Talking outsourcing- a blog from computing.co.uk

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Friday, 28 March 2008

Terminal 5 - The insider's view

Oh dear. The opening of Heathrow Terminal 5 (T5) has been a disaster. British Airways chief executive Willie Walsh must be in the running for understatement of the year for describing the mess as “not really our finest hour.” In this situation it might have been better to search for a quote from the Queen Mother, rather than alluding to Churchill – the poor passengers must have a touch of the Blitz spirit in T5 right now.

I’ve been talking to a number of IT companies about the T5 migration and they were all holding their breath. Both NIIT and TCS count BA as a major customer and even though it looks like the technology is not to blame, no IT supplier wants to see a good customer and business partner flailing around like a fish out of water.

I was a passenger on the first Eurostar service from St Pancras International station to Paris. Eurostar managed to operate services from Waterloo one day and to switch everything overnight to St Pancras without a hitch – apart from the fact that on opening day there were still no shops at St Pancras so it was impossible to even get a coffee, but the train service ran smoothly.

I appreciate that T5 is on a far grander scale than a train station, but there is no denying that the Eurostar project was a huge overnight transition too – and it worked. BA and BAA need to come up with some answers about what went wrong soon and especially whether it was really just a lack of burly baggage handlers or some fundamental design problems in the new technology commissioned for the terminal.

I want to end this blog post by featuring a long quote, basically an entire email straight from the BlackBerry of friend of mine who is a very senior UK-based executive in a major IT services company - that shall remain nameless. I received this last night, so it’s an excellent view from the coalface of the T5 experience on opening day:

“Sadly the UK hasn't covered itself in glory today. I say the UK because that's how important the success of T5 is for the country.

“I’m currently on Eurostar to Paris, while my bag wanders round T5's state of the art baggage system lonely as a… well actually I expect it has quite a few disgruntled baggy friends this evening as it circumnavigates the underground rubber runways.

“T5 looks nice, nice artwork, high tech and you can see the concept the designers are aiming for, but today it had lots of teething problems, not just the kind of fundamental shortage of flying opportunities. Check-in luggage conveyers were working intermittently, security operations slow. Information provision via the IT systems slow - slower than BA's internet updates which at least confirmed my flight was cancelled, rather than the suggestion chez T5 to queue up and enquire (such a polite term – ‘I say, would you mind awfully telling me if my plane might leave today?’) Yes, please speak to a warm and fluffy human. Sadly the ratio of query-ers to query-ees was unmanageable.

“I guess they'll show the queues that BA staff had to cope with on the news. By now I'm expecting at least one murder to have occurred, mentally - not, one hopes, physically. Many were stoic - at least when I left. But it could get ugly. I predict a riot?

“Arrivals was fun. First you can't actually leave departures - by any means. So we had to queue again until security could escort us out. Then once you've managed to leave, so to speak, you have to arrive. ‘Do you have your landing card?’ ‘I haven’t taken off yet.’ ‘Oh!’

“I guess I’ll go through the ‘arrivals from the EU’’ channel at customs.

“As I looked through the glass back into check-in on my way out, the seething queues suggested even check-in was pushing up the daisies.

“Abandoning my bag after being told I could look for it online, rather than join the next one-hour queue at arrivals baggage claims customer services, I headed for St Pancras station.

“I did have a nice opportunity to share some views - and mine were very positive - with the very nice BAA customer service man I met on the Heathrow Express back. I know he's going to think about these.

“I hope Willie Walsh commends the fortitude of the BA staff for the sheer drain on their emotional skills today. They are the easiest to blame - because they are there - and I sometimes despair at the amount of vitriol fellow passengers are prepared to deploy. For BA and BAA this really is a nightmare, and I have to say that I sympathise. It’s all too easy now to be smug and suggest more testing or a phased approach. But it really will be a fantastic feat when it does come together (could I propose tomorrow night - when I return from Paris?). And I have to say even today; my T5 experience was a whole magnitude better than that received at Delhi airport last month – twice.

“The difference is that we don't expect this standard from the UK's flagship airport. And you're always leaving Delhi at about 3am.

“I feel a case study coming on.

“I missed the first Eurostar in favour of buying a toothbrush, hairbrush and a few other essentials at the station. I ‘was’ a big fan of M&S's new railway station stores - until today when it dawned on me that ‘simply food’ really did sell what it says on the tin, to mix business straplines. So I couldn't rely on M&S in my time of greatest need. Thank you Accessorize.

“I now have a G&T in my hot and bothered hand, but sadly relaxation won't come. There's an unhappy child in the adjacent seat who'd like to share his frustration with us all. Carpets are stained and it’s looking jaded. I expected a sit-down buffet-car meal where some may have even dressed for dinner and with a sporting chance of a murder or a chase or a disappearance. The pasta forestiere eaten at my seat had no romance, but wasn't bad. And it’s now turned peaceful across the aisle.

“Off to brush up on my business French. Hmmn, wonder if Nicolas Sarkozy and Carla Bruni are on board?

“Bonsoir et Bon Voyage. “

Posted at 02:29 PM in innovation, management, strategy | Permalink | Comments (3) | TrackBack (0)

Wednesday, 26 March 2008

Tata takeovers are good for everyone

It’s exciting to hear that the Tata Group in India is purchasing Land Rover and Jaguar from Ford. Jaguar might be losing cash, but as a combined unit the two marques are generating a healthy profit for Ford, so it looks like a good purchase for Tata. The difference in strategy is the investment for the long-term, which Ford seems to be shying away from - perhaps wanting to cut free after years of trying to make Jaguar work.

With a five-year commitment to the business, this deal is good for British car manufacturing – securing jobs in Land Rover and Jaguar as well as Ford in the UK, as part of the deal involves sourcing parts from Ford.

Tata is becoming the poster-child of rapid industrial development in India – and Asia in general. In the UK we have seen them in the news a number of times in recent years. Tata now owns Tetley tea, and the purchase of Corus (formerly British Steel) by Tata Steel was one of the big business stories of last year.

The group also happens to run Tata Consultancy Services (TCS), the biggest player in the Indian technology services market. TCS made more than $4bn in revenue last year and it is safe to predict that they will be north of $5bn when this financial year ends.

TCS is about to completely restructure the organisation around business domains. My impression of the new strategy is that it is breaking the company up in a virtual way, so the retail IT part of TCS becomes entirely responsible for sales and growth in that part of the business, as does the public sector part of the organisation. It is like creating a number of virtual IT companies all within the TCS banner and each with their own revenue and growth targets.

I’m sure that they have always analysed where the money is coming in and who is generating growth, but it looks like some business autonomy is being passed down to the domain heads. That’s a good thing and in theory a good strategy. The buyers in the market that I have already spoken to about this (some of them TCS customers) are keen on the idea because it gives them better access to TCS and more flexibility.

I wonder how this impacts the second-tier suppliers though? They sell themselves as being smaller, quicker to react and more focused on particular industries when compared to the IT giants. Now TCS is acknowledging that the way forward is to specialise on the businesses they serve and to know those industries as well as their clients do. Where does that leave the smaller IT shops?

Posted at 12:16 PM in offshore outsourcing, strategy | Permalink | Comments (0) | TrackBack (0)

Tuesday, 18 March 2008

US troubles are the least of India's worries

I recently asked Deepak Khosla, senior vice president of marketing at Patni, about the economic slowdown in the US and the potential for recession – which some commentators say has already happened. The news from the US is looking ever more bleak now as even stalwarts of Wall Street, such as Bear Stearns, are getting into trouble.

Khosla acknowledged the US turmoil as an issue, but he listed a number of more local issues in the Indian outsourcing industry that are presently the focus of the IT players there.

“I think there are a few challenges that we had not really thought of,” he said.

“Who would have expected the dollar to go down as it did? Also, look at recruitment. Earlier we were interviewing six people for every person we recruited. Now we need to interview about 16 for each person we hire. We have to manage something like 70,000 interviews in 220 working days.”

Khosla said the entire industry is changing in India and there are some larger, more mature, companies capable of riding the change and some who will fall by the wayside.

“We previously had the models, but the environment is changing,” he said. “I am not surprised as the industry is going through an evolution. We are looking to the long term and trying to plan for the future, but it’s true that some companies are just struggling to keep their people, let alone acquire new business.”

Khosla actually highlighted that the IT service players in India are now differentiating their approach – it’s no longer a one-size-fits-all industry.

“Some are taking the mass-production factory approach, but some are going into specific niche areas,” he said.

“At Patni, we are looking very much into embedded systems and there is very strong growth in this market. Some companies are looking at business domains, some are looking at industrialisation, and some are looking at these niches. There are some benefits for us too by doing this - after all,an engineering drawing is an engineering drawing wherever you are and whatever language you use.”

It seems that the domestic issues in the Indian IT industry remain higher up the agenda than any worries about the US, but the market is changing and there are still some opportunities to thrive – provided the service providers know their market and can focus.

Posted at 06:00 PM in offshore outsourcing, skills, strategy | Permalink | Comments (0) | TrackBack (0)

Vietnam calling

I had a chat on the phone the other day with Paul Smith, managing director of Harvey Nash outsourcing. Of course, Harvey Nash is well known as one of the world’s leading staff recruitment companies, but it also offers outsourced services. The company recently signed a new contract with Prudential in Vietnam, extending an existing relationship, and so I gave him a call to ask about Vietnam.

First I asked Paul, why Vietnam? He said: “We had a lot of feedback from clients saying that they were experiencing staff churn in India, as well as the right quality. So we wanted to influence the quality of staff in our centre by becoming the first choice – we wanted to be the elephant rather than the flea”

That’s understandable and it sidesteps many of the staffing issue faced by India at present. Paul added: “We are now expanding here by 300 per cent per annum, we get the top graduates coming out of the major cities, we have influence on the universities and we even have our own university in Hanoi. And you don’t get ‘Delhi belly’ in Vietnam.”

To be fair, I know that I’ve eaten everywhere from street-side vendors to five-star hotels in India and very rarely suffered the dreaded Delhi belly, but I do know of some people who still pack their bag full of British snacks to keep them going with risking the local tiffin.

Paul believes that the demand in India is causing a major problem when staffing projects.

“You have so much demand pushing into India now,” he said. “People like Oracle, IBM, and Microsoft are creating such huge demand at the universities that people are prepared to hop job for just a dollar more. Your domain knowledge and the ability to create long-term relationships with teams will be affected in that environment.”

I asked Paul about the move to using local call centres for dealing with local staff and he agreed entirely. In fact, he outlined that the staff at the call centre in Vietnam are actually dealing with consumers in Vietnam, not offering a far-flung service to punters here in Britain.

“Prudential is very confident about using staff in a call centre in Vietnam because they use English people to speak to English customers and Vietnamese people to speak to Vietnamese customers,” he said.

“As with Prudential, companies like HSBC and Standard Chartered also see Vietnam as a massive consumer market that is developing very fast. We do not recommend voice outsourcing into the UK market from Vietnam, though that is more of a general rule that customer service staff should be local.”

So there you have it. I mentioned this on a blog the other day because of a news story talking about this as a recent trend. I believe Harvey Nash has been working to build up its Vietnam centre over the past eight years and Paul is one of the best-known commentators in the industry, so I’m inclined to believe what he says as a fairer picture of what is really going on.

Posted at 03:25 PM in offshore outsourcing, skills, strategy | Permalink | Comments (0) | TrackBack (0)

Czeching out the European information age

I had an interesting visit to the Czech Republic last week. I was speaking at a conference focused on the business of information technology in the country and it covered a multitude of areas, focusing a lot on legislative changes for most of the morning session.

What struck me, when the deputy prime minister (DPM) was speaking in the afternoon, was the directness of someone so senior in the political machine. He confessed that the IT industry should not expect too much from the forthcoming Czech presidency of the European Union. In fact he even confessed that he was not sure what anyone could expect from the presidency, but he did vouch to be working hard on ensuring the country would get as much as possible from the EU presidency.

The Lisbon Strategy is due to be reviewed soon and from what the DPM was saying, it looks like the UK and Czech Republic are the most progressive nations in the union, pushing for real measures to drag Europe into the information age – particularly in the area of IT-enabled services. Given the nature of the EU and the requirement for 27 nations to debate these matters it might be some time before we see much action.

Posted at 10:20 AM in government, innovation, strategy | Permalink | Comments (0) | TrackBack (0)

Wednesday, 12 March 2008

The contentious issue of overseas IT workers

There was some news this week in Computing about foreign IT workers entering the UK that could certainly be seen as alarming for those on both sides of the offshoring debate.

Atsco, the Association of Technology Staffing Companies, put a Freedom of Information request to Work Permits UK, the section of the Home Office responsible for issuing work visas.

Atsco found that 38,450 work permits were handed to non-EU IT workers last year. Of those visas, 82 per cent went to Indian nationals and there were about 5,000 more visas issued than the year before.

So what is Atsco worried about? There must be almost a million people employed in IT or IT services in the UK – at least that was the magnitude of the industry when I was doing research into offshoring from the UK for the BCS. A few thousand people sounds like small beer, doesn’t it?

Atsco’s concern is over what it terms ‘onshore offshoring’, where an offshore IT company wins a contract and then staffs the project with people from that remote location. Given that four out of five people getting these visas are Indian, let’s assume we are talking mostly about the big Indian IT companies here. So the allegation is that once TCS, Infosys, or Wipro wins a big UK contract and requires resource locally in the UK, they don’t go on a hiring spree over here, they just bus everyone in by filling the economy class seats on Air India and renting some cheap apartments.

No doubt those companies will retort that if they win a major contract and suddenly need to launch a major UK-based programme of work that involves auditing systems, benchmarking, and probably a knowledge transfer, then it’s only natural to get the people over from India – because when the systems are transferred they are the people who are going to have to manage them.

In addition, there is also the question of ramping up to meet demand. If I’m a CIO and I am choosing IT suppliers and I notice that one says it will take six months to hire the required people for the project and the other says they can have knowledgeable people on the ground in two weeks, then what would you expect me to do?

CIOs are not hired for their altruistic nature. They need to support the business and the business expects results, so let’s try to cut some of the quasi-patriotic crocodile tears from the way Atsco is presenting this reality.

In its new report, Atsco also talks about the long-term danger of bringing in foreign workers to handle low to middle-ranking IT jobs – creating a lack of opportunity for graduates here. I’m not sure I accept all of their arguments, but there is an issue. Again though, the CIO will be faced with the reality check of hiring fairly low-cost but completely inexperienced employees from UK campuses or experienced staff for a similar cost from offshore.

However, I’m not such an ardent capitalist that these concerns do not worry me. Greed is not necessarily good. I think that there is an issue with the way work visas are issued for IT projects in the UK, but we have to inject the debate with a sense of pragmatism and business reality.

I would ask the Home Office to review its conditions for granting visas and the longevity of those visas. I do believe that there is something wrong when a “knowledge transfer” programme can take two years or more – and so people can be expatriated from India to work on that project for several years, continuing to earn an Indian salary, rather than being hired locally in the UK.

There must be a way to use the flexibility of outsourcing or offshoring work partially to other regions, but also maintaining a commitment to local workers through the visa programme. If a job is going to take more than a year then surely that’s not really a task where someone should be brought in to the UK is it? What we need is a fresh debate and consultation that involves the key players with the Home Office. We can’t close down the borders entirely because domain experts are needed wherever they are, but if IT companies are just using the weaknesses of the visa system to bring lower-paid workers into the UK then there has to be a review in the near future.

Posted at 06:23 PM in offshore outsourcing, skills | Permalink | Comments (1) | TrackBack (0)

Tuesday, 11 March 2008

Czech-ing in

I am speaking today at a conference in Prague. I’m not on until just after 1pm, but I thought I would arrive promptly at 8am so I could follow the talks in the morning. So I got up and had breakfast early, listening to BBC Radio 5 in my hotel and was pleased to hear my editor at Computing, Bryan Glick, talking about broadband use in the UK while I was munching on my toast in the Czech Republic, thanks to the wonders of the BBC iPlayer – exactly the thing Bryan was talking about.

I walked to the Czech National Bank, avoiding the morning traffic, and took my place in the audience. Then the lectures started and I discovered that the entire morning is going to be in Czech and only switches to English once I am involved later in the day!

I’m certainly not a little Englander, insisting on the use of business English everywhere I go, but I have to confess that I only know a few words of Czech. At least if it was French then I could follow most of the debate, but I am afraid that I am reduced to blogging while people speak right now…

Posted at 10:15 AM in internet | Permalink | Comments (0) | TrackBack (0)

Monday, 10 March 2008

Hello? Hello? The problem with call centres

It’s amazing what you read in the papers sometimes. I’ve just been looking at a story in The Guardian today about how some voice-based contact centres are shifting projects back to local agents rather than using an offshore business model.

Hello? I’ve been talking about that trend for at least the past couple of years at business conferences and to my MBA students. Clearly there was a page free in the business section today and they had to call up that well-known journalist ‘Phil Space’ to get something together.

The offshoring backlash reached a peak in the UK in 2003. There was a significant international public backlash caused by the 2004 US presidential election, and since that time many voice-based customer service centres have explored how best to improve their service. In some cases, that resulted in a focus on local agents for some services, but we have an interesting situation in the UK. Our local contact centre industry continues to grow even as the amount that is sent offshore also grows, because the use of contact centres by all businesses continues to increase.

I was explaining the tendency to focus on voice-based contact centre work to MBA students at London South Bank University last week (and apologies to the evening MBA students as I should be talking to them today, but I am away in Prague), and one of the students questioned my logic.

“The problem is not accents, or local people in a call centre. If you get a local British person and they can’t help you then you still get frustrated. The problem is that call centres are just not designed very well and you always end up feeling angry after calling one, regardless of where they pick up the phone,” she said.

She had a valid point that’s hard to argue against.

Posted at 04:03 PM in offshore outsourcing, outsourcing, strategy | Permalink | Comments (1) | TrackBack (0)

Friday, 07 March 2008

Is China slipping behind?

I was just called by a financial journalist based in the City. She wanted to ask me about the news that JP Morgan plans to scale up its operations in the Philippines from around 5,000 people to 8,000 – quite an increase.

As so often happens when someone calls asking for an off-the-cuff comment, I had not read the news myself and I was sitting on a train from London to Nottingham with no access to the internet, other than through the tiny screen on my phone. So I gave some general comments on the situation in the Philippines and why a company like JP Morgan might want to invest further in the region.

It is clear to me that something interesting has developed in the marketplace, where everyone is usually comparing the relative merits of one country compared to another – even though these comparisons are usually too simplistic to be of much use. The thing is – and whisper this – everyone seems to have finally stopped comparing India to China.

I had a meeting earlier this week with some representatives of the Suzhou industrial park in China (an industrial park that is 288 square km!) and I mentioned this to them. They seemed to be quite upset, as I was implying that China is potentially slipping off the radar of western buyers interested in knowledge-based services. Then they slipped into the same mistake that everyone seems to make when promoting their region, trotting out statistics on tax breaks, office space, the graduate population, the number of golf courses, and just about everything except the weather and attractiveness of local women - though believe me, some investment agencies have actually spun that line with me.

It should be fairly obvious why JP Morgan is expanding in the Philippines. They have a considerable operation there already and the location offers everything a foreign investor might want – all those great things the Chinese were telling me about. So, with all those benefits and an incumbent operation, it is not likely that JP Morgan would hire 3,000 people in another location unless it was for a reason such as business continuity management.

I don’t want to sound flippant, but most senior executives I meet and talk to are really much more focused on the capabilities of partner companies, regardless of where that company is registered.

Can they do the job? I don’t care if they are based in California, Cornwall, or Korea. Yes, when companies are planning an offshore captive facility they will need to examine the fundamentals of that region, but I would argue that outsourcing is a lot more common than offshoring and creating a major captive for services.

Companies offering IT or IT-enabled services from regions such as China and the Philippines might want to work harder at developing their own reputation as a company, rather than supporting government-led initiatives and trade missions that do little more than present a sea of statistics and images of golf courses. I hate golf anyway. When someone uses a golf course as a way of selling a location to me it just makes me think of Bruce Forsyth in funny trousers. Not an attractive thought, even if he does deserve to be knighted for services to tap dancing and games shows.

The India and China debate is a serious point though. Go back a couple of years and every analyst and conference debate was about the question of who is going to win the outsourcing race – India or China? Today, the environment is much more open and it is clear that Chinese technology service firms are opening up to exports, but they are still really busy with the booming domestic market. Indian firms have just got better and better, but it is new players in countries such as the Philippines and Vietnam that are really going to be making the news in Asia.

Posted at 03:44 PM in offshore outsourcing | Permalink | Comments (2) | TrackBack (0)

Thursday, 06 March 2008

Of leaky taps, plumbers, and Indian IT suppliers

I was in Starbucks yesterday with a guy I know from the sourcing industry. He is a consultant who often works on supplier comparison, helping companies to looks at the strengths and weaknesses of different suppliers, and hopefully helping them to pick the right one for their project.

He said something interesting to me that chimed with some news I read in the Indian press this week about TCS starting a new unit focused on small to medium sized enterprises – with an expectation of earning $100m a year for at least the next five years from this new unit.

My coffee companion recently had a client with a fairly small project. Not millions at all, but probably about £50,000 a year of work. That’s about $100,000 per year to a supplier, so it is comparatively small, but the client was interesting and so the potential was clearly there for the relationship to grow bigger. It was a helpdesk project that could expand into support for several languages. He had called one of the top 10 Indian suppliers to ask if they would be interested in the project. His call was not returned. He tried calling again. He got nothing but voicemail. After three days of getting voicemail he gave up on them, thinking that if that’s the way they organise their own customer service then how are they going to organise it better for the client?

It’s not even as if they were just avoiding him because the project was too small to deal with. He was calling the switchboard of their London office and getting this reaction. Even if the project was too small to be of interest, the very least someone could have done is given him a call to let him know.

No, this was not TCS, but it was certainly one of the well-known Indian suppliers and it does demonstrate once again the old adage that a plumber never has time to fix the leaking tap in his own bathroom.

Posted at 01:07 PM in offshore outsourcing, outsourcing | Permalink | Comments (3) | TrackBack (0)