Will the Cloud computing displace traditional IT outsourcing?

Browsing through the web last week I found an article with quite a strong title “The end of outsourcing?!”, written by my friend and fellow IT outsourcing expert. In the article he argued about the prediction made by the head of the outsourcing practice at consultancy A.T. Kearney. In its report “The End of IT Outsourcing As We Know It” Mr. Arjun Sethi states: "In the next five years, outsourcing as we know it will have disappeared." Well, I would say rather bold prediction, especially taking into account recent predictions about the “upcoming golden age of outsourcing”, nevertheless let’s try to find out the probability of such prediction.

There have been much said about the future of IT outsourcing lately. From the Cloud dominance to global shift in delivery and governance models to reverse sourcing and protectionism. Myself, I conducted several works and started a number of discussions here in LinkedIn with the relation to the Cloud computing and its potential affect on IT outsourcing industry. While I saw many experts predicted growing trend for pay-per-drink model there wasn’t concordance and obvious verdict for the shift inside the industry anytime soon. Of course there are some obvious benefits of this model, such as costs, agility and focus which can provide a whole new set of opportunities for both business and individuals. But for the corporate sector, bread and butter of IT outsourcing, all they don’t outweigh security, reliability and ownership of proprietary systems yet. Moreover, investments made by corporations into the existing infrastructure slow down adoption in the sector.

In his forecast, however Mr. Arjun Sethi associates massive reconfiguration of IT ousourcing industry, that according to him should take place in the nearest future precisely with the rise of the Cloud computing. The new era will be driven by Google, Amazon and bunch of new players, while powerhouses such as HP, Accenture and Xerox are in peril to lose their leading positions, and boutique Indian outsourcers poised to disappear at all. Well, it is quite truth that we are moving away from large multi-year full stack contracts towards more specialized, smaller service agreements, but with the current massive consolidation many of those specialized providers will be under umbrella of those big ones.

I also agree that the Cloud brings huge opportunities for highly-configurable systems that might fit needs of many sectors and industries, but standardization which, according to Sethi will feature the revolution in industry is unlikely. Although, today all major software houses and providers include cloud computing offerings in their portfolio, most of them just contemplate their core offerings with the Cloud options, even Microsoft - the company that announced a company-wide refocusing on cloud computing still fully relies on its software installed in physical assets. It will take more than a year or two or even three to change their model.

Although cloud computing experienced a phenomenal growth during last years, it's still in its infancy in corporate sector - cash cow of IT outsourcing industry. No doubts it will grow, grow fast, especially in SME sector, but it will take a good amount of time to make this transition to fully based pay-per... model. And still much should be done before we can signify the new era - meanwhile, forgive for my prejudice I don’t see end of traditional outsourcing.

Will be glad to know other opinions. Please join the conversation in Linkedin, click here.

The Creative Cradle mission by NL EVD International will gathers top decision makers from Netherlands and North America

NL EVD International - a department of the Dutch Ministry of Economic Affairs that implements government policy for sustainability, innovation, and international business and cooperation organizes a Creative Cradle mission which involves prominent decision makers from North America visiting the Netherlands for series of matchmaking and networking events.

Most of US companies seek international cooperation, a new technology or creative impulse and are interested in the Netherlands as a creative hub for Europe. The host cities for the mission are Amsterdam and Rotterdam.

The mission will be held on September 25, 2010.

Starting a Nearshoring # hashtag on Twitter

Almost for everyone who uses Twitter more than once in a month, a shashtag or # prefix is quite familiar. The prefix is a simple way to indicate the belonging of your tweet to some topic, so that people who search for tweets with similar topic can easily find your.

So, even if you don't indicate the keyword "nearshoring" in your tweet but place a #hashtag anywhere except the end, your tweet will appear on relevant search.

So we decided to start a #nearshoring hashtag to share ourselves and allow you to share useful info by adding #nearshoring to our tweets

Has the recession changed outsourcing drivers for SME's and large companies?

Surely, there were a number of different aspects of outsourcing between enterprise and SME sectors even before the crisis. Outsourcing played different roles and spanned around different areas in each league. However, before the crisis some trends became widely common. Both sectors showed move towards more strategic forms of outsourcing where costs reduction wasn't only one major factor that drove outsourcing decisions. The crisis, however is deemed to change this trend. In volatile economic climate of last years many experts distinguished outsourcing drivers for each sector - claiming that large companies want to globalize and cut costs, while small and mid-sized seek expertise.

According to the latest survey by National Outsourcing Association the focus on the costs reduction has risen significantly among large end-users of outsourcing in UK. Today's big customers want 15 percent savings from outsourcing compared to 10 percent before the recession, while the time they want to achieve reduction has shortened. Access to the specialized skills and offloading of internal resources for mission critical processes ranked distant second and third positions.

At the same time another survey focused specifically on SME sector came with different indications. According to the survey conducted by Irish-based HiberniaErvos Technology Group, 63 percent of SME's who already utilize outsourcing put the ability to free up internal resources and focus on business-critical processes as a major benefit of outsourcing.

So is it just a specifics of each sectors? or there are more inclusive post-recession factors on place (such as difficulties for SME's to compete for qualified talent domestically or shortened time-to-market)?


Join the LinkedIn discussion on related subject here

Strategic Sourcing 2010: Driven by value!

Strategic sourcing is at its crossroads. Many organizations are re-evaluating their sourcing contracts. How about strategy, sourcing governance, supply and demand management? Enterprise and government are ready for a change, a move to get more value out of sourcing relationships!

For IT executives this means they have to become business partners and at the same time challenge their vendors and business counterparts: in the end it’s not really about cost savings – it’s all about business value! So the question is: What is the value of sourcing?

Nearshore Outsourcing Trend Grows Across the World

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Although Nearshoring concept became a widely popular business practice across the Europe it's still in emerging phase in the Western Hemisphere mainly because of strong popularity of India offshore offerings. However, escalating uncertainties of regional threats in India combined with increased focus on vulnerability management and demand to keep data close to where business actually located have changed delivery preferences of US businesses towards nearshore and sameshore options.

Recent ranking "The Nearshore Americas Power 50" named the most influential Nearshore figures from 16 countries from Americas region. The region is considered to be the main nearshoring destination for US and viable alternative to offshoring to India. The $11 billion industry has all chances to successfully compete with offshore destinations as realities of unsafe world have fully overrun into outsourcing decisions. Focus on vulnerability management and operating with lowest downstream risks help nearshoring destinations to attract more attention.

The survey being made by Black Book Research indicates that Central and Eastern Europe and Latin America are viewed as significantly less dangerous outsourcing locations that all major hubs of India and being marked as the top destinations for operating with lowest downstream risks. Having services centers nearshore and sameshore will be a major client priority in years to come.

From other side in nerarshoring study conducted by Erran Carmel and Pamela Abbott argue convincingly that distance still matters, and point to customer choosing the nearshore option to gain benefit from one or more of the following constructs of proximity: geographic, temporal, cultural, linguistic, economic, political, and historical linkages.

Central and Eastern Europe is significant nearshoring destinations for Western Europe for more than a decade. Where geographical and cultural proximity provides with lower costs interaction, better communication and no time zone difference. As a result project management became more transparent, time zone eliminates the need in extra work and cost difference dilutes.

ISV's Lunch Seminar in Amsterdam - The Art of Software Dev

On June 16, Levi9 Global Sourcing in conjunction with the University of Utrecht, Microsoft Corp and Exact Software is hosting an IT industry specific lunch seminar.

The seminar will be held in Amsterdam, and will gather under one roof some of leading IT professionals and scholars from the Netherlands. Among keyspeakers there are such distinguished panelist as Prof. Dr. Sjaak Brinkkemper, Professor of Organization and Information Utrecht University with specialization in software products and Roland Janssen, Manager ISV Partner Group, Microsoft, Gerard Hurkmans, sales manager Levi9 and Aard ’t Hart, Director of Research & Innovation, Exact Software

The seminar is oriented on Independent Software Vendors (ISV's) and will attract executives and senior level professionals of leading tech companies in the Netherlands. The event will provide unique opportunities for ISV's to delve into the process of nearshore outsourcing and get real recommendations and advices for the effective adoption of the practice within corporate strategy.

Moreover, panel and knowledge exchange sessions will be held to raise the standard of management knowledge in this field. Session will kick off at 11:30 a.m. and will be followed by coffee reception at 1.45 p.m.

To register for seminar please click here.

EC demands more progress towards a single telecoms market

Digital Agenda Commissioner Neelie Kroes has lambasted EU member states for putting their national interests above efforts to achieve the full economic benefits of a "truly single and competitive EU-wide telecoms market".

Fragmented national markets and huge differences in mobile call rates are affecting hundreds of thousands of consumers and businesses, according to Kroes.

Member states need to do more to ensure telecoms rules are properly implemented and the necessary investments in innovative services are made for the benefit of all 500 million European consumers, she said.

Kroes said more progress needed to be made in the development of the mobile data services sector and the rollout of optical fibre-based next generation access (NGA) networks.

As the commissioner in charge of the recently launched EU Digital Agenda, Kroes is expected to put forward new recommendations on how NGA network rollouts can be made faster later this year.

The EU Digital Agenda aims to deliver broadband coverage to all Europeans by 2013. To help achieve this, national regulators are being urged to comply with a Radio Spectrum Policy Programme that aims to ensure radio frequencies that are freed by the transition to digital broadcasting (the "digital dividend") are made available for new services, such as mobile broadband.

To help drive forward its Digital Agenda, the EC recently establishd the Body of European Regulators for Electronic Communications.

EU Wants Privacy Standards in Data Sharing with US

The European Union wants to agree broad privacy rules with the United States to safeguard personal data shared in pursuit of criminals and terrorism suspects, the EU's rights chief said.

The executive European Commission presented plans on Wednesday to negotiate a deal with Washington that would set standards for giving crime investigators access to information about EU citizens such as tax and health records or phone bills.

Such an agreement could make it easier for the 27-country EU to negotiate specific data transfers to the United States, and prevent messy battles such as an ongoing debate in Brussels over access to EU citizens' bank data.

Cooperation on information is vital for anti-terror investigators because Europe lacks the technology to use some data, particularly bank records, in cross-border probes.

But access to information has become increasingly controversial in Europe because of concerns over privacy, notably in Germany.

"The two continents are putting down values on which they can build all technical agreements in the future," Viviane Reding, the EU's Commissioner for justice and fundamental rights said in an interview with Reuters.

"All bilateral agreements would be based on this basic agreement."

Underscoring controversy in Europe, the European Parliament in February vetoed a temporary deal to allow terror investigators from the United States access to Europeans' bank details, raising concerns in Washington over security.

Europe outlines plan to boost broadband by 2020

All European households will have broadband speeds of 30Mbps (megabits per second) by 2020, the European Union has pledged.

It also promised universal broadband coverage by 2013 while getting half of Europeans using public services and shopping online by 2015.It is part of the European Union's five year plan for the digital economy.

The raft of measure were announced by newly-appointed digital affairs commissioner Neelie Kroes.

The EU's digital agenda will see over 30 laws introduced over the next three years.

Laying out her plans, Ms Kroes said that the EU invested 40% less in technology than the US.

It meant that nearly a third of Europeans had never used the internet and only 1% had access to fibre-based high-speed networks.

In order to catch up, EU governments must double their annual spending on research and development to 11bn euros (£9.4bn) by 2020, she said.

She also plans to improve technology standards, eliminate regulatory barriers, encourage electronic payments and simplify digital copyright management and licensing.

In November the European Parliament voted in favour of a major overhaul of telecoms law.

It aimed to harmonise the way mobile broadband is rolled out across Europe as well as establishing internet access as a fundamental right.

TPI says UK no longer biggest outsourcing market outside US

For the first time, France, Germany and Sweden all spent more on outsourcing than the UK in the first quarter of this year as contract renegotiations surged, according to TPI.

The UK spent less than €800m, 50% less than last year, compared with more than €1bn in Germany and €2bn in France as a result of a massive SNCF deal.

TPI said one mega-deal in Sweden meant the country doubled its total value of outsourcing contracts. It would not name the customer, but Swedish engineering company ABB recently signed a big deal with IBM.

This was on the back of a 7% increase in the total Emea market to €7bn.

TPI's Index measures commercial outsourcing contracts valued at €20m or more.


Contract restructuring accounted for a massive 40% of the total value of deals in the Emea region, which was significantly more than the previous record of 24% set in 2006.

New scope in deals in Europe was down by 22% and the number of contracts awarded in the region also declined by 24%.

"Even though this is only one quarter's results, it does appear that the key countries contributing to Europe's outsourcing performance are shifting to the less mature continental markets," said Duncan Aitchison, president at TPI Emea

IT Outsourcing is set to growth in the second half of 2010

According to the industry experts IT outsourcing looks set to grow in popularity throughout the rest of the year.

This is the suggestion of a new report by IDC European Software and Services, which has predicted European IT services expenditure will grow in second half of 2010 and further in 2011, with IT outsourcing being the main driver behind this dynamic.

With stabilized IT budgets and easing of economic conditions businesses will begin to invest in IT project again. The study revealed the industry could record a growth rate of 2.2 per cent next year.

Laura Converso, research manager at IDC European Software and Services, said: "Demand for projects and outsourcing will pick up towards the second half of 2010."

She added that the need for IT services will be most prominent this year in the UK, Germany and the Nordic countries.

Patrick O’Brien, senior analyst at IT industry analyst Ovum, recently predicted a strong year for outsourcing IT as the economy emerges from recession.

CIO Nearshore trip in april

For more info
http://events.linkedin.com/CIO-nearshore-trip/pub/269658

Government Sector Outsourcing: Transforming Public Service with Outsourced IT Services

Government organizations are not too different from large corporate firms, in that, both have cost savings and operational efficiency as core objectives in carrying out their functions and mandates. It is with these objectives that governments are increasing their outsourcing and simultaneously its share of IT/ITeS spends... Read More

Why Near shore - the mitigation of business risks

During last years we have seen in practice that the nearshore outsourcing model provided a viable alternative between the desire to optimize application development and maintenance costs from one side and to reduce uncertainties and downstream risks of sending those activities to offshore providers from another. Geographical and cultural proximity, no time-zone difference, linguistic and scholar affinity and availability of strong IT skills inherent to nearshore locations allowed to develop intimate business relationships that translated into better communication and project management. While proximity and no visa hassles made it easier for project management to be more present in the project. As a result companies engaged in nearshore outsourcing model in many cases saw increased project management efficiency, better quality of output and less extra work.

From other side escalating uncertainties in traditional offshore locations, increasing costs and attrition levels combined with increased focus on vulnerability management and safety of corporate data have irreversibly changed customer delivery preferences to nearshore and sameshore options allowing those geographically closed destinations to profit from nearshoring advantages in their specific clusters based around clients in North America, Europe and Asia. According to recent surveys of global corporate executives, the top locations to operate with lowest downstream risks in 2009 were Central and Eastern Europe as well as Latin America, which are significant nearshoring destinations for US and West European customers respectively.

According to Black Box Research report uncertainties in offshore locations continue to escalate thereby strengthening focus on vulnerability management. Having service centers Nearshore and Sameshore will be a major client priority in outsourcing for next several years as clients will prefer to keep their data, process resources and account closer to where the business actually is.

Farshoring, nearshoring, outsourcing

Het Nederlandse bedrijf Exact (software ontwikkelaar voor CRM, ERP en HRM toepassingen), bestaat dit jaar 25 jaar. In de loop der tijd zijn de producten van Exact uitgegroeid tot behoorlijk kennisintensieve producten die niet zomaar door een willekeurige ontwikkelaar zijn aan te passen aan de nieuwste eisen van de markt. Om als bedrijf overeind te blijven is innovatie cruciaal. Interessant is het dus om te weten hoe een bedrijf als Exact, dat inmiddels vestigingen heeft in 40 landen, dat doet. Lees meer

Detachering op afstand

Paul Schuyt;
Inmiddels ben ik 22 jaar werkzaam in de ict-industrie en ondanks alle goede bedoelingen is Nederland nog steeds een detacheringsland. In mijn jonge jaren, zo’n vijftien jaar geleden, sprak ik als accountmanager al met klanten over het outsourcen van applicatiebeheer en het aangaan van een resultaatverplichting bij bouwtrajecten. Smalend werd in die tijd al gesproken over ‘uurtje/factuurtje’, of wat netter ‘time and material’. Het leek alsof de ict-industrie niets anders wilde en de klantorganisatie niet anders kon.

In de jaren negentig zijn de Anglo-Saksische landen ons voorgegaan bij het outsourcen van ict en het neerleggen van een resultaatverplichting bij de ict-leveranciers. Alleen in Nederland zijn we nog niet veel verder gekomen dan het grootschalig uitbesteden van het beheer van infrastructuren. Op het gebied van applicatieontwikkeling en -beheer wordt nog steeds aarzelend gekeken naar uitbesteding en wordt er regelmatig verslag gedaan van het feit dat uitbestedingen, zeker in samenhang met offshore, niet vanzelfsprekend een succes zijn.

Read more: http://www.computable.nl/artikel/ict_topics/outsourcing/3238447/1276946/detachering-op-afstand.html#ixzz0eNGlJS9E

Ten tips from outsourcing experts and practitioners on how to save money on external consultants with do-it-yourself outsourcing.

Sure, you could hire a big, expensive outsourcing consulting firm to guide you step-by-step through the IT services procurement process. They've got experience, off-the-rack SLAs and contractual provisions, and enough templates and processes to fill a large conference room. But not everyone can or will pay $300-plus an hour for outsourcing handholding anymore.

The good news is that many IT organizations are capable of handling much of the process in-house. And such do-it-yourself outsourcing can pay off in ways beyond the bottom line, like a more flexible contract or a stronger relationship with the IT service provider. Read more

Oost-Europa, een lonkend alternatief

Ondanks de huidige economische recessie wordt over het algemeen aangenomen dat in Nederland een structureel tekort is aan goed opgeleide ict’ers. Tevens wordt aangenomen dat dit tekort zich niet oplost en alleen maar groter wordt. Er zijn ongeveer 250.000 ict’ers werkzaam in Nederland en bij een groei van 3 à 4 procent is er een jaarlijkse behoefte aan een toename van circa vijfduizend ict’ers. Dit aantal staat nog los van de compensatie van de uitstroom van ict’ers uit de arbeidsmarkt.

Read more: http://www.computable.nl/artikel/ict_topics/outsourcing/3148598/1276946/oosteuropa-een-lonkend-alternatief.html#ixzz0WYxSfVJU

Westpac's Kelly says mega outsourcing trend is shifting

Westpac CEO Gail Kelly has broadly hinted that the bank is unlikely to renew its decade-long IT outsourcing deal with IBM, as banks move away from all-in-one mega deals to more tactical best-of-breed outsourcing arrangements.