Article 43


Monday, February 23, 2009

IT Outsourcing News 2/09

At the end of the week I look up at the Heavens and thank The Universe for another paycheck.

Every morning when I wake up I ask the same Universe “Will today be the day I get layed off?”

My rose-colored glasses wearing friends say “Don’t worry, you’re so smart, you’ll find a COMPUTER JOB if you get layed off.”

Yeah. Right.

If only I were smart enough to take that New York City GARBAGE MAN JOB 30 years ago, I’d be enjoying a nice, healthy pension with my high-school drop out friends right now.

EVER WONDER what a sailor on a SINKING SHIP who knows NO RESCUE is underway FEELS LIKE?


Down economy fuels IT outsourcing
Trend to focus, shorter-term deals is seen; wariness of offshoring emerges

By Denise Dubie
Network World
February 13, 2009

Companies flocked to IT OUTSOURCING vendors as the recession unfolded last year and industry watchers expect more of the same as companies seek to slash fixed costs and deliver services with smaller staffs.

However, even as deals are made, look for them to be of smaller size and duration. Global sourcing advisory firm TPI reports that megadeals, those valued at more than $1 billion, peppered the first half of 2008 but tapered off into the second half as economic conditions worsened. The number of deals worth less than $1 billion increased by 12%, TPI says.

Such deals show that buyers are trying to address specific pain points.

For instance, Gartner noted customers in 2008 displayed growing focus on green IT as it related to infrastructure outsourcing and “the carbon footprint of data centers.” Yet while green IT is growing in popularity, the focus remains on cost, power optimization and service resilience, more so than environmental motivations. Other infrastructure services such as remote monitoring are also gaining buyer interest as companies look to reduce costs via lower labor rates and reduce manual efforts.

“The challenging economic environment will continue to drive buyers to make costs containment a priority in infrastructure outsourcing, while objectives such as business enhancement will temporarily lose their attractiveness,” Gartner states.

The market research firm reported that the average contract size among the top 20 outsourcing deals inked in 2008 reached $998 million and the average length exceeded six years. Companies such as AT&T, EDS and Tata Consulting Service contracted multi-year, megadeals in 2008, while IBM in late December signed multi-year outsourcing contracts with Whirlpool and Sara Lee, the values of which were not disclosed. Overall IBM reported it had signed services contracts totaling $17.2 billion, including 24 greater than $100 million, in the fourth quarter.

“The pipeline for the leading outsourcers is strengthening as they get a lot of distress calls from new prospects. We haven’t tracked a slowdown in the market yet,” says Ben Pring, research vice president at Gartner.


“IBM was able to be quite bullish and quite confident on its positive guidance because of its outsourcing backlog,” Pring says.

Others, such as HP-EDS also entered 2009 with momentum. IBM Global Services’ top challenger won five of the largest deals in 2008, Gartner says.

Despite IBM’s contract wins, the company was actually absent from the list of the biggest deals, evidence of a different dynamic among IT buyers. “TPI continues to see overall total contract value size decrease, which is a function of shorter contract duration (under five years) and more discrete sourcing, says Mike Slavin, partner and managing director, CIO Services North America at TPI. “A significant percentage of our engagements are now below the $25 million threshold.”

Making the best deal

With planned job cuts in January reaching a seven-year high, according to global outplacement consultancy Challenger, Gray & Christmas, more companies are looking to alternative delivery and acquisition models for IT services and application resources. Gartner says in 2008 software-as-a-service and cloud computing were among the top five alternative delivery methods that experienced accelerated adoption and are poised for growth into 2009.

Gartner estimated the worldwide SaaS market at $6.5 billion at the close of 2008, and the research firm forecasted it could grow to $15.2 billion by the end of 2012. A survey of 80 providers of such services shows that revenue from the offerings almost totaled $10 billion, with expectations of 35% growth in the next three years. And as service providers plan road maps going forward, Gartner reports investments in alternative delivery and acquisition models are on the rise. The latest figures have providers investing close to $5 billion in cloud-computing capabilities, Gartner reports. And just last week, IBM, Savvis and Juniper all made cloud computing announcements.

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“It seems that 2009 may actually be the year to really look at and consider commercial cloud computing offerings,” TPI’s Slavin says.

Industry watchers warn that enterprise IT executives considering a new services contract should proceed with caution and confirm they have the business processes in place to ensure outsourcing services won’t hurt them more than they help. And those continuing with existing contracts could take the opportunity to renegotiate terms, says Christine Ferrusi Ross, vice president and research director at Forrester Research.

“What was price competitive six months ago could most likely not be price competitive today,” she explains. “Clients can be negotiating labor rates and working to ensure the scope of the contract is accurate to current conditions.”

Yet not all outsourcers will be in the same position. Indian offshore providers, because of the Satyam scandal and other factors such as increasing labor rates and resource attrition, are scrambling to continue double-digit growth rates, according to Forrester. Customers could renegotiate contracts with vendors to reflect the current economic climate, which ultimately would help the provider keep the client but lessen the revenue generated from the contract. With this in mind, clients need to remain firm with providers on current rates and skeptical if terms of a contract seem too attractively priced.

“Rates for offshore resources in India should remain stable or flat for the next two years at least. Clients should not accept rate increases this year or next unless they have very low rates already,” a recent Forrester report states. “Clients need to be careful about getting a deal that seems too good to be true. In 99% of the cases, it will indeed be too good to be true.”

Specifically, the fallout from Satyam’s scandal is causing many companies new to outsourcing to approach the offshore vendors with much more caution than in previous years.

“There is definitely wariness in the mind of clients as they reach offshore,” TPI’s Slavin says.


Posted by Elvis on 02/23/09 •
Section Dealing with Layoff
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Chery S18

Rememebr when CHRYSLER signed that deal with Chery Automomobiles in China?

Maybe they’ll be the only DETROIT survivor, as the $5,000 imports get ready to roll in.


China’s Chery Auto Unveils Electric Car

February 20, 2009

China’s largest independent carmaker Chery Automobile rolled off its first plug-in electric car this week, the latest Chinese automotive company to produce an alternative energy vehicle.

The all-electric car, S18, can go up to 150 kilometres (93 miles) on one charge and has a maximum speed of 120 kilometres (72 miles) an hour, the company said in a statement.

The battery can be fully charged within six hours using a 220-volt home outlet, while 80 percent of the battery can be charged within 30 minutes, it said.

“The price will be very suitable for families,” Yuan Tao, vice president of Chery said, without offering details.

It was also unclear when the car would be available to buy.

Unlike another Chinese carmaker, the BYD Co, which began selling its plug-in electric hybrid car in China in December, the Chery has not given the S18 the option of running on petrol.

BYD’s plug-in hybrid, named the F3DM, can travel 100 kilometres on its battery, or 580 kilometres in hybrid mode with petrol.

Domestic manufacturers of clean vehicles are likely to get a boost from the government in the form of a policy package to help the car industry through the global economic crisis.

China’s Ministry of Finance said Tuesday the government planned to subsidise purchases of alternative energy vehicles to expand domestic demand, boost the domestic car industry and reduce pollution emissions.


Posted by Elvis on 02/23/09 •
Section General Reading
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