MCN Direct Newswire

Vol. 5 No. 29, 16 October 2006

This issue is sponsored by:

TeleWare and The UK Consulting Industry Report 2005/6

This issue news

1. Siemens' services business gets swallowed up
2. Outsourcing market takes a fall
3. Capgemini provides cure for Lloydspharmacy
4. India's Infosys set to break $3bn barrier
5. LogicaCMG banks $27m in Kuwait
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. SIEMENS' SERVICES BUSINESS GETS SWALLOWED UP

Siemens has bundled its IT services operations, Siemens Business Services (SBS), with four internal IT solutions and software divisions to create Siemens IT and Services Solutions (SIS).

The demise of SBS has been predicted for some time, after poor financial results led to a major turnaround beginning in 2005. SBS posted fiscal 2005 sales of €5.4 billion (£3.6 billion), 75% of which were generated outside the Siemens group. Since then, SBS has sold its product-related services business to Fujitsu Siemens Computers.

The new operation, SIS, will be led by SBS group president Christoph Kollatz and will include: SBS' 33,000 staff; Programme and System Engineering, which develops IT solutions for Siemens' sales departments and has 7,000 employees; and Systems Information Systems, the company's 4,000-strong presence in India. Two further software development centres in Greece and Switzerland will add a further 400 staff.

SIS is expected to generate sales of about €5 billion a year, making it a second-tier player without the resources and reach of leading global IT service providers.

Despite SIS' lack of scale - making the business a potential acquisition target - Siemens remains confident, with president and CEO Klaus Kleinfeld saying: "IT know-how is a key to Siemens' success. That is why we are bundling our IT solutions and software expertise in a separate group."

The group will operate from January 2007 along sector-specific lines and will include Siemens' internal IT systems. Its future, however, depends on the completion of the SBS turnaround which requires cost cuts of €1.5 billion by spring of next year.

2. OUTSOURCING MARKET TAKES A FALL

The value of outsourcing contracts signed in the first three quarters of this year is 2% down on last year's comparable period and 11% lower than 2004 - the first time the market has shrunk.

Sourcing advisory firm TPI said the latest quarter, from July to September, was the worst in four years for $50 million-plus contract awards. Its data suggests a drop in spending on outsourcing for the year, leading to a 1% fall in suppliers' 2006 revenues to $68.1 billion (£36.7 billion).

The decline is driven by an estimated 4% cut in IT outsourcing spend across the year. By contrast, the business process outsourcing (BPO) market is expected to grow 10%, with more contracts awarded in the last quarter ($4.5 billion) than in any previous quarter.

TPI managing director Duncan Aitchison said: "The growth in BPO and decline in ITO is not unrelated. As organisations place more and more processes in the hands of third parties, they no longer require the associated infrastructure and hence have less IT to outsource."

Despite the overall shrinkage in the outsourcing market, TPI said deal activity remains buoyant, with the number of $50 million-plus contracts agreed in the year greater than ever. The increasing number of contracts, yet declining market value, is attributed to existing deals being terminated and more contracts being renewals or renegotiations at lower cost or of shorter duration.

Although India's service providers have secured only 4% of total headline contract values this year, TPI does not underestimate their potential. Aitchison explained: "Many of these providers have adopted the strategy of growing from within, often signing small deals and then incrementally increasing their value as their capabilities grow. This approach lays the foundations for them to compete for larger contracts."

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3. CAPGEMINI PROVIDES CURE FOR LLOYDSPHARMACY

Capgemini is taking a bottom-up approach to modernisation across the NHS, supporting the implementation and management of an electronic dispensing system for a major UK pharmacy chain.

Lloydspharmacy has run successful trials of a dispensing system designed by Capgemini at 28 of its branches and has commissioned the consultancy to roll out the system across all its 1,540 UK branches for completion next year. Capgemini will also manage the IT that underpins the system in a five-year outsourcing contract.

The Complete Medication and Patient Support System - CoMPaSS - has been designed to support the expanding role of pharmacies in UK healthcare policy. Services offered to patients will include private consultations, drug use reviews, management of chronic conditions, blood glucose monitoring and treatment for minor ailments. The system will provide a platform for changes such as electronic prescribing and claiming which form part of the NHS's £6.2 billion Connecting for Health IT programme.

Roy Maddison, CoMPaSS programme manager at Lloydspharmacy, said: "The role of pharmacies in UK healthcare is undergoing large-scale change and, in this new environment, only those able to offer new facilities and efficiencies will succeed. The major investment we are making in technology reflects our determination to maintain our position of leadership in this area of primary healthcare."

4. INDIA'S INFOSYS SET TO BREAK $3bn BARRIER

Infosys Technologies, India's second largest IT services firm, has revised its full-year revenue forecast to over $3 billion (£1.6 billion) on the basis of strong second-quarter and first-half returns.

Infosys' net profit rose 44% to $199 million, on revenues climbing 42% to $746 million in the quarter to 30 September. Its interim results rose by similar percentages, to reach net profit of $373 million and revenue of $1.4 billion.

Infosys CEO Nandan Nilekani commented: "Our business model provides a compelling value proposition to clients in a flat world. Our robust organic growth, coupled with investments in various strategic areas, helped us to grow faster in this environment. We have revised our guidance to cross $3 billion in revenues this fiscal year."

Infosys added 45 new clients during the second quarter and around 8,000 employees, for a total of 66,150. Looking forward, the company is forecasting year-on-year growth of 40.6-41.1% for the year to the end of March 2007.

5. LOGICACMG BANKS $27m IN KUWAIT

LogicaCMG has proved its knowledge of banking in the Middle East by winning a two-year, $27 million (£14.5 million) contract at the National Bank of Kuwait (NBK).

The contract requires LogicaCMG to replace NBK's core banking and branch teller systems and implement a service oriented architecture that will give the bank greater business agility and a platform to support expansion plans.

LogicaCMG has completed a business study, transformation roadmap and architecture plans for the project and will now implement the system.

Fadi Chehayeb, chief information officer at NBK, said: "LogicaCMG was the best fit for this project because it could not only provide the systems integration, technical and business consultancy skills we needed, but it also had the right third-party relationships, along with local support and a very strong cultural fit with our organisation."

NBK was formed in 1952 as the first national bank in the Gulf region and is now the largest Kuwaiti bank, with a regional and international network of offices and branches.

• LogicaCMG and IBM have been selected to take part in a £4.1 million government project aimed at reducing traffic pollution through the use of mobile sensors. The commercial players will work with a number of universities and the Department of Transport on the project, which aims to provide a more detailed picture of the environmental impact of transport so that future decisions can be made on sound scientific evidence.

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Written by Sarah Underwood. Copyright 2012 PMP (UK) Ltd.