Often, executive management initiates the implementation of wholesale global services delivery as a proxy for pushing more difficult and fundamental change in corporate strategy, culture, performance or ways of working
by Deborah Kops
During the last few years, corporate acceptance of services globalization has seen dramatic upward movement. Almost every multi and trans national corporation has heard the clarion call, and is readily convinced of the benefits of globalizing and standardizing processes and technologies.
Yet, informed leadership at the top of the house may be missing. Executive management may latch onto the headlines, assuming that services globalization will quickly move the organization into the pantheon of corporate greats. Ensuring that the results do not disappoint requires the C-suite to understand the role it plays in designing, justifying and communicating the program.
The C-suite sets the tone and direction for changes in business models. Therefore, a working knowledge of the pitfalls of offshoring and outsourcing is critical to success.
How do the top traps stack up?
Ignoring the culture of the organization. There is no standard template for services globalization; what can be implemented successfully in one organization may prove infeasible in another. But there is a link between culture, solution and approach which is often ignored in the push to change the architecture of business-process delivery. Jack Welch’s vaunted “70-70-70” might be the right program for process-driven GE where Six Sigma is the common language, but wrong for a culture that values how people team together over process.
For example, organizations with a rigorously applied supply chain might find that implementing an integrated end-to-end outsourcing deal runs counter to a culture where internal transparency and measurement are applied at proscribed intervals. Or a corporation that places more emphasis on the value of the individual employee may find that the change-management investment required will be extraordinary compared to that of an organization that refers to staff as just so much headcount.
No rationale for implementation or line of sight other than cost reduction. Business lines ask: Where will the savings be redeployed? Will I be able to provide better customer service? Or get to market faster?
Business lines look for an end game from services globalization beyond expected cost savings. Transparency relative to the stream of benefits is critical to keep the corporation focused during the challenges of implementation. Otherwise, services globalization becomes just another initiative driven from the center, which appears to be a taking of business line support for the greater good of the organization rather than a better way of working.
Not establishing a program framework at the top. The statement in the strategic plan that demands support functions and business units outsource or go offshore is merely an aspiration, not a goal. Without clearly defined expectations for performance in the form of horizons and hurdles, reporting requirements and governance principles, business units and support functions are on their own when it comes to developing a business case, aligning interests with providers, and reporting progress.
The impacts of services globalization on risk, reporting, investment and corporate performance are far too critical to leave well meaning units to make it up on their own. At the very minimum, corporate leadership must give direction as to acceptable returns and cost reduction, inputs, business case structure, terms and treatment of stranded costs.
Letting the tail wag the dog. Often, the push to services globalization is used as a test or proxy to re-adjust the power structure of an organization from business line or geographic leadership to the center. Yet, companies that do not know how to work globally will not run to embrace global finance or human-resources provision. This shortcut — focusing on realigning back-office processes in lieu of attacking much more difficult … and fundamental … changes in business unit operational alignment and go to market strategy — is generally a recipe for resistance and failure for the globalization of services. Business lines, which work on a country or regional basis, will not view changes in their support structure as the model for better, more efficient ways of working. Services “tissue rejection” will be palpable, and will be evident in the form of workarounds, set up of shadow organizations and non compliance.
Expecting services globalization to send a message to Wall Street. Wall Street and its foreign counterparts have now read the story and seen the film. Today, outsourcing and offshoring are taken for granted by the investment community rather than considered a big strategic or cost control breakthrough. What the investment community is more interested in is how the company will redeploy any cost savings and avoidance into the structural growth of the business. And, as a corollary, the outsourcing and offshoring scorecard cannot be reported each and every quarter. The horizon for the implementation of a shared-services operation or end-to-end outsourcing is much longer than a quarter; unfortunately with the pressure of public markets’ expectations, double digit savings benefits are expected to appear in single digit quarterly intervals. The smart executive team understands that globalizing services represents a major change in corporate architecture whose benefit will take more than a reporting period to measure.
Underfunding/underinvesting in implementation. The industry knows that the costs of implementation can run as much as 10%–15% of total functional spend, yet the C-suite sometimes expects that existing staff can transform through solution design, change management and process/technology transition, all the while managing operations. It is an impossible task.
During a period of time, which is expected to be as much as two years or more, an expert and devoted transformation team must be in place to successfully effect transformation. Assuming that the retained team can do two jobs is a major error; just dealing with the folks who are now doing their jobs is enough of a challenge. There are no shortcuts.
Making side deals with recalcitrant business lines. Implementing services globalization is no time to balkanize the corporation by committing to deals, special treatment, or carve outs with powerful business-line leaders who just won’t play. This rejection is most likely a signal that the solution was not developed with the end user in mind, or that communication about the degree of standardization, costs, benefits, delivery, and staging is very much short of the mark. Or perhaps the executive suite has not yet convinced itself of the program imperative.
The C-suite, and only the C-suite, can get business-line management on board. Change cannot be pushed and justified by the support functions; executive management must request all business-line leadership to participate for the greater good of the corporation. Allowing groups to opt out without a compelling business reason reduces the impact of services globalization.
Forgetting about adult supervision. Too fast, too slow or just right …. Few organizations can manage to absorb across-the-board change simultaneously in the globalization of key back-office processes. The executive team must play orchestra conductor by identifying the intersections and overlaps of major initiatives, prioritizing resources, gauging the pace of change that the organization can bear, and ensure that timing, scope and phasing of deployment across a range of transformation initiatives does not conflict.
This “supervision” is especially critical if there are major business growth initiatives in the works. Back-office process globalization does not roll out in isolation from a major acquisition or new product introduction. Communicating business changes and understanding their impact upon global services initiatives is the responsibility of executive leadership.
Abrogating design and implementation to consultants. Globalizing services is no longer an event or a one-off, but rather a way of life. Consultants in all shapes and sizes — large technology/process firms, strategy houses, boutique sourcing firms and law firms — are exceptionally valuable at various points in the implementation of a global services strategy.
At the end of the day, when contracts are signed or the doors to the captive are opened, the corporation is left alone with its intentions, captive locations, contracts, risks, its investment and its providers.
Building a central internal team with institutional knowledge that can create solutions, source, manage and govern on its own is critical to successful services operations.
Sweeping failures under the rug. Globalizing services constitutes heavy lifting on the part of the corporation. Much learning comes as a result of failing at one or more aspects of solution development, deployment, change management or governance. Being honest and transparent about what is working and what isn’t, and quickly applying the lessons is the first step to avoiding disappointment.
1/15/2007
How To Outsource Web Work
First I must explain my experiences. This article comes on the eve of the release of one a web site my company and I have been diligently working on for the past year. During the year we went from developing the project in house to outsourcing it to two different teams in India, until finally deciding to bring the project back in house. Rather than focus on the entire development process I thought it would be a good opportunity to explain my experiences outsourcing, particularly outsourcing to companies in India and how to best do so.
Who this article is for:
• Companies or individuals wanting to develop a web project or application at minimal cost
• Companies or individuals investigating the various ways of developing a web project or application
• Companies or individuals currently developing with an outsourced foreign team in India or other non-native country
Outsourcing Is Hard and Takes Time
What you must first realize that outsourcing is hard and takes time. There are certain sacrifices that are inherently made when you outsource a project overseas these include communication issues, timing issues, and language issues.
As anyone who has experienced overseas outsourcing it can be difficult. Outsourcing to an outside party, another company or individual is incredibly hard. Typically the concerns include security and accountability. Unlike an employee, who is expecting a paycheck each week company’s responsible for outsourced projects may have a number of other “employers” or benefactors. You are almost never their only source of income. Will they complete your project on time? Will they deliver for the quoted price? Will communication be a problem?
The Problems With Outsourcing
The four major reasons outsourcing is difficult:
* Communcation
* Security
* Technical Skill
* Price
Recently we had an in house project we wanted to develop. We used the project as a practice tool for some contacts in India. It was the perfect test project. Its complexity and depth as well as the fact that it was completely internal (we had no client deadlines to meet) would made it a perfect tool to test these Indian developers. Unfortunately, it was a complete failure. After two separate seemingly established companies failed to develop the site we had to take it back inside and finish it ourselves.
Why Does Outsourcing (Usually) Not Work?
A while back I attended a fantastic seminar on business growth and development. I was there mostly for networking opportunities, but was able to learn a great deal from the presenters. One of the contacts I made was an upstart IP telephony company. The upstart wanted my company to manage his team of developers in India, they would hand off projects to my company, we would feed it to the team and they would output the work. Ultimately we were responsible for the output. What would we get in return? What would be our compensation for managing this team in India? Access to their resources for $10/hour. We could use the team as we wished to do most or all of our work.
After viewing some of the code of the Indian company in question we decided to decline the offer. Until recently it was a decision I was still unsure of. But, in hindsight, after the events of this most recent project, I believe we made the right decision.
Communication
Why is outsourcing so difficult? The biggest reason is typically communication. First, in my case the company and individuals I dealt with were not from America, they were from India, and their first language was not English. This presented a number of problems throughout the progress of the project.
As we do with most projects, we created a number of guidelines and objections for the project including look, usability, and maps. A great deal of time was spent via chat client explaining and expanding on certain ideas and routes in order to allow the developers to begin developing, a task that is not as time consuming or more straight forward when dealing with a more native team.
Certain words and phrases had to be removed or revised to avoid confusion, but even after doing so, the product we received was not what we had requested. Instead the product we received was a mutated mess of what we had originally requested.
I was interviewing a potential client the other day that had had a similar problem. She came to our conference table and plunked down pages and pages of beautiful diagrams and text on the content of the system she wanted built. It was a dream come true. Everything was sectioned off, user interaction was mapped and diagramed, the flow of the sections and modules of the sites was illustrated, this was the perfect client. The poor woman then went on to describe how she had paid a developer $500 to produce a system. After communication issues she spent hours developing these documents in order to facilitate the system’s production.
After months of coding and back-and-forth the system was never finished. The developer collected his $500, but my client had a half finished system that was poorly coded, poorly designed, and she had done most of the work! Now I don’t think she was totally screwed (she did receive A LOT for her money), but, she was quoted $500 for a full system, a full system that was never provided.
In terms of communication you have to ask yourself:
* Am I ready to spend the extra time it takes to use a foreign developer?
* Am I technically savvy enough to make the types of requests I need to make when dealing with a foreign developer in terms of communication?
* Is my extra time better spent on my own work?
Other communication issues such as time and means also arise. What is the time difference between you and your developers? We often have difficulty working with clients on the West Coast because of a 3 hour time difference. What happens when your developers are 12 hours ahead of you? It’s 3pm here, but are your developers up and working, ready for a conversation about your system at 3 am, or vice versa? Are you willing to stay up extra late just to communicate with your team in India?
Finally means of communication can also be an issue. IMs and chatting is a great tool for quick communication, but often meaning or connotation can get lost or misconstrued when sent through this means. Phone calls can be incredibly expensive quickly adding to the bottom-line of your project.
Security
Security is probably the second most important issue to consider when developing with an overseas developer. Not only security in terms of money, how you will provide payment, and they will provide work, but also intellectual property issues, have you worked out who owns the code you are developing?
You must also make sure that you are in full control and can change and of the resources your developer must access in order to do work. Are you ready and capable of changing FTP information, database names, usernames and passwords? This will all help once the project is complete and you are ready to take your finished product.
Finally another major concern is developers stealing ideas. Have you worked out some kind of agreement that your ideas or the system you’ve described to your developer is your intellectual property and that they are not allowed to try to duplicate or replicate in any way before, during, or after development?
One of the major reasons I have been hesitant to use Indian, or any other foreign developers, so far is because of the level or quality of their work. I have seen some great programmers, but in terms of my personal preferences for standards based, XHTML & CSS web sites, none have yet met my level of satisfaction.
Can you say the same of your developers? Do you, or someone at your organization have the skills or know-how to evaluate the quality (not just the appearance) of the coding your developers provide?
Price
The third and final factor is price. Price is the reason your outsourcing or considering outsourcing in the beginning right? Well scope creep is a large problem when dealing with foreign outsourced developers. To avoid scope creep you must plan and detail everything. Do you have the time or want to plan/detail everything? Is your time better spent more profitable somewhere else? If you bill your own time at $90/hour and spend 100+ hours developing incredibly detailed, intricate plans, and spend additional time communicating and re-communicating to your developers are you using your time efficiently?
Now you may have found a very talented, capable team or individual across the spans of ocean and land to do your work for you. I don’t argue that some great company’s do exist. I also am not arguing that the level of work or the talent of the individuals is not great. I must say though that the biggest problem with outsourcing, the reason it does not work on a small scale is COMMUNICATION!
Communication, that stupid word that kept creeping up in all of my freshman required courses. Communication, the #1 failure of most businesses, both internally and in client relationships, is the reason outsourcing does not work.
Now, outsourcing can work. In fact, right now we are working with a fantastic company in India that has been efficient, easy to communicate with, and thorough. We have established checksums and procedures based on the same things I just talked about in order to facilitate this symbiotic relationship. Another key thing to point out, they are much more expensive than the original few companies we hired for our other projects. So the old axiom really is true, you do get what you pay for.
Who this article is for:
• Companies or individuals wanting to develop a web project or application at minimal cost
• Companies or individuals investigating the various ways of developing a web project or application
• Companies or individuals currently developing with an outsourced foreign team in India or other non-native country
Outsourcing Is Hard and Takes Time
What you must first realize that outsourcing is hard and takes time. There are certain sacrifices that are inherently made when you outsource a project overseas these include communication issues, timing issues, and language issues.
As anyone who has experienced overseas outsourcing it can be difficult. Outsourcing to an outside party, another company or individual is incredibly hard. Typically the concerns include security and accountability. Unlike an employee, who is expecting a paycheck each week company’s responsible for outsourced projects may have a number of other “employers” or benefactors. You are almost never their only source of income. Will they complete your project on time? Will they deliver for the quoted price? Will communication be a problem?
The Problems With Outsourcing
The four major reasons outsourcing is difficult:
* Communcation
* Security
* Technical Skill
* Price
Recently we had an in house project we wanted to develop. We used the project as a practice tool for some contacts in India. It was the perfect test project. Its complexity and depth as well as the fact that it was completely internal (we had no client deadlines to meet) would made it a perfect tool to test these Indian developers. Unfortunately, it was a complete failure. After two separate seemingly established companies failed to develop the site we had to take it back inside and finish it ourselves.
Why Does Outsourcing (Usually) Not Work?
A while back I attended a fantastic seminar on business growth and development. I was there mostly for networking opportunities, but was able to learn a great deal from the presenters. One of the contacts I made was an upstart IP telephony company. The upstart wanted my company to manage his team of developers in India, they would hand off projects to my company, we would feed it to the team and they would output the work. Ultimately we were responsible for the output. What would we get in return? What would be our compensation for managing this team in India? Access to their resources for $10/hour. We could use the team as we wished to do most or all of our work.
After viewing some of the code of the Indian company in question we decided to decline the offer. Until recently it was a decision I was still unsure of. But, in hindsight, after the events of this most recent project, I believe we made the right decision.
Communication
Why is outsourcing so difficult? The biggest reason is typically communication. First, in my case the company and individuals I dealt with were not from America, they were from India, and their first language was not English. This presented a number of problems throughout the progress of the project.
As we do with most projects, we created a number of guidelines and objections for the project including look, usability, and maps. A great deal of time was spent via chat client explaining and expanding on certain ideas and routes in order to allow the developers to begin developing, a task that is not as time consuming or more straight forward when dealing with a more native team.
Certain words and phrases had to be removed or revised to avoid confusion, but even after doing so, the product we received was not what we had requested. Instead the product we received was a mutated mess of what we had originally requested.
I was interviewing a potential client the other day that had had a similar problem. She came to our conference table and plunked down pages and pages of beautiful diagrams and text on the content of the system she wanted built. It was a dream come true. Everything was sectioned off, user interaction was mapped and diagramed, the flow of the sections and modules of the sites was illustrated, this was the perfect client. The poor woman then went on to describe how she had paid a developer $500 to produce a system. After communication issues she spent hours developing these documents in order to facilitate the system’s production.
After months of coding and back-and-forth the system was never finished. The developer collected his $500, but my client had a half finished system that was poorly coded, poorly designed, and she had done most of the work! Now I don’t think she was totally screwed (she did receive A LOT for her money), but, she was quoted $500 for a full system, a full system that was never provided.
In terms of communication you have to ask yourself:
* Am I ready to spend the extra time it takes to use a foreign developer?
* Am I technically savvy enough to make the types of requests I need to make when dealing with a foreign developer in terms of communication?
* Is my extra time better spent on my own work?
Other communication issues such as time and means also arise. What is the time difference between you and your developers? We often have difficulty working with clients on the West Coast because of a 3 hour time difference. What happens when your developers are 12 hours ahead of you? It’s 3pm here, but are your developers up and working, ready for a conversation about your system at 3 am, or vice versa? Are you willing to stay up extra late just to communicate with your team in India?
Finally means of communication can also be an issue. IMs and chatting is a great tool for quick communication, but often meaning or connotation can get lost or misconstrued when sent through this means. Phone calls can be incredibly expensive quickly adding to the bottom-line of your project.
Security
Security is probably the second most important issue to consider when developing with an overseas developer. Not only security in terms of money, how you will provide payment, and they will provide work, but also intellectual property issues, have you worked out who owns the code you are developing?
You must also make sure that you are in full control and can change and of the resources your developer must access in order to do work. Are you ready and capable of changing FTP information, database names, usernames and passwords? This will all help once the project is complete and you are ready to take your finished product.
Finally another major concern is developers stealing ideas. Have you worked out some kind of agreement that your ideas or the system you’ve described to your developer is your intellectual property and that they are not allowed to try to duplicate or replicate in any way before, during, or after development?
One of the major reasons I have been hesitant to use Indian, or any other foreign developers, so far is because of the level or quality of their work. I have seen some great programmers, but in terms of my personal preferences for standards based, XHTML & CSS web sites, none have yet met my level of satisfaction.
Can you say the same of your developers? Do you, or someone at your organization have the skills or know-how to evaluate the quality (not just the appearance) of the coding your developers provide?
Price
The third and final factor is price. Price is the reason your outsourcing or considering outsourcing in the beginning right? Well scope creep is a large problem when dealing with foreign outsourced developers. To avoid scope creep you must plan and detail everything. Do you have the time or want to plan/detail everything? Is your time better spent more profitable somewhere else? If you bill your own time at $90/hour and spend 100+ hours developing incredibly detailed, intricate plans, and spend additional time communicating and re-communicating to your developers are you using your time efficiently?
Now you may have found a very talented, capable team or individual across the spans of ocean and land to do your work for you. I don’t argue that some great company’s do exist. I also am not arguing that the level of work or the talent of the individuals is not great. I must say though that the biggest problem with outsourcing, the reason it does not work on a small scale is COMMUNICATION!
Communication, that stupid word that kept creeping up in all of my freshman required courses. Communication, the #1 failure of most businesses, both internally and in client relationships, is the reason outsourcing does not work.
Now, outsourcing can work. In fact, right now we are working with a fantastic company in India that has been efficient, easy to communicate with, and thorough. We have established checksums and procedures based on the same things I just talked about in order to facilitate this symbiotic relationship. Another key thing to point out, they are much more expensive than the original few companies we hired for our other projects. So the old axiom really is true, you do get what you pay for.
PAC: Top players on the European IT services market in 2006
According to PAC this year, eleven providers are likely to exceed €2 billion of revenue (not taking into account possible captive revenue) on the European IT services market. They include five American firms - IBM, HP, EDS, Accenture, CSC, five European - Capgemini, Atos Origin, T-Systems, SBS, LogicaCMG, and one Japanese provider - Fujitsu Services.
Considering growth rates, the clear leader is LogicaCMG, which managed to expand by +39% in the first half of 2006, mainly thanks to the takeover of Unilog. Organic growth of +5% was satisfactory - particularly in the year of the merger.
Second comes Capgemini with an impressive +10% in the first nine months, and even +13% in Europe. With +14%, outsourcing activities generated the strongest growth. The company recorded a considerable increase in project services, amounting to +10% in the Professional Services unit and to +11% for Technology Services. Compared to this, the +5% growth in Consulting Services is rather modest, although this rate is in line with the market average. Capgemini seems to have realized that the project services market has different types of buyers, addressing them with the corresponding business models.
With +7% worldwide for the past financial year (ending 31 August), Accenture ranks third. However, EMEA revenues fell by -1% due to problems in the UK (-18%!). While consulting increased by a moderate +3%, outsourcing grew by +13%, especially in application management and BPO. It’s remarkable that the problems with Sainsbury and the NHS have not had a more negative effect on the business trend in the outsourcing area in particular.
Fourth comes a company that only a short while ago was considered to be in deep water by many market observers: EDS; it posted +9% worldwide and +10% in Europe during the first nine months, despite the GM contracts being re-awarded. EDS has returned to its old shape, its offering and delivery are up-to-date and well aligned.
IBM follows on rank 5, generating a modest +3% in the first nine months. Growth was driven by the SO (IT outsourcing) and BTO (BPO) areas, with +6% and +5%, respectively. Here IBM - like EDS - has managed a turnaround and is also benefiting from the redesign of its offering and delivery. At only +1%, though, the consulting business (GBS) did not live up to expectations.
T-Systems ranks sixth, posting growth of almost +3% in its IT activities. While the large-account business (ES) declined by -1%, the SMB business (BS) expanded by an impressive +58%. Captive business shrank by -5%; external IT revenues rose by 9% - solely thanks to the takeover of gedas.
HP comes seventh, with a weak +1% in the past financial year (ending 31 October). While performance in the outsourcing business (MS) was satisfactory with +6%, the CI area (project services) grew only modestly at +2%. HP suffered in particular from a slight decline (-2%) in TS activities (hardware maintenance and support services), which still account for more than 60% of global services revenues. Compared to its archrival IBM, however, HP still seems to be lagging behind when it comes to rationalizing delivery and portfolio. However, they are working hard to remedy this.
CSC ranks eighth after the first six months of the current fiscal year (starting on 1 April). Especially in Europe, its revenue plunged by a considerable -7%. CSC is followed by Atos Origin, whose revenue fell by -1%, or grew slightly by +2% “pro forma”, i.e. considering divestitures. Both companies show a large share of outsourcing and, what is more, have so far followed a strong big-deal approach - similar to EDS in the 1990s. Now, however, they both increasingly need to adapt to the changed market environment and adjust their business models even more to trends such as multi-sourcing, standardized offerings/ managed services, and (especially for Atos Origin) global delivery models.
Last is SBS with a revenue decline of -4% in the past financial year (ending 30 September). While captive revenues increased by +6% during this period, external revenues fell by 7%. This decline, though, PAC attributes to the sale of the PRS activities (hardware maintenance and support services) to Fujitsu Siemens. When excluding this disposal, SBS grew by +8%, its external business even by +10%, pushed by activities abroad (mainly in the UK, the US and Austria). This development is all the more impressive when it’s taken into account that SBS' past fiscal year was marked by enormous uncertainty about the company's future. After Kleinfeld's announcement that SBS would be tied even more closely to the other Siemens areas and that most of the Siemens Group's IT resources would be bundled in the SIS unit, the market regained its confidence - and SBS can be optimistic again about its future.
Considering growth rates, the clear leader is LogicaCMG, which managed to expand by +39% in the first half of 2006, mainly thanks to the takeover of Unilog. Organic growth of +5% was satisfactory - particularly in the year of the merger.
Second comes Capgemini with an impressive +10% in the first nine months, and even +13% in Europe. With +14%, outsourcing activities generated the strongest growth. The company recorded a considerable increase in project services, amounting to +10% in the Professional Services unit and to +11% for Technology Services. Compared to this, the +5% growth in Consulting Services is rather modest, although this rate is in line with the market average. Capgemini seems to have realized that the project services market has different types of buyers, addressing them with the corresponding business models.
With +7% worldwide for the past financial year (ending 31 August), Accenture ranks third. However, EMEA revenues fell by -1% due to problems in the UK (-18%!). While consulting increased by a moderate +3%, outsourcing grew by +13%, especially in application management and BPO. It’s remarkable that the problems with Sainsbury and the NHS have not had a more negative effect on the business trend in the outsourcing area in particular.
Fourth comes a company that only a short while ago was considered to be in deep water by many market observers: EDS; it posted +9% worldwide and +10% in Europe during the first nine months, despite the GM contracts being re-awarded. EDS has returned to its old shape, its offering and delivery are up-to-date and well aligned.
IBM follows on rank 5, generating a modest +3% in the first nine months. Growth was driven by the SO (IT outsourcing) and BTO (BPO) areas, with +6% and +5%, respectively. Here IBM - like EDS - has managed a turnaround and is also benefiting from the redesign of its offering and delivery. At only +1%, though, the consulting business (GBS) did not live up to expectations.
T-Systems ranks sixth, posting growth of almost +3% in its IT activities. While the large-account business (ES) declined by -1%, the SMB business (BS) expanded by an impressive +58%. Captive business shrank by -5%; external IT revenues rose by 9% - solely thanks to the takeover of gedas.
HP comes seventh, with a weak +1% in the past financial year (ending 31 October). While performance in the outsourcing business (MS) was satisfactory with +6%, the CI area (project services) grew only modestly at +2%. HP suffered in particular from a slight decline (-2%) in TS activities (hardware maintenance and support services), which still account for more than 60% of global services revenues. Compared to its archrival IBM, however, HP still seems to be lagging behind when it comes to rationalizing delivery and portfolio. However, they are working hard to remedy this.
CSC ranks eighth after the first six months of the current fiscal year (starting on 1 April). Especially in Europe, its revenue plunged by a considerable -7%. CSC is followed by Atos Origin, whose revenue fell by -1%, or grew slightly by +2% “pro forma”, i.e. considering divestitures. Both companies show a large share of outsourcing and, what is more, have so far followed a strong big-deal approach - similar to EDS in the 1990s. Now, however, they both increasingly need to adapt to the changed market environment and adjust their business models even more to trends such as multi-sourcing, standardized offerings/ managed services, and (especially for Atos Origin) global delivery models.
Last is SBS with a revenue decline of -4% in the past financial year (ending 30 September). While captive revenues increased by +6% during this period, external revenues fell by 7%. This decline, though, PAC attributes to the sale of the PRS activities (hardware maintenance and support services) to Fujitsu Siemens. When excluding this disposal, SBS grew by +8%, its external business even by +10%, pushed by activities abroad (mainly in the UK, the US and Austria). This development is all the more impressive when it’s taken into account that SBS' past fiscal year was marked by enormous uncertainty about the company's future. After Kleinfeld's announcement that SBS would be tied even more closely to the other Siemens areas and that most of the Siemens Group's IT resources would be bundled in the SIS unit, the market regained its confidence - and SBS can be optimistic again about its future.
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