Wednesday, May 16, 2007
Saturday, May 12, 2007
FT.com / Companies / IT - Atos in talks with possible bidders
FT.com / Companies / IT - Atos in talks with possible bidders
Atos in talks with possible bidders
By Peggy Hollinger
Published: May 12 2007 03:00 | Last updated: May 12 2007 03:00
Management at Atos Originis to spend the weekend in negotiations with prospective bidders for the French IT services group, aiming for a decision by Monday.
The company's shares were suspended after news of the talks began to leak into the market. Atos was forced to accelerate discussions as a result.
The company said it expected to make an announcement early on Monday, although originally it had no such intention. People close to the situation said the outcome was still far from certain.
In March, Atos confirmed that it had received a number of approaches. People close to the situation said these included a potential €4bn ($5.4bn) bid from Permira and Centaurus, the British buy-out firm and hedge fund. Eurozeo and PAI, the French private equity groups, are also understood to have expressed interest, while Atos rival CapGemini pulled out of the running.
Atos has in the past said that it continues to "support the execution of [its] transformation plan" and "further the group's development", implying strongly that it wanted a buyer who would keep the company in one piece. Peggy Hollinger
Copyright The Financial Times Limited 2007
Atos in talks with possible bidders
By Peggy Hollinger
Published: May 12 2007 03:00 | Last updated: May 12 2007 03:00
Management at Atos Originis to spend the weekend in negotiations with prospective bidders for the French IT services group, aiming for a decision by Monday.
The company's shares were suspended after news of the talks began to leak into the market. Atos was forced to accelerate discussions as a result.
The company said it expected to make an announcement early on Monday, although originally it had no such intention. People close to the situation said the outcome was still far from certain.
In March, Atos confirmed that it had received a number of approaches. People close to the situation said these included a potential €4bn ($5.4bn) bid from Permira and Centaurus, the British buy-out firm and hedge fund. Eurozeo and PAI, the French private equity groups, are also understood to have expressed interest, while Atos rival CapGemini pulled out of the running.
Atos has in the past said that it continues to "support the execution of [its] transformation plan" and "further the group's development", implying strongly that it wanted a buyer who would keep the company in one piece. Peggy Hollinger
Copyright The Financial Times Limited 2007
Wednesday, May 09, 2007
FT.com / Technology - TECHNOLOGY LITE: The shrinking IT department
FT.com / Technology - TECHNOLOGY LITE: The shrinking IT department
TECHNOLOGY LITE: The shrinking IT department
By Dan Ilett
Published: May 9 2007 11:36 | Last updated: May 9 2007 11:36
Business leaders are learning a few lessons about IT. After spending small fortunes on equipment and technical specialists over the last decade or so, many have started to realise that a lack of cost savings and profit avenues from these investments means a shake-up is required.
In a bid to reset the IT profit model, larger businesses are now starting to mimic smaller ones by contracting specialist IT companies to service their technology while they focus on selling their product.
“You’ve now got the virtualised server environment where you can host things remotely,” says Mark Kobayashi-Hilary, author of Global services – moving to a level playing field. “With that, all the grunt work is then taken away from the office. It’d be better to stick to what you’re best at, write down your technical requirements and ask someone else to do it.”
Several services are now on offer that remove the burden of administration from the IT department. For example, some companies opt for software as a service, such as Google’s spreadsheet and word-processing applications that can be used over an internet browser. More commonly in larger companies, this type of hosted service involves customer relationship management (CRM) programs from providers such as Salesforce.com.
“You can also outsource IT maintenance by paying a retainer or an hourly rate to another company,” adds Mr Hilary. “Smaller companies do that because it’s cheaper than the salary of an engineer. All this means you have a virtualised IT department.”
Such actions to shrink the IT department’s staff and equipment have been coined as moving to an “IT lite” environment – a trend that has been noticed in some of Europe’s largest companies. The Corporate IT Forum (CIF), a CIO-end-user organisation for big companies, said its members are now employing more business-minded people to negotiate outsourcing contracts.
“[Our members] were all experiencing the same thing,” says David Roberts, CEO of the CIF. “We found there’ll be fewer people in the IT department but they’ll spend higher amounts of money and will be much more commercially aware. The corporation really has to have these skills to compete with the Accentures of this world.”
Mr Roberts explains that CEOs are also pressuring the IT department to find ways of profiting the business, which requires a radical shift in thought from simply saving the company money and time – a move which could see the IT department slim down considerably.
“These models are threatening the old establishments,” he says. “This has been a long time coming, where technology alone can build a profitable business. You’re therefore going to need business people for IT who can procure and you can now procure almost anything from the other side of the globe.”
Yet some outsourcing companies have been waiting for this moment for years. For example, companies based in China and India, which recruit tens of thousands of highly qualified technical people every year, have based their entire business models on this very shift. Now jobs such as programming, support and administration could soon be offshored to these firms while project managers and architects will remain safely employed internally.
“The need for programming is reducing as this is not an essential skill to have in house,” says Ian Campbell group CIO of British Energy. “If you look at new companies, they’re being more virtual in IT, but British Energy is coming from a traditional position – if it was new, I would go for that new model.
“The role of the CIO is to understand the business and provide added value. But to do that you need commercial IT managers who can sort contracts. IT people don’t come with these skills and I’m spending a reasonable amount of my time working on relationship management.
“I’ve seen one or two organisations that have gone from hundreds of people in the IT department to 50. They are really going for it while others are waiting for it to become standardised.”
Of course outsourcing IT jobs could also spell turbulent times for people with technical skills. While many can design databases, build back-end offices and speak programming languages to each other, businesses are starting to require commercial knowledge and better communicative skills. On the other hand, IT recruitment agencies are having difficulty in finding the next generation of IT worker.
“The salaries can be anything up to £200,000 because of these trends,” says Albert Ellis, CEO of recruitment firm Harvey Nash. “These people are a mixture of project managers and business analysts. One of the interesting things about this is they not only need understanding of technology and offshoring but sales, cultural issues and how to manage expectations for the board and the customers. This is all new territory.”
Research from US employment IT analyst Foote Partners backs this up. It claims employers are “desperate for employees who have more than just technical skills”. Capgemini’s Global CIO report also urges CIOs to move away from IT-centric management.
The IT director of European catering firm Elior Alastair Fuller changed the staff on his IT team in a bid to improve the business: “The sector we work in is changing so the IT needed to change,” he says. “What was apparent was that the 20 people in the IT department were clearly not fit for purpose. Now we have almost a new team and only have four of the original.
“The new people have brought a much broader set of skills on board. For the IT departments in some organisations it’s about doing the minimum. In the same organisations you can see the self-sustaining interest in IT.”
Copyright The Financial Times Limited 2007
TECHNOLOGY LITE: The shrinking IT department
By Dan Ilett
Published: May 9 2007 11:36 | Last updated: May 9 2007 11:36
Business leaders are learning a few lessons about IT. After spending small fortunes on equipment and technical specialists over the last decade or so, many have started to realise that a lack of cost savings and profit avenues from these investments means a shake-up is required.
In a bid to reset the IT profit model, larger businesses are now starting to mimic smaller ones by contracting specialist IT companies to service their technology while they focus on selling their product.
“You’ve now got the virtualised server environment where you can host things remotely,” says Mark Kobayashi-Hilary, author of Global services – moving to a level playing field. “With that, all the grunt work is then taken away from the office. It’d be better to stick to what you’re best at, write down your technical requirements and ask someone else to do it.”
Several services are now on offer that remove the burden of administration from the IT department. For example, some companies opt for software as a service, such as Google’s spreadsheet and word-processing applications that can be used over an internet browser. More commonly in larger companies, this type of hosted service involves customer relationship management (CRM) programs from providers such as Salesforce.com.
“You can also outsource IT maintenance by paying a retainer or an hourly rate to another company,” adds Mr Hilary. “Smaller companies do that because it’s cheaper than the salary of an engineer. All this means you have a virtualised IT department.”
Such actions to shrink the IT department’s staff and equipment have been coined as moving to an “IT lite” environment – a trend that has been noticed in some of Europe’s largest companies. The Corporate IT Forum (CIF), a CIO-end-user organisation for big companies, said its members are now employing more business-minded people to negotiate outsourcing contracts.
“[Our members] were all experiencing the same thing,” says David Roberts, CEO of the CIF. “We found there’ll be fewer people in the IT department but they’ll spend higher amounts of money and will be much more commercially aware. The corporation really has to have these skills to compete with the Accentures of this world.”
Mr Roberts explains that CEOs are also pressuring the IT department to find ways of profiting the business, which requires a radical shift in thought from simply saving the company money and time – a move which could see the IT department slim down considerably.
“These models are threatening the old establishments,” he says. “This has been a long time coming, where technology alone can build a profitable business. You’re therefore going to need business people for IT who can procure and you can now procure almost anything from the other side of the globe.”
Yet some outsourcing companies have been waiting for this moment for years. For example, companies based in China and India, which recruit tens of thousands of highly qualified technical people every year, have based their entire business models on this very shift. Now jobs such as programming, support and administration could soon be offshored to these firms while project managers and architects will remain safely employed internally.
“The need for programming is reducing as this is not an essential skill to have in house,” says Ian Campbell group CIO of British Energy. “If you look at new companies, they’re being more virtual in IT, but British Energy is coming from a traditional position – if it was new, I would go for that new model.
“The role of the CIO is to understand the business and provide added value. But to do that you need commercial IT managers who can sort contracts. IT people don’t come with these skills and I’m spending a reasonable amount of my time working on relationship management.
“I’ve seen one or two organisations that have gone from hundreds of people in the IT department to 50. They are really going for it while others are waiting for it to become standardised.”
Of course outsourcing IT jobs could also spell turbulent times for people with technical skills. While many can design databases, build back-end offices and speak programming languages to each other, businesses are starting to require commercial knowledge and better communicative skills. On the other hand, IT recruitment agencies are having difficulty in finding the next generation of IT worker.
“The salaries can be anything up to £200,000 because of these trends,” says Albert Ellis, CEO of recruitment firm Harvey Nash. “These people are a mixture of project managers and business analysts. One of the interesting things about this is they not only need understanding of technology and offshoring but sales, cultural issues and how to manage expectations for the board and the customers. This is all new territory.”
Research from US employment IT analyst Foote Partners backs this up. It claims employers are “desperate for employees who have more than just technical skills”. Capgemini’s Global CIO report also urges CIOs to move away from IT-centric management.
The IT director of European catering firm Elior Alastair Fuller changed the staff on his IT team in a bid to improve the business: “The sector we work in is changing so the IT needed to change,” he says. “What was apparent was that the 20 people in the IT department were clearly not fit for purpose. Now we have almost a new team and only have four of the original.
“The new people have brought a much broader set of skills on board. For the IT departments in some organisations it’s about doing the minimum. In the same organisations you can see the self-sustaining interest in IT.”
Copyright The Financial Times Limited 2007
FT.com / Technology - Outsourcing is more than just saving money
FT.com / Technology - Outsourcing is more than just saving money
Outsourcing is more than just saving money
By Kim Thomas
Published: May 9 2007 11:36 | Last updated: May 9 2007 11:36
Large organisations have grown used to outsourcing their IT function to a single supplier. This supplier not only manages every aspect – software development, infrastructure, networks, help desk – but also innovates at the same time. And all for a lower price than could be achieved in-house.
However, a new report argues that this model is on the way out. According to sourcing advisory firm Morgan Chambers, businesses in the UK – although the same issues apply everywhere – are facing “outsourcing turmoil”, with nearly £7bn worth of deals up for renewal by March 2008.
The report, Outsourcing Service Provider Performance 2006, was based on a survey of 500 top executives across Europe, and it found little loyalty to existing providers.
The large outsourcing providers who have dominated the market for the past 10 years will see their high-value contracts broken up and distributed among a number of providers.
Why is this happening?
“There is a sea-change in the marketplace,” says Phil Morris, chief executive of Morgan Chambers. “Clients are thinking: ‘We know there is a much broader choice, and the services we have today are more portable than when we did our original outsourcing’.”
With hindsight, there are obvious flaws with the traditional model. It takes a long time, perhaps nine months to a year, says Claudio Da Rold, vice-president of sourcing at analyst Gartner, to negotiate and transfer a function to another supplier.
Once responsibility is in the hands of a outsider, it is much harder for the IT function to respond to the changing needs of the business. While the client organisation wants to look forward, an outsourcing deal is usually about fixing problems from the past, says Mr Da Rold.
Many deals founder because of the focus on cost, says Jimmy Harris, managing director of infrastructure outsourcing at Accenture: “Many of the ‘disasters’ we have seen are a function of the client getting exactly what they asked for.”
Companies increasingly recognise that they need more from an outsourcer than an ability to save money. IT has to be able to respond to the changing requirements of the business, and that requires a set of skilled individuals who can innovate, not just a pool of software coders and support teams.
As Sanjiv Gossain, managing director of outsourcer Cognizant puts it: “We’re moving from arbitrage of labour to arbitrage of intellect: where can I get the smartest brains for my money?”
As a result, the outsourcing market is changing rapidly. Indian offshore companies, such as TCS, Wipro and Infosys, are now challenging the established giants such as EDS, Accenture and IBM. Once concerned exclusively with providing cheap low-level services such as software maintenance, they are now offering high-end functions, often in the client’s home country.
These companies, says Mr Morris, “are competing on innovation, value-add, closeness of relationship and absolute focus on customer needs”.
At the same time, the large providers are taking advantage of cheap labour in places such as India, China and eastern Europe to provide offshore services. Clients now expect global delivery to be part of the outsourcing deal, says Mr Harris.
Accenture supplies infrastructure management services from delivery centres in India, China, eastern Europe, the Philippines and South America, for example.
Because software is increasingly standardised, it is easier for clients to switch between suppliers. Smaller companies offering specialised services have emerged to take on part of the IT function, giving clients the opportunity to take a best-of-breed approach.
Businesses can also opt for software-as-a-service, as offered by salesforce.com, in which a third party hosts a software application and delivers it over the internet.
British Airways has taken advantage of the increasingly competitive nature of the outsourcing market to implement deals that match its business requirements.
“Five years ago, we saw a need to be more flexible with resourcing,” explains Mike Croucher, head of IT delivery at BA. “We didn’t want to expand our headcount. We wanted to be able to flex resources, both skills and technology, depending on business demands.”
BA approached two providers it already had dealings with: the large Indian outsourcer Tata Consultancy Services (TCS) and a smaller Indian provider, Navayuga Infotech (NIT).
Rather than set up a single five-year contract, it asked the companies to tender for each piece of work. “One minute I might need a lot of resource in an Oracle environment, and the next I might need a lot of resource in a Java environment,” says Mr Croucher.
As a result, the company now has framework agreements with its two main suppliers: “It’s a very simple framework that allows my project managers to contract with them quickly around the piece of work they want to do. The basic framework gives all the terms and conditions and the payment schedules. None of that has to be reinvented each time – it’s simply the work we require and the price for that work.”
The model has worked well, says Mr Croucher, and has enabled BA to increase the number of projects it carries out without taking on more staff. Its own staff, meanwhile, have had the opportunity to move out of software development and support work and into different roles, such as business analysis.
A pick-and-mix approach may offer greater flexibility than the old one-stop shop model, but its complexity provides new challenges. Businesses need to tackle the problem strategically, says Mr Da Rold: “Multisourcing is not about selecting a number of providers. It’s about managing internal and external providers.”
Before entering into outsourcing relationships, a company needs to understand exactly what it wants from them and how it is going to manage them – and how the providers are going to work with each other.
“You need an architecture and a strategy in which everyone knows exactly what they are expected to do, and the requirements and boundaries between different providers are defined.
“On top of that, you need to have a strategy when you select the service providers so that they sign up not only to deliver their own piece of work, but to co-operate with other providers and internal IT to manage their end-to-end service,” says Mr Da Rold.
A common approach is to have a strategic relationship with one key supplier, says Ollie Ross, head of research at the Corporate IT Forum: “At that level, there is a great understanding on both sides of what that partnership is about and what it’s going to deliver to both parties, and what risks and effort it will take to deliver that.”
That key supplier can then manage the relationships with the other, smaller suppliers. ING Bank, which has recently outsourced its infrastructure management to four providers, is using this approach.
IT outsourcing has come a long way in the past 15 years, but it is still evolving. If the unwieldy model of outsourcing the IT function to one provider is nearing extinction, then its replacement still needs some fine-tuning.
“Multisourcing is a reality: the practices to nail it down and get the best out of it are still a work in progress,” says Mr Da Rold.
●FT Global Outsourcing and Offshoring Conference in London, May 14-15: www.ft.com/conferences
Copyright The Financial Times Limited 2007
Outsourcing is more than just saving money
By Kim Thomas
Published: May 9 2007 11:36 | Last updated: May 9 2007 11:36
Large organisations have grown used to outsourcing their IT function to a single supplier. This supplier not only manages every aspect – software development, infrastructure, networks, help desk – but also innovates at the same time. And all for a lower price than could be achieved in-house.
However, a new report argues that this model is on the way out. According to sourcing advisory firm Morgan Chambers, businesses in the UK – although the same issues apply everywhere – are facing “outsourcing turmoil”, with nearly £7bn worth of deals up for renewal by March 2008.
The report, Outsourcing Service Provider Performance 2006, was based on a survey of 500 top executives across Europe, and it found little loyalty to existing providers.
The large outsourcing providers who have dominated the market for the past 10 years will see their high-value contracts broken up and distributed among a number of providers.
Why is this happening?
“There is a sea-change in the marketplace,” says Phil Morris, chief executive of Morgan Chambers. “Clients are thinking: ‘We know there is a much broader choice, and the services we have today are more portable than when we did our original outsourcing’.”
With hindsight, there are obvious flaws with the traditional model. It takes a long time, perhaps nine months to a year, says Claudio Da Rold, vice-president of sourcing at analyst Gartner, to negotiate and transfer a function to another supplier.
Once responsibility is in the hands of a outsider, it is much harder for the IT function to respond to the changing needs of the business. While the client organisation wants to look forward, an outsourcing deal is usually about fixing problems from the past, says Mr Da Rold.
Many deals founder because of the focus on cost, says Jimmy Harris, managing director of infrastructure outsourcing at Accenture: “Many of the ‘disasters’ we have seen are a function of the client getting exactly what they asked for.”
Companies increasingly recognise that they need more from an outsourcer than an ability to save money. IT has to be able to respond to the changing requirements of the business, and that requires a set of skilled individuals who can innovate, not just a pool of software coders and support teams.
As Sanjiv Gossain, managing director of outsourcer Cognizant puts it: “We’re moving from arbitrage of labour to arbitrage of intellect: where can I get the smartest brains for my money?”
As a result, the outsourcing market is changing rapidly. Indian offshore companies, such as TCS, Wipro and Infosys, are now challenging the established giants such as EDS, Accenture and IBM. Once concerned exclusively with providing cheap low-level services such as software maintenance, they are now offering high-end functions, often in the client’s home country.
These companies, says Mr Morris, “are competing on innovation, value-add, closeness of relationship and absolute focus on customer needs”.
At the same time, the large providers are taking advantage of cheap labour in places such as India, China and eastern Europe to provide offshore services. Clients now expect global delivery to be part of the outsourcing deal, says Mr Harris.
Accenture supplies infrastructure management services from delivery centres in India, China, eastern Europe, the Philippines and South America, for example.
Because software is increasingly standardised, it is easier for clients to switch between suppliers. Smaller companies offering specialised services have emerged to take on part of the IT function, giving clients the opportunity to take a best-of-breed approach.
Businesses can also opt for software-as-a-service, as offered by salesforce.com, in which a third party hosts a software application and delivers it over the internet.
British Airways has taken advantage of the increasingly competitive nature of the outsourcing market to implement deals that match its business requirements.
“Five years ago, we saw a need to be more flexible with resourcing,” explains Mike Croucher, head of IT delivery at BA. “We didn’t want to expand our headcount. We wanted to be able to flex resources, both skills and technology, depending on business demands.”
BA approached two providers it already had dealings with: the large Indian outsourcer Tata Consultancy Services (TCS) and a smaller Indian provider, Navayuga Infotech (NIT).
Rather than set up a single five-year contract, it asked the companies to tender for each piece of work. “One minute I might need a lot of resource in an Oracle environment, and the next I might need a lot of resource in a Java environment,” says Mr Croucher.
As a result, the company now has framework agreements with its two main suppliers: “It’s a very simple framework that allows my project managers to contract with them quickly around the piece of work they want to do. The basic framework gives all the terms and conditions and the payment schedules. None of that has to be reinvented each time – it’s simply the work we require and the price for that work.”
The model has worked well, says Mr Croucher, and has enabled BA to increase the number of projects it carries out without taking on more staff. Its own staff, meanwhile, have had the opportunity to move out of software development and support work and into different roles, such as business analysis.
A pick-and-mix approach may offer greater flexibility than the old one-stop shop model, but its complexity provides new challenges. Businesses need to tackle the problem strategically, says Mr Da Rold: “Multisourcing is not about selecting a number of providers. It’s about managing internal and external providers.”
Before entering into outsourcing relationships, a company needs to understand exactly what it wants from them and how it is going to manage them – and how the providers are going to work with each other.
“You need an architecture and a strategy in which everyone knows exactly what they are expected to do, and the requirements and boundaries between different providers are defined.
“On top of that, you need to have a strategy when you select the service providers so that they sign up not only to deliver their own piece of work, but to co-operate with other providers and internal IT to manage their end-to-end service,” says Mr Da Rold.
A common approach is to have a strategic relationship with one key supplier, says Ollie Ross, head of research at the Corporate IT Forum: “At that level, there is a great understanding on both sides of what that partnership is about and what it’s going to deliver to both parties, and what risks and effort it will take to deliver that.”
That key supplier can then manage the relationships with the other, smaller suppliers. ING Bank, which has recently outsourced its infrastructure management to four providers, is using this approach.
IT outsourcing has come a long way in the past 15 years, but it is still evolving. If the unwieldy model of outsourcing the IT function to one provider is nearing extinction, then its replacement still needs some fine-tuning.
“Multisourcing is a reality: the practices to nail it down and get the best out of it are still a work in progress,” says Mr Da Rold.
●FT Global Outsourcing and Offshoring Conference in London, May 14-15: www.ft.com/conferences
Copyright The Financial Times Limited 2007
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