable happens -- the outsourcer shuts its doors (even if you did a financial health check, this can still happen); the outsourcer gets acquired by one of your major competitors; the outsourcer fails to remedy critical service issues. These situations don't often happen; in fact, they usually don't! But you need to be prepared. You need a 'plan B,' a backup plan, as a contingency. The odds are you will never need to use it. But not having a contingency plan could be disastrous for your business. And, if the outsourcer is providing mission-critical services, you need to test your contingency plan as a part of your company's business continuity preparations.
Outsourcing is a fact of life in businesses today. It's a key strategy in focusing on core competencies, managing costs and headcount, and delivering enhanced shareholder value. These 10 tips will help you better ensure a successful outsourcing experience, get improved services and quality from the outsource provider, and manage and mitigate the risks that can arise with outsourcing.
With the right preparation, attention to detail, and on-going oversight, your outsourcing contracts can become a key business asset.
About the author
Canda Rozier is a former SVP, Chief Procurement Officer at First Data, a Fortune 250 global financial services company. The views expressed in this article, however, are hers and do not necessarily reflect the views of First Data.
She is Principal and Owner of Canda S Rozier, LLC, providing consulting services for strategic procurement, business transformation and cost reduction. She can be reached at csrozierllc@comcast.net.
Posted by Global Sourcing Forum on Fri, Jun 25, 2010
By: Mark Kobayashi-Hillary, IT Editor, Shared Services & Outsourcing Network (SSON)
I wrote a few recent blogs focused on the cloud and how it might change the nature of IT outsourcing for a large proportion of systems integrators and suppliers. It was amusing for me to notice how many suppliers have recently announced new cloud initiatives, even in just the past few weeks. While I was in Brazil a couple of weeks ago, one of the major international IT suppliers did not talk about anything else at all. It was as if a chasm has opened up between traditional suppliers following the tried and tested delivery models and those who are striking out into the cloud without any firm footing, but a strong belief that the future is virtual.
And this made me think, because a friend of mine came over to my west London neighbourhood for coffee yesterday. He has to give a speech on sourcing trends at a Brussels conference soon and he wanted some tips on what to include. Really he was sanity checking his own ideas and making sure he had not forgotten anything important.
With just ten minutes to speak, we decided he should get to the point quickly, so we managed to break the ‘world' of IT outsourcing into three major areas of change:
* Technological
* Regional
* Operational
This is a broad sweep. I know that an outsourced contract will have executive, management, and operational dimensions. It will need to be governed in many areas; reporting, performance, financial, contract, demand, and risk. But to simplify all these contractual aspects into areas where trends might be observed, I think we only need study these three dimensions.
Technologically, there is a coming together of various strands of technical thinking on virtualisation. Remote infrastructure management, software as a service, the cloud and app stores as vehicles for accessing tools and giving configuration power to the end user, not the systems integrator. Even the British government is now configuring all future technology systems around a G-Cloud and government app store - since when was our government so far ahead of the private sector?
Regionally, there are many new developments. The FIFA world cup in South Africa is putting Africa on TV news reports every day - even in the USA where ‘soccer' has taken longer to be accepted as a global game. This is not just window dressing. There are executives with budget in the USA and Europe who have never visited any part of Africa, let alone South Africa, so their prejudice about a continent historically seen as poor and needy sits at odds with the sight of football fans enjoying international cuisine and watching sport in world-class arenas. The global south, especially Latin America and Africa, will be places to watch this decade as companies in those regions turn their attention to export markets.
Operationally, IT sourcing is moving into a world where clients are not really prepared to use capex for outsourcing. They are very much more driven by a desire to pay for services as they are used, so the good old days of charging a client up front for all the kit being used in a project are over. Clients are getting far more interested in value and outcomes from the relationship, rather than just contracting and paying for resource. This means more risk for suppliers and less initial investment for end users. Pay-as-you-go is the new charging model.
These are the broad themes for 2010, but what do you think will change in 2011? Will it be the creation of new markets (health, environment, security...) that create a step-change in services, or can we expect to extrapolate the past for a bit longer yet?
Posted by Global Sourcing Forum on Mon, Jun 21, 2010
By Chandan Das, BPOvoice
The hostile response to outsourcing to India notwithstanding, India continues to be the most preferred global destination for businesses keen on offshoring their non-core information technology and back-office operations. The fact unveiled during a survey is not surprising keeping in view that India still holds on to its low-cost benefits alongside additional alternatives. In addition, India also possesses a high-tech business atmosphere together with an advanced talent pool proficient in English speaking skills and a flourishing economy.
While outsourcing to India has been successful in maintaining its pristine position status, other outsourcing countries continue to reel under the backlash against outsourcing jobs from overseas, especially the United States. A recent study says that during the number of outsourcing locations worldwide has decreased notably. In fact, as per the Global Services Location Index, India, the Philippines and China have secured the top three preferred outsourcing locations worldwide.
The prevailing economic crisis as well as the currency crash have put the European nations far behind in the race for securing berths among the top outsourcing countries globally. Industry experts are of the view that had the misfortunes not affected the European nations, the developed economies in Western Europe would have enhanced their position with the help of jobs outsourced by the Eastern and Central European countries. In fact, while Poland, Hungary and the Czech Republic missed out on opportunities, they were secured by their rivals in the Middle East. While the Middle East nations like the UAE, Morocco and Tunisia scored heavily, several new nations, including Egypt, Jordan and Vietnam have secured their places among the top 10 most favored outsourcing destinations in the Global Services Location Index.
While the fact remains that India and the Philippines together comprise half of the global BPO market and the Philippines is regarded as a strong Indian rival, the fact is that India still remains miles ahead of the Asia-Pacific nation. The study points out that since the industry in the Philippines in basically call center motivated, it cannot be considered as a genuine competitor to India. Similar is the case with the other emerging markets, such as China, Vietnam, Sri Lanka and other Asian nations. India not only has a high-tech business atmosphere, a large pool of talented workforce and an experience of over two decades, but its booming economy too is assisting the BPO sector by eradicating the effects of the recent global economic recession sooner.
On the other hand, India, thus far known as the traditional contender to the United States as software developers, is now the architect of unrestrained business growth. Since the last few years, Indian software development firms have been establishing their marks in the global markets providing inexpensive facilities to clients regardless of their dimension and vertical. Most importantly, after the global economic slum, India has emerged as the redeemer of such organizations worldwide and this single aspect has contributed to India's numero uno position in the IT and ITeS industry globally.
Posted by Global Sourcing Forum on Thu, Jun 17, 2010
Where do you think of when considering offshore IT outsourcing? Usually it's India, because there is a large pool of companies that have great experience in the sourcing marketplace, but what about Brazil?
By: Mark Kobayashi-Hillary, IT Editor, Shared Services & Outsourcing Network (SSON),
Along with Russia, India, and China, Brazil is one of the BRICs, yet I don't hear it mentioned often by service buyers, so I'm here in São Paulo to investigate the local market. I just spent two days at the Gartner Latin American outsourcing summit and I'm on a plane to Rio as I write this blog - heading to a one-day conference hosted by BRASSCOM, the hi-tech trade association here in Brazil.
Nobody really needs an introduction to Brazil. You already know about the samba music, the beaches, and carnival, but this is also a nation of almost 200m people and the fifth largest country on the planet by area. Brazil was barely touched by the global economic slowdown due to a healthy domestic economy and in the past three months the GDP has soared by 9 per cent. In Europe or the USA, this kind of healthy economy feels unbelievable and unattainable as we limp out of recession.
This is the fastest growth in Brazil for 14 years and things are just getting hotter, even in the southern hemisphere winter. So what are the advantages for the executive seeking an IT partner in the land of samba and soccer?
The biggest advantage is the scale of the industry and depth of business knowledge. The IT industry here has a solid half-century heritage stretching all the way back to the mainframe era. Almost 2m people work in the local IT industry on a daily basis and the IT firms often recruit from outside their industry - so business analysts are not programmers who earned a promotion, they are bankers or doctors hired by an IT firm to offer their industry expertise to the technology teams.
Brazil is a world leader in many business areas, for instance Internet banking has been normal for many years and Itau is one of the top ten global banks, political elections are 100% electronic, new oil and gas fields are being explored, and the environment is not a future industry - all new cars in Brazil can take alcohol instead of gasoline, or a mix of both.
Brazilian IT firms are also very flexible. I've spent the past week talking to many of them and though most of them have quality accreditation such as CMM and ISO 9001, they often prefer to talk about Agile methodologies - it feels like a more natural fit for their attitude. The Brazilian mentality is very flexible, open, and sometimes challenging - a junior programmer would not be seen as out of place challenging a request from a client and that's seen as a major benefit assisting one of the main issues with outsourcing - drone-like development teams churning out code that should never be produced, but is, because nobody challenged the client on the specification.
Naturally there are some disadvantages. Brazil has been focused on a booming domestic market for many years so the IT firms have not really needed to turn their attention to the outside world. This does mean that many firms are not really ready to do business in English at all levels - even if all the people you get to meet can work in English rather than Portuguese.
There is no real reason to go to Brazil for cost advantage alone. IT there is a lot less expensive than in the USA, but it can't compete with India and other Asian countries.
However, if you are not driven entirely by cost and you choose one of the suppliers with export experience then it would be hard to go wrong. The Brazilian IT market is a largely undiscovered gem, with millions of experts having decades of local experience now making their skills available to the world. And let's face it, Rio in winter is still a place where you can do meetings in T-shirts, so what's stopping you?
Posted by Global Sourcing Forum on Mon, Jun 14, 2010
Bank of Ireland has shortlisted HCL Technologies and IBM for an outsourcing contract potentially worth over $600 million, replacing incumbent vendor HP, which had signed a seven-year deal with the bank in 2004 .
The outsourcing contract will involve management of the bank's IT infrastructure including desktops, servers, printers and other communication networks.
"After a detailed evaluation and assessment process over the past nine months, a decision has now been taken to proceed with a shortlist of two suppliers, HCL and IBM, to the next stage of the competitive process which is expected to be completed in the coming weeks," said Cora Whyte, the bank's spokesperson.
Incumbent HP is set to lose the contract to either HCL or IBM. The seven-year long contract due to expire next year was worth $600 million when signed in 2004.
"The Bank is some months into a competitive tender process, assisted by third parties, with HP and a number of other external suppliers, focusing on service enhancements, improved customer experience, cost savings and efficiencies. As a result, Bank of Ireland will not be progressing further with HP as part of this process," Whyte said.
Meanwhile, the outsourcing contract will have to pass the hurdles posed by trade unions pushing for a severance package and employment guarantees after the transaction is done.
The global market for IT infrastructure outsourcing has been growing. For instance, the top 15 vendors analysed by research firm Forrester in a recent report provided remote and onsite services for about 16.7 million desktops, 1.7 million servers and 23.4 million users globally. These vendors, including IBM, HP-EDS, CSC and some Indian tech firms such as HCL delivered $83.9 billion worth of infrastructure services last year.
Source: economictimes
Posted by Global Sourcing Forum on Thu, Jun 10, 2010
Why do so many IT suppliers appear to be in denial about the effect the cloud could have on their business model?
By: Mark Kobayashi-Hillary, IT Editor, Shared Services & Outsourcing Network (SSON),
I have spent the past few weeks talking about the cloud and the implications for the outsourcing market. Many IT suppliers want to ignore the cloud and see it as just hot air, but if you look back over my past few blog entries on utility computing, Software as a Service, and remote infrastructure management you can see distinct businesses evolving that are all related to the cloud concept. This stuff is real.
In short, the cloud is going to fundamentally change the international IT outsourcing marketplace. But the market is not standing still:
* New regions offering hi-tech services are developing rapidly and offering either lower rates than everyone's favourite India, or clusters of firms with a particular specialism, such as the open source technology experts in Brazil, film post-production in New Zealand, or animation in Bangladesh.
* The USA remains the dominant target market for most offshore IT suppliers, but it no longer enjoys the reverence of earlier years. All sensible service suppliers are spreading the risk of a future downturn in the USA by exploring new customer markets in South America, Asia, the Middle East, and in their own domestic market. The combined nations of the European Union are now outsourcing more IT and business processes than the USA, emphasizing the need to look beyond the USA for customers.
* Public sector experience is becoming increasingly important as huge deficit-reduction measures in Europe and the USA force a rethink of how government services are delivered - often requiring an innovative approach to technology use.
Offshore outsourcing exploded in popularity following the millennium. Take a look at these figures on how much the IT industry now contributes to the entire economy of India - nearly 6 per cent of GDP. In the Philippines it's around twice that (if you include BPO) and Brazil has a long established IT industry directly employing over a million, with a cleantech revolution in progress there that is far ahead of what we are seeing in Europe or the US.
But what are the major suppliers doing to react to this new market environment? From what I can see after speaking to most of the big players, I can't see a lot of change. In fact, I have a fear that many are just breathing a sigh of relief that the global economy is entering a period of growth once more, after the fear that we could have slipped into a decade-long depression.
When I attended the NASSCOM annual conference in India last February, I asked IT suppliers from India and several other countries for their views on what's changing. Most talked about the fact that the period of hardship had allowed them to ‘innovate' and respond to reduced circumstances. Then every firm told me about the thousands of people they are planning to hire in 2010, emphasising that the hard times are over.
So has nothing changed? Are the IT suppliers just going to hire in their thousands again and watch the attrition rates soar as competition for talent takes off. Or has the IT sourcing market fundamentally changed? Why are many suppliers not even talking seriously about cleantech, public sector, or new markets?
And more importantly, why are so many IT suppliers in denial about the effect the cloud could have on their business model? Here's a thought for some of them. Remember when your bread and butter business was systems integration and the customisation of big CRM or ERP installations? Within a decade absolutely no firm anywhere is going to be managing their technology in that way - because of the cloud. So what's your future cash cow?