Thursday, 30 October 2008

Gladstone rejects Constellation bid approach

Unsurprisingly, yesterday leisure systems provider Gladstone rejected the unsolicited approach worth £13.54m from Canadian firm Constellation Software (see here for RNS).

At the same time, Gladstone announced that it had changed Gladstone changed its nominated adviser to Grant Thornton and its broker to Fairfax IS. Is this driven by a potential conflict of interest?

I note that up to July 2008 Gladstone’s broker was KBC Peel Hunter, when they swapped to Daniel Stewart – now they’re with Fairfax IS where former KBC Peel Hunt man Adam Hart works. So perhaps not.....

What happens next? As noted
previously, one would normally suspect that an MBO or another bidder would enter the running – the main problem being Constellation’s near 29% share holding - but I’m expecting Constellation to open discussions with the major shareholders to see if they can win this bid with a higher offer. Since my last post on this topic, I’m now doubtful that 28p will succeed, but if no-one else enters the battle, I suspect that an increased offer of around 30p will see Constellation win (and still get a bargain).

Monday, 27 October 2008

Northgate to complete Anite PS take over

Today’s announcement by the Office of Fair Trading that Northgate’s acquisition will not be referred to the Competition Commission (see here for Anite RNS), should mean that Northgate’s take-over of Anite’s Public Sector division will now go through.

Anite’s investment in the Public Sector came in the form of the multiple acquisitions of independent companies (like Sheridan, BCT, Imasys, MPS) and businesses from larger players (like ICL and Bull). Being ungenerous, most had problems at the time they were acquired, and those that didn’t have problems seemed to have reached their peak at the time of acquisition - and Anite paid top prices for businesses that were just going ex-growth.

In the beginning, Anite appeared to have a strategy of bringing the products together with common technical infrastructures and/or appearance, a strategy that it quickly realised would be vastly expensive, and not necessarily of benefit to its sales. I remember a discussion with APS’ senior management back in 2001, when they already doubted the wisdom of bringing the product sets together. But ultimately I believe that the demise of the Public Sector unit was driven by its disastrous State of Victoria project, and multiple problems with the Pericles revenues & benefits product acquired from ICL in 2001.

Anite never really achieved a target of becoming the top supplier in its chosen markets in the Public Sector – Pericles was always number 4 (behind Northgate/ Sx3, Capita and IBS), ITS/Paris was always number 3 (behind Capita/Academy and Civica/Radius), Housing Management was number 5 (behind Northgate/Sx3, Orchard, Capita/IBS and Civica/Comino) – only Sheridan and Imasys seemed to be towards the number one spot in Social Services and Document Management respectively. Anite’s Police and security businesses were well regarded, but if rumours coming out of Anite are to be believed, more problem projects in those areas meant that true profitability was low, and in some cases non-existent.

What will Northgate do with the acquired businesses? I believe that Northgate is an altogether better managed organisation, and on the basis that they have completed a good due diligence phase and understand what they’ve purchased, I would expect to see most of the main units thriving within Northgate. As with all such acquisitions, there is bound to be some fall-out in the early days, but Northgate has considerable experience of such acquisitions and I’m confident will provide some stability to a previously rocky business.

Bottom fishing

With the FTSE 100 currently below 3,700, some 40% down on its peak earlier this year, is it time for some bottom fishing amongst software and services suppliers to the UK Public Sector?

Looking at the winners and losers to date, the big losers to date have been Logica (currently at 66p, down 60% on its peak earlier this year), Anite (currently at 30p, down 50%) and @UK (currently at 2.75p, down 68%). IDOX (9.25p, down 38%) and Mouchel (293, down 40%) seemed to have followed the market trend; whilst Capita (581p, down 33%) and Gladstone (22p, down only 15% as it is on the receiving end of a bid) seem to have beaten the market downturn.

Of course, some companies may have underlying problems before the potential impact of recession and credit crises (@UK, for instance, is down some 96% from its peak just after launch on AIM, and I believe its share price would have reached the current level without any external credit crunch or potential recession).

Logica appears to have been affected by the recent drops in valuations of off-shore IT companies that I believe are much more dependent on general commercial markets than Logica. But with a market cap of less than £1billion and more than £3billion in annual revenues, even allowing for c £1billion in debt, the share price drop seems overdone, particularly given the August management statement when their CEO, Andy Green said:

"We had a good first half...... Given the market environment, we remain alert to changes in customer sentiment but our first half performance gives us increased confidence that 2008 pro forma revenue growth will be closer to 4%, compared to our previous guidance of around 3%."

Tribal seems to be similarly affected – despite an up-beat half-year report, its market cap is down at £76m for a company turning over (with its new acquisition HELM) c £200m per annum (with net debt reported as only c £7m).

Meanwhile, Capita (long standing winner of Holway’s boring award) continues to receive a high rating (current p/e of c 25) on the back of years of monotonous annual growth in EPS, but has clearly seen its share price marked down in line with the general market.

Is it worth investing now? As ever, readers must do their own research, but my view is not yet. Fortunately I sold my holdings in Logica and Tribal near their peaks earlier this year – I will be looking to buy back in later, but not yet. Capita and Mouchel will continue to follow the market down, and will be possible purchases when the market settles.

But I believe that the downturn has yet to bottom out – my view is that the FTSE will need to hit 3,200 before it stabilises – and until then the very nature of having more sellers than buyers will hit the share prices of all listed companies, without necessarily reflecting their intrinsic value. I remain a holder of IDOX and Gladstone, both are solid, profitable companies that, I believe, will lose their independence via takeover in the next few months.

Wednesday, 22 October 2008

Illegal acts of software maintainers...

Oracle and SAP are currently going head-to-head in the US courts over actions taken by TomorrowNow, a SAP subsidiary. It is alleged that TomorrowNow, a third party supporter of Oracle systems – and duly authorised to download material from Oracle on behalf of its customers - used its customers’ usernames and passwords to download more than it should.

I won’t go into this case in detail (Oracle’s full complaint can be found
here) – in practice SAP appears to have confirmed that some “extra” downloads were made – and I suspect that the case will focus on trying to assess the level of losses Oracle incurred as a result (somewhere between SAP’s zero figure and Oracle’s $1 billion). But is there potential for the problem to be repeated – possibly with different players – in the UK market?

Clearly yes – and there are some big players that are open to such problems. Most large players’ senior management would not endorse TomorrowNow-type activities, and many make the access limits clear to their staff. In practice however, “Chinese walls” between operating divisions are easily broken by individual staff that “help a mate” or “return a favour”.

In Radius I remember that, when one of our customers out-sourced the running of one of our applications and sought to unilaterally assign all licence rights and obligations to the out-sourcer, Radius would always insist on the original customer retaining a responsibility for TomorrowNow-type breaches (we also built in additional protection for both our original customer and Radius – something that was subsequently proved to be highly beneficial for some of our customers).

We never used those clauses in anger, but their objective was to ensure that the contract between customer and out-sourcer included clauses to try to prevent TomorrowNow-type breaches by the out-sourcer’s staff. The clauses were a bit like a burglar alarm – if the alarm was ever set off by a burglary, the alarm has failed in its main role of deterrence.

The advice for customers using third-party software maintainers and out-sourcers is clear. Ensure that you contracts include not just the legal requirements, but also processes and procedures to be carried out by the third party’s management to educate and monitor their staff to follow the legal guidelines on access to other suppliers’ confidential information.

The advice for third-party software maintainers and out-sourcers is also clear – you must not only ensure that you make the importance of strict confidentiality abundantly clear to staff, but also put in place processes and procedures to monitor staff access to other’s confidential information. Rogue employees have always been, and always will be, one of the biggest problems for established suppliers – procedures to educate and then robustly supervise their actions are the only solution – particularly if those staff are off-shore.

Monday, 20 October 2008

Handbags at dawn.

An ex-colleague phoned me after reading my recent blog Back to Front – how to get efficiency gains, to remind me of our meeting with a number of heads of department of a South Eastern unitary authority, where we had discussed the merging of three separate debtors systems, from three different suppliers, run in three different departments.

The business case was glaringly obvious, but none of the heads of department was prepared to give up their system. In the end the meeting finished for us, but continued for some in the car park with, reputedly, handbags flying between managers. In the end only two of the debtors systems were merged, the third head of department refusing to give up on her system – and the Chief Exec refusing to over-ride her.

This was, and still remains, a major hurdle in breaking down the “silo” nature of local authority departments – primarily in larger authorities – Unitaries, London Boroughs and Mets. Strong heads of department – and typically a Chief Exec who doesn’t want to get involved or make tough decisions over his Officers.

Many of the transformational gains that are available to local authorities involve cross-departmental or even cross-authority (e.g. shared service delivery) working. In many authorities this can only be achieved if the process is both initiated and seen through to completion by the Chief Exec.

Unfortunately, some Chief Execs do not see this as part of their or their department’s role. Some delegate responsibility to individual Officers, but give them neither the authority nor their support to drive strong heads of department down the agreed transformation route. These Chief Execs need to change their views – before someone changes the Chief Exec......

Thursday, 16 October 2008

ID Data to bring in administrators

ID Data Group plc (AIM: IDD), the smart card and card solutions group, has today announced that its core business unit ID Data Limited has filed at the High Court of Justice notification of its intention to appoint an administrator to protect itself from its creditors. See here for full statement.

Many people in the Local Authority market will not recognise ID Data, but they had just started getting their innovative smartcard technology into use by councils – and had recently delivered a multi-application smartcard RFID solution to allow citizens to use a single card as their library card, leisure centre card and bus pass. However, this was a very small part of their business, and it was a lack of funds in the current credit crunch that seems to have caused problems for this company.

I would hope and expect that ID Data will find a buyer – in particular for its CardBASE Technologies subsidiary (which, interestingly, is not mentioned in the statement), which has developed some highly innovative software for multiple application smart cards.

Wednesday, 15 October 2008

Gladstone mulls over response to Constellation’s bid

Gladstone (GLD) – suppliers of leisure centre systems to both local authorities and commercial operators – and its shareholders are mulling over their response to the cheeky 25p bid from its majority shareholder, Constellation.

Companies that might be considering rival bids appear to be concerned about the potential block of the near 29% current shareholding of Constellation (and there are rumours that Constellation has been upping its stake by buying in the market since announcing its offer yesterday). Current shareholders hopes for a rival bid may, therefore, be dashed.

But major institutional shareholders and several private investors believe that the current offer price lets Constellation buy Gladstone on the cheap. Taking into account the cash in the balance sheet, and the 4.5 million shares held in the treasury, it’s estimated that Constellation will only have to stump up an estimated a net £3-4 million in cash to complete the acquisition. In addition Constellation would get Gladstone's c £2M of freehold property.

And that’s without factoring in the great strides Gladstone has made in launching its new product suite Orbit ( .... the same name as we used for our e-procurement product in Radius .... ), on the back of their acquisition of a company in Denmark with potentially the best leisure product on the market – Orbit looked great at the recent Leisure Industry show in Birmingham. I believe that their main competitors’ products appear weak at the moment compared to Orbit – and although gym membership will undoubtedly reduce in the upcoming recession, I believe that the prospects for Orbit are great – let alone the likely return from Gladstone’s investments in the education sector.

Therefore, I expect that the Board will reject the current offer as undervaluing the company – but would not be surprised if they open negotiations with Constellation about upping the offer. As noted in my earlier blog, I believe that an offer of c30p is likely to be sufficient to easily win the support of shareholders (unless a counter bid appears – in which case I expect the final price to be c35p).

Having said that, a lot will be down to the Board, their personal plans and Constellation’s likely plans for them. Normally I would have considered an MBO as likely, but the current credit crunch, and Constellation’s near 30% holding makes that difficult.

My guess is that Constellation will up their bid to 28p and, unless someone else enters the fray, or the Board puts up a spirited defence – that will be it.

P.S. I am a shareholder in Gladstone myself. This blog is not intended as investment advice – please DYOR (do your own research) if you intend to invest in any of the companies mentioned anywhere in this blog.

Monday, 13 October 2008

Constellation makes cheeky bid for Gladstone

Gladstone (GLD) – suppliers of leisure centre systems to both local authorities and commercial operators – is today on the receiving end of a cheeky 25p bid from its majority shareholder, Constellation Software (a Canadian company listed on the Toronto Stock Exchange).

Constellation Software Inc. said it will make a 25 pence per share cash offer for the shares of Gladstone Plc. it does not already own, valuing the company at about £13.54 million. Constellation says that the offer for the approx 71% of shares it doesn’t already own represents a premium of about 33.3 percent to the closing price of 18.75 pence per Gladstone share on Oct. 10.

This should come as no real surprise for regular readers as my blog item
After Anite and IBS – where’s the next big acquisition last month flagged Gladstone as one of the candidates for acquisition. I guess we’re all surprised at the timing with the current financial crises, but full marks to Constellation on timing their move when the market is well down (GLD were trading around 22p only a few days ago). I also understand that Gladstone’s CEO, Dr Said Ziai is currently in Australia.

Will it succeed? In my opinion, the offer doesn’t over-value the company which in its last reported financial year had a turnover of £9.2 million and net assets of £12.8 million (and an operating profit of £1.66 million). In addition, I’m guessing that GLD has around 12p of net cash (there was £4M in cash on the balance sheet at 29 Feb 2008), and around 8% of its own shares in treasury.

Unless there is a counter-bid, In the current financial environment I think that the bid could succeed – yes – I think there could be a counter-bid (I can think of at least two prospective bidders that could be running their slide-rules over GLD right now) – but have they got easy access to the cash? If so, then my guess is that 30p might win, but that 35p will be the take-out bid – but then Constellation do have c29% of the shares already.......

P.S. I am a shareholder in Gladstone myself.

Back to Front – how to get efficiency gains

The Audit Commission’s report “Back to Front” (download here) reviews how councils have made back office efficiency gains and identifies lessons for the future. The report is released with a covering press release that emphasises the need for English councils to increase the £1.2bn in efficiency gains between 2005 and 2008 through savings on back office work. But how?

I won’t repeat the report’s suggestions here, but I will highlight one of its conclusions - a transformational approach is often required for the greatest benefits.

My own experiences have been that, in many cases, departments have made existing processes and procedures more efficient (e.g. through the use of more and better IT systems), without addressing and changing the core ways it undertakes business. As we always used to say, if you have a poor process, and you automate it, it just goes wrong that much more quickly and noticeably.

Also, some, through the purchase of the wrong type of IT system, have undergone lengthy business process re-engineering projects that have primarily been focussed on getting the departments processes to match the way the software works, rather than transforming the processes to provide the most efficient methods for the authority.

Most local authorities now have the e-government building blocks that enable innovative approaches to the delivery of services both internally and externally. Many modern systems are fully inter-operable, and applications like e-payments, e-procurement, workflow and call handling systems, combined with a transactional web-site and other interoperable back office systems, allow innovative processes to be introduced.

As a small example, many authorities are faced with the high costs of raising invoices for ad-hoc services, chasing payment, and then writing off un-recoverable invoices. Some authorities approached this by making the production of invoices easier/cheaper, and introducing automated debt recovery workflows (but still having to write off un-recoverable invoices). Others used their call centre and related systems to transform the process, insisting on payments in advance for many services, with no need to chase payments for invoices (and no need to write off unpaid invoices). These latter authorities have gained more through their transformation than those authorities that sought just to make their existing processes more efficient.

This is a small example of what is possible once you have the interoperable components of e-government in place. Far better, and more far-reaching transformations are now possible – all that’s needed are good ideas, and the willingness of Officers, managers and staff to implement them.

Friday, 10 October 2008

Icelandic terror attack to net over £1billion?

The early comments on my early-morning blog yesterday (predicting that local authority losses with Icelandic banks would exceed £0.5billion) thought that I had over-stated the likely losses (and were generally amazed that the SI was under the anti-terrorism laws, something that most of the press picked up on later in the day). Now it appears that I understated the figure - and it's nearer £1billion.

The BBC has compiled a full list of the authorities affected - see here - with the big potential losers being:

Kent County Council - £50 million
Nottingham City Council - £42 million
Norfolk County Council - £32.5 million
Dorset County Council - £28.1 million
Hertfordshire - £28 million
Barnet Council- £27 million
Somerset County Council - £25 million
Northumberland County Council - £23 million
Surrey County Council - £20 million
Hillingdon Council - £20 million
Neath Port Talbot Council - £20 million
Westminster Council - £17 million
Brent - £15 million
Caerphilly County Council - £15 million.
North Ayrshire - £15 million

IE8 – initial opinion...

My general advice to all my customers is never to use the first major release of new software from Microsoft – let someone else debug it for you – and then take it after the first Service Pack or minor release. However, those of you that have known me over the past few years will know that I’m a technical geek at heart, have always be interested in the latest technology as soon as it is available, and so you’ll not be surprised that I’ve moved my browsing across to Internet Explorer Beta 2.

My early impressions are very good – the only minor problems I’ve found have been solved by turning on the compatibility viewer for some sites that don’t display properly under IE8. There has been a massive improvement in usability and stability, with noticeable improvements in performance over IE7.

The biggest benefit has been the use of accelerators – primarily for use with searches and maps. I use the Internet a lot for research, and the ability to highlight a word or phrase and then search on it without having to cut-and-paste it into the search box is very useful. However, as a committed user of Internet mapping (before putting the address into my SatNav), the ability to highlight a postcode (of a prospect’s office or a hotel location) to then get a map in a new tab, is really useful. I can see this functionality being embraced by a variety of other web-sites above and beyond the subset included in the beta programme.

I also work with a lot of tabs open in my browser. Although only a minor improvement, IE8’s grouping of the tabs is very helpful, and does help one’s focus on a particular route of investigation, without being drawn off at a tangent by tabs opened for other reasons.

Whilst the Web Slices functionality looks potentially of use, the slices available with the beta are few and far between. I thought the eBay slice looked of interest, but I’ve yet to work out how to load it into my browser area – and even when I use it off the eBay web-site, it only searches the US site – not the UK eBay site – so not much use yet. But this sort of functionality might be embraced by Councils who want to offer a local information service to their citizens?

I haven’t had the courage to turn on the suggested sites functionality yet (I have too many pages to view already, without any automated suggestions). Also, I’ve not used the InPrivate Browsing (more popularly known as “porn mode”) that allows you to open a new browsing session where no record is kept of your travels.

Controversially, IE8 (like Google’s Chrome browser) allows users to effectively block third party cookies and pixels, blocking any kind of outside advertising based on tracking and analytics services – great – let’s have as much of this as is possible and legal!

IE8’s phishing filter SmartScreen appears to be much better than IE7, and a full-window warning pops up when you stumble upon a suspected phishing site. However, SmartScreen relies largely on a database of known phishing sites, so a new, unknown phishing site may be able to slip through the cracks. IE8 also displays sites' domains in a darker text colour, so you can more easily see whether you're actually visiting a page, say, or in reality a page on some site you've never heard of.

Have I noticed the supposed improvement in performance of IE8? Yes – it seems to be noticeably faster on many websites – with an even better improvement on my complex sites (like portfolio/stock pages) which use JavaScript.

Is it more stable? Yes – stable as a rock – despite a week of heavy usage IE8 has yet to crash. Yet my usage of IE7 (particularly with a lot of open tabs) would regularly see a crash or two a day. The stability has been so good that I’ve not had the opportunity to test its improved crash recovery and the ability to recover the last browsing session in case the browser does crash, or even if you just accidentally close it yourself.

If you want to try IE8 (most probably at home – as I’m sure your IT department at work won’t allow it yet) click
here for more information and a download site (but if you do download, make sure you disable any add-on toolbars before you run it or it can, reputedly, crash).

Thursday, 9 October 2008

Councils lose £0.5billion in Iceland terror attack?

How much has been lost by UK local authorities who invested their cash in Icelandic banks? And where do the Anti Terror laws come in?

The Conservatives say their own research has identified at least one London council that had banked £40m, one in the South East which had a £30m deposit and others with £20m or £25m.

Meanwhile, London public authorities are thought to face a total exposure of around £200m, according the umbrella organisation London Councils – with Brent (£27M), Westminster (£17M) and Havering (£12.5M) leading the queue of Icelandic creditors in the capital (along with TfL - £40M and the Met Police - £30M).

Meanwhile, county councils like Kent (£50M) and Herts (£17M) have also lost significant sums. There is a deafening silence from most Mets, Unitaries and Districts. Whilst district councils have lost less, there are a lot more of them, and their potential losses are estimated at around £150M, with Mets and Unitaries also losing c £150M.

Like bankers, many authorities have been reluctant to reveal the size of their problems publicly (congratulations to those that have been totally open), but extrapolating from the information available at the moment, it seems highly likely that the total losses will exceed £500M.

Incidentally, it’s surprising to me that the Government has used the Anti terror laws to deal with the Landsbanki Bank problem. The wording of the new Statutory Instrument (2008 No. 2668), laid before parliament at 8th October 08, called the The Landsbanki Freezing Order 2008, starts with:

The Treasury believe that action to the detriment of the United Kingdom’s economy (or part of it) has been or is likely to be taken by certain persons who are the government of or resident of a country or territory outside the United Kingdom.

The Treasury, in exercise of the powers conferred by sections 4 and 14 of and Schedule 3 to the Anti-terrorism, Crime and Security Act 2001(a), make the following Order:

EDS confirms loss of UK posts

Regular readers of this blog will not be surprised by this week’s announcement that the HP job cuts announced last month will fall on 3,378 posts in the UK arm of EDS (see last month’s post EDS/HP to shed 8% of staff – going off-shore?.

Understandably, the Public and Commercial Services Union has condemned this - see
here – (even though they represent less than 10% of all EDS staff).

However, my understanding is that the job cuts will happen over the next two years, and that many are expected to come from its current voluntary redundancy exercise, which was already in place prior to the announcement. Also, not all the 3,378 posts are currently filled, and I’m told the cut in posts reflects some of EDS’s pessimism on growth over the next two years, rather than a dramatic reduction in business.

Either way, as I noted last month, this move also represents a gradual and continual move of EDS workload to off-shore operations. It will be interesting to see if this move affects its business with UK Public Sector customers, who seem to like the cost benefits, but suffer from negative staff and citizen comments whenever such moves take place.

Tuesday, 7 October 2008

New minister – new policy on HIPs?

Margaret Beckett has been appointed in Communities and Local Government as Minister of State for Housing, replacing Caroline Flint.

Ms Flint was firm with her support for HIPs in public – but perhaps less so in private. In common with many LA Land Charges staff, she and her department seemed to have a strong dislike of Personal Search Companies – but even so she did not signal the end of the Home Information Pack.

Margaret Beckett meanwhile is reputedly in favour of getting rid of HIPs. As noted last month in my
HIPS will go – but when article, it’s only a matter of time before HIPS go – it just looks a bit sooner now....

What’s a Petabyte?

I was intrigued by an article about building and managing a 150 Petabyte database, only to wonder what is the definition of a petabyte – a thousand or a million terabytes?

Quick research showed that a petabyte (derived from the SI prefix peta- ) is a unit of information or computer storage equal to one quadrillion bytes, or 1000 terabytes. It is commonly abbreviated PB. When used with byte multiples, the prefix may indicate a power of either 1000 or 1024, so the exact number may be either:

1,000,000,000,000,000 bytes — 1000 to the power 5, or 10 to the power 15, or
1,125,899,906,842,624 bytes — 1024 to the power 5, or 2 to the power 50.

I know that many local authorities hold terabytes of data, but has anyone out there moved into petabytes?

Monday, 6 October 2008

Problems of going off-shore - more.....

The Register has followed up on their interesting poll on the “off-shoring backlash” that I referred to in my earlier blog item last week, with an article of the challenges of distributed software development. You can read their full article here.

The problem areas and their impact on the different models for distributed software development will come as no surprise to anyone involved in such projects, with communication being the top problem area, followed by “software quality issues due to the variable level of skills between locations” and “political issues with the way the organisation is structured”. The Register concludes that the main message of their survey seems to be that if you distribute development, quality will suffer.

Given that this second survey includes a lot of organisations which do not off-shore some/all work, but distribute the work between different locations within their own organisations, in my mind, the survey confirms that the off-shore model – when used properly – can work as well as any equivalent model based on staff working locally. The key is to get the right model, and to ensure that the organisational roles and procedures for software development are strongly stated and adhered to.

What I find most interesting is the correlation of the perceived success against the reasons for distributed development. In this area, 65% of respondents who believed their distributed development approach was primarily motivated by cost savings reported that their development was out of control. Those focussing on resource optimisation and/or management strategy responded best, with only 12% out of control and around 50% good or great.

In my previous blog item I noted that:

Another type of poor customer is one who has had a poor methodology in his IT operations to date (poor/non-existent documentation, poor statements of requirements, non-existent specifications, etc ...), and expects to continue in the same way when working off-shore – a 5,000 mile gap between customer and supplier will only accentuate the problems of this approach.

The Register’s article supports this – it highlights that organisations that take an ad-hoc or mixed approach to distributed development have the highest dissatisfaction with their level of control – whilst those having formalised hub-and-spoke or peer-to-peer approaches have better control.

I can but repeat that this is no doubt that off-shoring can and does work - but only if it is done properly – with the right management expectations, relevant splits of roles and responsibilities, firm methodologies and strong communication.

Thursday, 2 October 2008

The problems of going off-shore

The Register has an interesting poll on the “off-shoring backlash”. With my own experience of off-shoring, initially poorly due to our naivety/inexperience, then very successfully once we understood how to work offshore effectively, I can sympathise with most of the comments, such as:

“2 years of excuses, laziness, constant turnover (complete waste of training time when the guy/girl buggers off and leaves you with a new muppet).”

“This informal communication is completely lost when parts of a project are outsourced. Sending the same spec to another country to be evaluated by a developer who has never met the author and who must route all queries through an account manager just does not work”

This is no doubt that off-shoring can and does work, but only if it is done properly. Like any market, there are good off-shore suppliers, and bad off-shore suppliers – and both small and large off-shore suppliers can fit into each category. Staff turnover is a major problem for many off-shoring suppliers – in a good company, this should not be a major issue. The biggest issue is the management of risk – all too frequently, the off-shore supplier seeks to move to a “body shopping” contract where the deliverable is a number of “warm bodies” with minimal risk on the supplier, and most of the risk remaining with, or returning to the customer.

Not surprisingly there are also good and bad customers for off-shoring. First-time off-shorers can be the worst – their expectations seem to be sky high, soon to be brought down to earth by reputable suppliers – but then they are tempted by better financial offers from other suppliers who perhaps do not supply such good services – leading to a poor project, and the customer gets a bad experience of off-shoring. Another type of poor customer is one who has had a poor methodology in his IT operations to date (poor/non-existent documentation, poor statements of requirements, non-existent specifications, etc ...), and expects to continue in the same way when working off-shore – a 5,000 mile gap between customer and supplier will only accentuate the problems of this approach.

The Register’s articles, and most other commentators on off-shoring, agree that communication is the key to good off-shore projects. I absolutely agree with this – and it doesn’t necessarily have to be by putting staff face-to-face in each other’s countries (although this is one solution) – modern communications, and the use of relevant software development methodologies, together with splitting responsibilities properly between the on-shore and off-shore teams are also key.

However, it is also necessary for both customer and supplier to recognise that different types of projects need to be contracted and managed in different ways, and differently for different customers.

Wednesday, 1 October 2008

A for PCTs and providers

From today, all NHS commissioners will be required to post information about tendering opportunities and contract awards on a new site, making it easier for suppliers to track down single opportunities and understand exactly what PCTs want. For commissioners, Supply2Health will help meet their legal requirements to advertise and potentially increase the number of suppliers responding to their adverts by reaching a wider audience.

When he launched the service last week, Health Minister Ben Bradshaw said:

"We are committed to make it easier to do business with the NHS. And in complex healthcare market we realise it's not easy to find the perfect match.”

"Talking to providers of all types, what was keeping people awake at night was the thought they may have missed an opportunity. That there was a PCT out there in need of exactly what they had to offer, but they simply didn’t know about each other.”

“If you want to be technical, it is an online procurement portal. But I like to think of it more as a sort of online dating agency. A for PCTs and providers.”

“Supply2Health is a place where PCTs looking for love and clinical services can place their ad, tell the world about who they are and what they want, and then wait for eligible suitors to come and sweep them off their feet.”

Is it likely to help IT suppliers be swept off their feet into wedded bliss? No - despite the positive launch last week, be aware that it does not cover all types of procurement, only “Part B Clinical Services” – something not mentioned in Ben Bradshaw’s speech.....

It looks as if smaller IT suppliers will have to continue to rely on either their rich grandmother’s contacts, or visiting the local pub, to find true romance.

Visit – however, there don’t appear to be any/many opportunities on there yet – other than ones from a PCT called Testshire, mentioning Jill, Jan, Jack and John Test - Ooops.....