• IBM announced first-quarter 2011 earnings:   Total revenues for the first quarter of 2011 of $24.6 billion increased 8 percent from the first quarter of 2010. IBM will hit $100 billion this year, is their any doubt about who is the biggest kid on the block!
• More IBM Business:  and The Hartford Financial Services Group, Inc. announced a new five-year technology services agreement to help The Hartford simplify and transform its technology infrastructure. The partnership is part of The Hartford’s companywide effort to become a more cost-efficient and customer-focused organization.
  • CSC continues to grow: CSC has signed a seven-year information technology (IT) outsourcing contract renewal with Tryg, the second-largest insurance company in the Nordic region. The new agreement expands the scope of the existing contract to include new services and extends to include Tryg’s most recent acquisitions in Finland and Sweden with Moderna. This extension, which was awarded during CSC’s fiscal 2011 fourth quarter, adds $348 million to the previously announced contract, which now runs through December 2017, if all options are exercised.
  • Unisys stays strong: Unisys Corporation announced that its New Zealand subsidiary has received an extension of its contract to provide Foodstuffs (Wellington) Cooperative Society Limited, New Zealand’s biggest grocery distributor, with IT services for store point-of-sale (POS) and related systems.

• 25 Most Dangerous Cities for Offshore Outsourcing:  The annual survey of offshore outsourcing location risk, conducted by the Datamonitor Group (formerly the Brown-Wilson Group), asked 3,100 corporate development leaders, including more than 400 outsourcing customers, to indicate their company’s inclination to consider specific offshore locations for outsourcing (including IT outsourcing and BPO). The survey also asked respondents to rank those cities on various perceived threats and weaknesses, including geopolitical risk, terrorist threats, climate concerns, legal maturity, environmental waste and pollution, IT and telecom infrastructure security, and crime rates.
•  List of the Most Dangerous Cities includes:  1. Karachi, Pakistan; 2. Medellin, Colombia; 3. Juarez, Mexico ;4. Cali, Columbia; 5. Tijuana, Mexico; 6. Lahore, Pakistan; 7. Jakarta, Indonesia; 8. Lagos, Nigeria; 9. Dhaka, Bangladesh; 10. Chittagong, Bangladesh; 11. Amman, Jordan; 12. Khulna, Bangladesh; 13. Faisalabad, Pakistan; 14. Rawalpindi, Pakistan; 15. Port-au-Prince Haiti; 16. Managua, Nicaragua; 17. Chihuahua, Mexico; 18. Ljubljana, Slovenia; 19. Tashkent, Uzbekistan; 20. Bandung, Indonesia ;21. Kingston, Jamaica; 22. Tel Aviv, Israel; 23. Colombo, Sri Lanka; 24. Johannesburg, South Africa; 25. Accra, Ghana
•  The 25 Safest Cities for Offshore Outsourcing in 2010; 1. Prague, Czech Republic; 2. Warsaw, Poland; 3. Brno, Czech Republic; 4. Krakow, Poland; 5. Toronto, Canada; 6. Halifax, Canada; 7. Singapore, Singapore; 8. Dublin, Ireland; 9. Kiev, Ukraine; 10. Chennai, India; 11. Pune, India; 12. Wuxi, China; 13. Monterrey, Mexico; 14. Sao Paolo, Brazil; 15. Bangalore, India; 16. Beijing, China; 17. Santiago, Chile; 18. Brasilia, Brazil; 19. Mumbai, India; 20. Dalian, China; 21. Chandigarh, India; 22. Rio de Janeiro, Brazil; 23. Cebu City, Philippines; 24. Kuala Lumpur, Malaysia; 25. Kolkata, India
•  Outsourcing: IT Customers Disappointed With Results: A recent IDG Enterprise Outsourcing & Service Providers Survey of IT and business executives reveals that they’re not achieving their desired results from outsourcing, and many of them blame their own management practices for outsourcing’s ineffectiveness.
•  Indian Outsourcing Price Increases: In a recent article in the Economic Times India Web site, it was reported that Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies are beginning to see an uptick in pricing, which the article says is being driven by higher salary costs and an improved business environment. The bottom line: as much as a 5 percent price hike.

• Outsourcing – The New Paradigm - “A hundred years ago, companies stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid…Today, a similar revolution is under way.”  
   -Nicholas Carr, Author of “The Big Switch: Rewiring the World”
• The New Sourcing Paradigm – really interesting article on sourcing and the directions that we will be seeing over the next few years http://www.outsourcingintelligencenetwork.com/oi_prod/index.php?option=com_oiarticles&keyword=&category=&limit=10&limitstart=20 .
• Outsourcing – Offshore vs. Onshore -the data is reflecting a significant backlash to offshore outsourcing and the pendulum is starting to swing back to onshore outsourcing. 
• IaaS – Infrastructure-as-a-Service has been gaining significant traction, turn on and off the infrastructure as you need it and only pay for what you need, we have been working with a client on its implementation with some very interesting and positive results; for more information see Skytap of Seattle.  
• Benchmarking – the new wave of outsourcing deals are asking for benchmarking through an external third party advisory services firms to better inform the client management of the effectiveness of the delivery from the outsourcing services provider, something everyone should be considering for their next outsourcing services contract.  

• Jim Love, Chelsea Consulting Group  CEO, has recently written a number of articles on outsourcing for the Cutter Journal www.cutter.com , I believe that you will find these articles topical, insightful and right for our times 

• Two disturbing trends in IT outsourcing - An Information Week survey notes that almost 30 percent of the companies surveyed fired an IT outsourcing partner during the past year. In addition, a TPI survey found that 59 percent of respondents’ end users reported support delivered was lower quality than internal support prior to outsourcing.
• Another interesting trend – Gartner Group says that by 2012 over 20% of all organizations will have NO IT ASSETS.
• Gartner states that by 2012, 65% of the support conversations will happen in the cloud.
• Gartner estimates that 80% of the dollars companies spend on IT is dedicated to “keeping the lights on” and represents “dead money” which does not contribute directly to business growth.

 Outsourcing’s Relentless March: Gartner predicts that the rise of cloud computing, virtualization, and mobile devices not only will drive many firms to relinquish the commodity support functions that consume many IT resources, but also will force them to migrate to a model in which external providers own and support the entire infrastructure.

 Outsourcing’s Relentless March (more):  The CIO Executive Board goes a step further in its predictions for these factory IT functions; in its report “The Future of Corporate IT,” it predicts that when the wave of outsourcing, cloud computing, and virtualization has achieved its full potential, fewer than 25% of the current IT workforce will remain in their present roles!

 Some Numbers That May Be of Interest: According to Computer Economics, the typical IT organization spends about 5-6% of its total IT budget on contracted services with an external provider. 23% of IT organizations outsource help-desk functions, 21% outsource desktop support, and 27% contract with an external provider to maintain existing applications.

 Outsourcing Deals Getting Smaller: Outsourcing specialist boutique TPI also notes that the average value of an outsourcing deal has dropped from $360M US in 2000 to around $100M US in 2010.

 Outsourcing Strategy Discussion: Rob Aalders, Director at Transformation Analytics and the author of The IT Outsourcing Guide, advises firms considering outsourcing to think through their motives at four levels:

1. Goals: the macro-level business results we hope to achieve

2. Objectives: the granular outcomes we expect

3. Critical success factors: the elements that have the most leverage and that we intend to  focus on in our measurement of outsourced outcomes

4. Criteria: the attributes we expect our outsourced partner to bring to the relationship

Outsourcing Governance: I believe that in the future we are going to see far more emphasis placed on the governance of the outsourcing deals that has been in the past. Through effective governance we can often avoid many of the pitfalls that come with outsourcing deals and their resulting high costs of premature deal breakups.

Outsourcing “Outsourcing Governance”: This is a trend in the early stages, watch for its rapid assent over the next few years! More organizations are realizing that they are not equipped to properly manage their outsourcing deals and are turning to experts for the governance support required.

Jim Love, Chelsea Consulting Group CEO: Jim has recently written a number of articles on outsourcing for the Cutter Journal www.cutter.com , I believe that you will find these articles topical, insightful and right for our times.

Outsourcing Services Providers Turnover: Turnover continues to trend upwards. An Information Week survey notes that almost 30 percent of the companies surveyed fired an IT outsourcing partner during the past year. In addition, a TPI survey found that 59 percent of respondents’ end users reported support delivered was lower quality than internal support prior to outsourcing.

Healthcare IT Outsourcing: The healthcare industry continues there strong move to IT outsourcing as presented in the attached article; give it a read, I found it most informative.
www.everestresearchinstitute.com/Product/11277

Insourcing – an increasingly popular option: There is a number of large organizations and advisory firms that will tell you that insourcing of currently outsourced IT is a viable option. While some organizations choose this route, most that do insource do so as part of their planned end game based on their outsourcing strategy to use an outsourcer for a fixed period of time. For most organizations, once they outsource their IT to an outside service provider their opportunity to bring IT in-house is greatly diminished due to staffing issues, complexity of technology and costs. While we will continue to see insourcing as an option it will be of declining value and hence less viable to most organizations. Outsourcing is here to stay!!!

Why Outsourcing Deals Fail: We wrote a white paper a few years back on why outsourcing deals fail. I took it off the shelf, dusted it off and found (even in this fast moving times) it to still be applicable. If you want a copy please send me a note at darrelcberry@chelseaconsulting.ca

Key Trends in Outsourcing for 2011: Some of the key trends that we see coming of age in 20011 include:
• Shorter contracts, more providers in your IT shop
• Outsourcing choices are inherently complex – and becoming more so
• Continuing move away from cost as the primary driver of outsourcing deals
• Increasing flexibility of new cost models including more variable cost model choices
• Continuing move of offshore outsourcing deals back onshore
• More no-traditional outsourcing services providers entering the market including local boutique service providers

Think the Great Recession is over?: Not for CIOs. For the second year running, business productivity and cost reduction was the No. 1 concern of CIOs, CTOs and IT executives in the annual CIO survey from the Society for Information Management — and by a wide margin, according to Jerry Luftman, who has conducted the survey for SIM for the past 10 years.

The big just keep getting bigger: Accenture will acquire the sourcing services and business process outsourcing (BPO) services assets of Ariba, Inc., a top provider of collaborative business commerce solutions. Upon the closing of the acquisition, Accenture will take ownership of these assets, which include Ariba’s category expertise, sourcing process expertise and strategic sourcing execution resources. Approximately 160 Ariba employees are expected to join Accenture upon the closing of the transaction. The acquisition, which is subject to customary closing conditions, is expected to close within Ariba’s quarter ended December. The purchase price is $51 million, $12 million of which is subject to escrow to be released based on the assignment and performance of certain assets.

 Outsourcing Relationship Management: Although a number of outsourcing buyers and providers achieve a base level of cost savings through their arrangements, recent research (from Deloitte Consulting, Forrester, and CIO magazine, to name a few) shows that many are disappointed by the lack of innovation and “added value” their arrangements are able to deliver. Experienced outsourcing professionals have seen how strong working relationships between buyer and provider generate better results for both parties, and how poor working relationships lead to squandered value; in fact, little else can contribute more to deal success or failure.

Improving Troubled Outsourcing Relationships: Managing complex outsourcing relationships has never been easy—in a recent Vantage Partners survey, 71% of customer and service provider respondents say they begin facing challenges within a year of contract signing. Half also say the issues in their arrangement still need to be addressed, and unfortunately, ineffective resolution of those issues results, on average, in a 29% loss of annual contract value.

 Cloud Computing – Outsourcing at its purest:  Recent Aberdeen research has shown that 67% of organizations already utilize IT resources in the Cloud, with almost 10% more who are planning to do so later this year. The migration to the Cloud is well underway.

 The 2011 outsourcing World Summit Conference and Expo: Worth attending if you are an outsourcing services provider, you are an outsourcing customer or you are thinking about outsourcing, www.iaop.org/summit , check it out.

Offshore Backlash Continues: It is expected that, with the USA pumping $600 billion into the financial markets in early November 2010, the US dollar will go through another round of devaluation creating continuing pressure on offshore companies to deliver the costs savings promised, this combined with the persistent 10% unemployment in the USA is causing more companies to rethink their offshore outsourcing decisions.

Managing Complex Outsourcing Relationships has never been easy—in a recent Vantage Partners survey, 71% of customer and service provider respondents say they begin facing challenges within a year of contract signing. Half also say the issues in their arrangement still need to be addressed, and unfortunately, ineffective resolution of those issues results, on average, in a 29% loss of annual contract value.

Canadian Outsourcing Company keeps moving forward. CGI signed a $43 million 5 year deal to manage a US government website.  

 SLAs: In the October 1, 2010 issue of Outsourcing Center I found an article titled: When is an SLA Not Necessary in an Outsourcing Relationship? My answer to that questions is NEVER, outsourcing deals always need SLAs measuring all of the various outcomes expected of the contract including one-time projects not anticipated in the original outsourcing deal and “time-to-market” initiatives that require both parties to act quickly. It is clearly a recipe for disaster to move forward without a clear SLA that defines the completion and success criteria.

Offshore Outsourcing: While Latin America currently accounts for less than a tenth of the offshore outsourcing market in 2010, there is a lot of promise. It is expected Latin America, in particular Brazil, Mexico and Chile are  the rising stars of offshore outsourcing. Service providers based in Latin America have a unique opportunity to position themselves for this wave of offshore expansion and interest in Latin America. Though, as mentioned in this blog earlier, we expect there to be an offshore outsourcing backlash with more choices and deals done closer to home.

 Upcoming Event:  The 2011 Outsourcing World Summit® February 21-23, 2011 | Renaissance Esmeralda, Indian Wells, California

Here’s what I read in ZDNet today.

Microsoft’s Windows 7 arrived in late 2009 and kicked off a PC upgrade cycle that’s expected to last a few years. Windows 7 got Microsoft back in the game among consumers and the enterprise upgrade cycle is expected to arrive in the second half of 2010 and carry through 2011.

Yes indeed.  We are back on that old treadmill.  Microsoft “improves” their software.  You buy it, but — “my gosh!”   Surprise, surprise!  The new software runs like a slug on your old hardware.   You have to upgrade your hardware.   More cost.  More disruption and frankly – more waste.

It doesn’t have to be that way.  But don’t expect the “consultant” from your hardware vendor to tell you that.  They don’t want you to know there is an alternative.   They really don’t want you to know that it’s not only cheaper — it’s better than the alternative.

More and more companies are discovering that you don’t need to be on the constant cycle of upgrades.  These companies have opted for a proven alternative – which virtualizes their PC platform.  Why?  It’s faster, better and its cheaper.

It’s a simple prospect.  Using the built in facilities in your software, your individual PCs are virtualized and run off one large server in a highly secure data centre.  All your software from office suite to email is moved into one package.

What your users experience as PC session is delivered across the network on a laptop or – for dedicated workstations – through a sold state device that costs under 200.00

Believe it or not, it’s faster than your current setup by a noticeable amount.   We ran this solution on one of our old netbooks – one we never use because frankly, it’s as slow as molasses in January.  The result?  Blinding speed on applications.

Other advantages?   Everything is always backed up.  Everything is always secure.  Worried about what data people can take off your system on a USB key?  Stop worrying.   You can control that — and  whole lot more.

Do some employees have Macs?  No problem.  The same desktop that they work on at work is the same one they see at home.  In fact, with a virtual desktop, you can leave work, go home and resume the same session exactly where you were when you left.

Did I mention that the solid state PC replacements use 70 percent less power?

Or did I mention that with this new platform your support costs plummet?  With this platform, almost all of your support is done at the server level.  Office suites, email — even your exchange server are all supported centrally and reliably. What little onsite support remains can be easily handled without need onsite support staff.

When you factor in all of this, not only do you get a better service, faster service, more security — and it’s green — AND you save a lot of money.  How much?  Well, we’d be happy to help you do the business case and you will be surprised.

Of course, if you have money to burn — go the regular route and upgrade the software and buy all those new machines.   Your hardware vendor will love you!

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