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April 2010 Quick Hits - News, Trends & Analysis

Rolls-Royce Sign Engineering Deal With TCS
As commented on Computing Weekly "UK-based Rolls-Royce has announced a global engineering partnership with business solutions and outsourcing technology firm Tata Consultancy Services (TCS). TCS will provide Rolls-Royce with a range of technical and engineering services across its entire product portfolio. TCS will support Rolls-Royce's strategy of expanding its engineering services in India. It will set up an engineering centre in the city of Bangalore to cater to Rolls-Royce design and engineering requirements. Rolls-Royce said that it chose to partner with TCS because of its technical and project management capabilities, following a comprehensive and competitive evaluation process". This is a good case of using outsourcing to augment a captive offshoring strategy. The partnership with Tata should give Rolls a low-risk means to greater flexibility and capacity. It is a solid win for Tata as well.

Outsourcing Trends In Europe
As commented on offshoring times "A study report states that 60 percent of UK businesses are outsourcing more than they did two years ago. Some 61 percent of businesses are outsourcing IT requirements to local suppliers instead of overseas alternatives, with only 6.9 percent of business awarding contracts to the lowest bidders." In our experience the lowest bidder rarely wins the outsourcing project - factors like people, quality of proposal, client referrals and technical strength play an important role. The second comment on this survey I believe is that it highlights a short term trend. Due to the recent job market lull, there are now plenty of local talented IT people available at reduced rates. However, once the economy picks up, they will be re-employed and companies will again need to offshore to sustain cost savings.

IBM Optimistic After Strong Q1 Sales In Software
IBM's latest earnings indicate that the tech rebound that took hold late last year is spreading beyond consumers and starting to draw in the large corporate buyers, according to the Financial Times. The net income in Q1 2010 is up 13% from same time last year with the strong growth coming being middleware and software divisions. Professional services were down $1.5BN which is not surprising as organisations can find similar consultants at 50% less that can deliver the same transformation. Maybe CIOs will be more conscious when buying professional services after this recession and shop around for better deals, perhaps the old saying "no one ever got fired for hiring IBM" will become "Someone might get fired for hiring IBM".

 

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