
Crap IT A!
Couldn't happen to a nicer company!
Britain's fave outsourcing badass Capita today reported a £513.7m pre-tax loss for 2017 and tapped investors for £701m in a rights issue that it will use to fund restructuring and toward paying down debts. The London Stock Exchange-listed organ revealed that sales for the calendar year fell 4.3 per cent to £4.2bn, and it made …
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No bidding for unsustainable contracts ?
Many, possibly most ITO and BPO contracts are financially unsustainable at face value. The whole point is that the customers invariably choose on the basis of lowest cost, without understanding the business model and profit drivers for the vendor. As a result, vendor margins are backloaded to the later stages of the contract, and are usually created mostly by out-of-scope requests and the inevitable change in customer requirements. Obviously sometimes the vendor gets unlucky and the customer keeps everything within scope, and avoids unforseen out of contract change, and that becomes a non-performing contract, but those are the minority.
The new CEO is by background a petroleum geologist. So he's used to commercial risk judgements, but taken scientifically in a data rich environment. I wonder how well versed he is in the black art of outsource contracting, where the main value levers are under-bidding, persuading the customer of the huge value to be created by the outsource, and then fleecing the customer by charging an arm and a leg for anything outside of scope? If the man expects Crapita to contract on the basis of a clear profit priced into the contract, then we can be sure that business will shrink rapidly. Capita's business shrinking would be no bad thing, but it favour better outcomes for customers - they'll still outsource to the lowest cost bidder, and then act all surprised when it goes expensively wrong.
The problems of crap outsourcing are a dismal failure by the management and procurement functions of the customer - the bottom feeders of ITO and BPO can hardly be blamed since they're delivering what the market is asking for, of headline cost savings.regardless of longer term downsides. Just like McDonald's decision to throw out a working help desk arrangement to an offshore alternative, or KFC's decision to give fast food logistics to a division of the German Post Office.
No bidding for unsustainable contracts ? At least somebody seems to have found a cluebat under the sofa ...
Yeah, my first thought was that bidding for contracts you know to be unsustainable is crazy. You might find yourself in a contract that you thought was going to be sustainable but turns out not to be, but bidding for one you know is going to be unsustainable is seriously insane.
Then I thought some more, and it does actually make sense (for small values of sense). If you have deep enough pockets (like Microsoft and Oracle) then going after unsustainable contracts can be a good long term strategy. Win enough of them and some of your competitors go under because they don't get any contracts at all, or get contracts by underbidding your underpriced bid. Once you have a monopoly on the market the sky is the limit.
Of course, it doesn't always work out that way, but some companies think it's worth a try.
Then I thought some more, and it does actually make sense (for small values of sense)
You probably also didn't consider the alternative explanation. Sales are tasked with getting new work, and have a reward structure based on this. While they are probably aware that contracts that they take on are unsustainable they still get a bonus for it, and so consider it their sworn duty to collect their bonus by getting as much new work as possible, regardless of it's profitibility. Or how much money the company actually loses by winning the contract.
When this happens then the sales management are also on the bonuses, so aren't inclined to point out to senior management that they should be changing the reward structure, and so you end up with an entrenched bureaucracy. Fixing this situation by somebody at the top standing up against that entire bureaucracy is quite rare, since there would be a chorous of "all my staff will quit and the company will be ruined if you do this". Of course, if you let them carry on then the company will be ruined and nobody will have a job...
My divisional boss used to have a saying along the lines of "Revenue is vanity - margin is sanity". He had the honesty to stand up at a meeting of all the divisional staff - and reported that a much hyped joint venture with a smaller company had resulted in "bugger all".
He was a breath of fresh air. He understood that most senior management were playing at theatricals without admitting it to themselves - but he knew when to drop the charade. His troops were very loyal to him - especially after he appointed himself pizza/kebab courier as the only useful thing he could to help a project technical team in the small hours.
And he said Capita would no longer bid for unsustainable contracts.
Why would you bid on those contracts anyway?
He said the firm's focus will be on developing its own proprietary software.
Proprietary software that will lock people and make it next to impossible to leave, well that's one way of generating income.
Proprietary software that will lock people and make it next to impossible to leave, well that's one way of generating income.
I would have thought that he's referring to the 35 CRM systems. Developing a proprietary systems is actually a very sensible way to go, although not without considerable risks. And one of those risks is demonstrating to customers that you don't trust third party IT vendors or solutions services.....
“Why would you bid on those contracts anyway?“
Salesmen will bid on anything that earns them a commission. Once the deal has been struck, delivering it becomes someone else’s problem. If salesmen earned commission on profit rather than sales order value then you would see a completely different outcome.
Salesmen don't get to choose to bid on stuff - the business decides whether it'll bid on what the salesman brings to the table. That'll involve product, pricing, marketing, legal, finance, management, service delivery, support, and sometimes the bloke who cleans the fountain in reception.
Nobody bids on anything without huge numbers of people agreeing it can be delivered and supported.
Once the deal is struck, delivery is down to the Service Delivery guys, who will have previously agreed they can do it.
"Once the deal is struck, delivery is down to the Service Delivery guys, who will have previously agreed they can do it."
Yeah...only if governance procedures are being followed correctly, or exist in the first place. The assumption that Service Delivery know what Sales are selling is not always true, sadly.
Sales go after what they can get commission on. There is still a widespread unwillingness to be honest about the true cost of IT projects so bids are often under costed (I think this is true on most IT projects, not just ones which are outsourced).
Also, the clients are not always be totally honest about their internal setup e.g. they will say someone who understands system X will be available 3 days a week to support but actually they are committed to 3 other projects already. Even big players like Capita aren't always savvy enough to lock that down contractually.
When the poor souls who actually have to deliver it get stuck in and find out the client is a basket case or the bid was full of ridiculously optimistic costs/assumptions the sales staff are long gone by then of course... Former Systems Integrator and managed service provider developer here, definitely not bitter.
We once had a business model where we invested in integrating and testing a standardised hardware/software solution to fit a generalised market niche.
The first customer came - and the salesman ordered a different hardware model because he could get a "good deal" on it. Which then took us several weeks even to get the LAN cards to work - wiping out any profit.
..have been under investing in their own IT. And these are the same people you outsource to, to manage your IT. Managers, read that*
*They will, then still choose Crapita anyway. A NHS Trust I know went to them for IT support a few years back. They've regretted it ever since. I have no sympathy. We warned them it was a mistake.
Phone call three weeks ago from a recruitment consultant I know
"Hello Salestard. Capita are recruiting salespeople, would you be interested"
"Not a chance"
"They're paying well"
"Still not a chance"
[sighs] "This is getting silly. You're the twentieth person this morning who's dismissed them out of hand"
The humane thing for Capita would be to take it round the back of the shed with the shotgun and put it out of its misery.
"Still not a chance"
You couldn't capitalise on their desperation by demanding a huge base salary, guaranteed minimum bonus, and nine months notice?
Obviously "salesman working for Crapita" would be a big stain on your CV, but you could always claim to have been unemployed, or in prison. Or just describe it as a sabbatical.
Big stain on my soul, never mind the CV.
That's when you *know* a place is bad - even the sales types are seeing it as a stain on their souls[1]..
[1] I thought that you all had to give up your souls as part of the induction into being a sales person? Much like an IT person has to give up their sanity to join a helldesk..
"when they collapse, there'll be no job losses in the UK,"
If only.
My Local Authority has put just about everything in to outsourcing with Crapita as the handling agent.
Many of these people used to work for the LA before being nudged out.
Many are also on better money and that also presents problems.
As with Carillion, if Crapita goes the top end doesn't get affected but that bastard butterfly takes over.
- can't deliver working software to buyers
- horribly expensive
- can't manage their own IT
- can't even make money themselves (can be dangerous to customers if they go bankrupt)
- universally loathed which means you can't argue anymore that your purchase was using a reputable vendor
What's the rationale behind retaining the services of these clowns? Schmoozier salesmen?
same goes for others too nowadays, -cough- IBM- cough
Anyone who knowingly works for a financially unsound employer will only have themselves to blame for not leaving the boat earlier. If they have any skill at all then it is being wasted in CAPITA and they should move elsewhere as soon as possible, to become productive members of the society again. If the only motive for such move is the bankruptcy of the employer then, well, who is to blame? Commendards or stick-in-the-mud workers?
The work that Capita does will still need to be done, so the vast majority of those 70,000 will end up doing the same jobs but for the actual organisation that needs the work done.
The only people who will lose their jobs will be the sales drones and the ones who actually run Capita.
Everyone's favorite outsourcing business Capita is scheduled to see 415 government contracts with the British public sector expire between 2022 and 2025, more than any other major supplier.
According to UK government spending research firm Tussell, the IT services company will see government contracts to the value of £700 million come to an end during the next three years.
While it is set to wave goodbye to more contracts than any strategic supplier in any area of the public sector, the value of its expiring contracts is eclipsed by facilities management supplier G4S, which will see 30 contracts worth a total of £1.8bn expire over the period.
Lenovo has struck an agreement with Hong Kong comms conglomerate PCCW to create a jointly owned services company, advancing its strategy of growth through services.
PCCW operates a globe-spanning software-defined network, some of which uses its own submarine cables. The company also owns PCCW Solutions – an IT services provider with a big footprint in Hong Kong, mainland China, and parts of Southeast Asia.
Lenovo and PCCW Solutions will create an entity dubbed PCCW Lenovo Technology Solutions (PLTS) that will see the Chinese kit-maker and the Hong Kong services company offer "one-stop customer solutions that integrate services, devices and digital infrastructure" according to a joint Lenovo/PCCW announcement.
The government of the Philippines has welcomed the decision by giant business process outsourcer Concentrix Corporation to forgo tax incentives and instead allow its staff to continue working from home for the foreseeable future. The nation feels that subsidising outsourcers' bottom lines does nothing to boost the local economy.
The Philippines imposed lengthy and strict COVID-19 lockdowns that saw its substantial business process outsourcing sector quickly adapt to working from home. The nation's government supported that move by continuing to offer the pre-COVID subsidies it offered to outsourcers that run offices located in certain special economic zones.
Those subsidies have subsequently been removed, and the requirement to operate from special economic zones restored.
Infosys celebrated the first anniversary of the e-filing portal it built for India's tax authorities fixing another prominent glitch – this time a search functionality error.
Complaints about the error streamed in to India's Income Tax Department, which tweeted about the error on Tuesday.
A labor rights non-profit has filed a complaint with India's Ministry of Labor alleging IT services giant Infosys has subjected its employees to an illegal noncompete clause.
Within the contracts for onboarding employees is a stipulation, according to Nascent Information Technology Employees Senate (NITES), that staff may not accept employment from any Infosys customer they worked with while at Infosys for six months after terminating employment.
Employees are also barred from working for an Infosys competitor if it means they would work with a customer they worked with at Infosys during the 12 months prior to leaving Infosys.
Co-Operative Bank is terminating its outsourcing contract with Capita years ahead of schedule and is planning to TUPE across staff to provision services in-house again, ending what at times was a fractious relationship.
A six-year agreement for Capita to run the Bank's mortgage services operation was signed in 2015 worth £325m, it included handling customer queries and applications and mortgage maturity, as well as digitising processes.
Yet the following year the companies fell out, with Co-Operative Bank threatening litigation over alleged failings regarding digital transformation service delivery.
Everyone's favourite outsourcing badass Capita is taking control of the £110m Turing student exchange programme formerly run by The British Council, a public corporation.
Announced in 2020 by UK Prime Minister Boris Johnson, the new Turing Scheme replaced the EU's Erasmus student exchange scheme, which the UK withdrew from as it formally left the EU.
The British Council had helped administer the Erasmus scheme since 2007, and since 2014 has administered the successor Erasmus+ programme.
Capita is again clearing out another of the previous CEO’s past conquests with confirmation this morning that it is offloading software licensing and hardware reseller Trustmarque to One Equity Partners for £111m.
Readers will no doubt be delighted to hear that the sale represents a good earner for Capita, everyone's fave outsourcing badass, which paid £57m for Trustmarque in 2016. Not all of Capita's other past divestments have proved as financially nourishing.
"We are pleased to have agreed the sale of Trustmarque to One Equity Partners following a competitive sales process," said Jon Lewis, who grabbed the controls of what appeared to be a slowly sinking ship in December 2017.
The Reserve Bank of India (RBI) has warned the nation's finance sector that outsourcing information technology jobs could "expose them to significant financial, operational and reputational risks."
The RBI offered that opinion last week in a Statement on Developmental and Regulatory Policies that, after considering issues such as emergency lending for healthcare infrastructure and reform of default credit swaps, wends its way to a "Master Direction on IT Outsourcing and Master Direction on Information Technology Governance, Risk, Controls and Assurance Practices."
That section opens with the observation: "The financial system is seeing extensive leveraging and outsourcing of critical IT services by Regulated Entities to get easier access to newer technologies through financial technology players to improve efficiencies."
A pro-outsourcing CIO whose first act at a new employer was to set up a £475,000 backhander scheme has been jailed for six years.
Brian Chant, 62, took the bribes after joining procurement services firm Achilles in 2011, Southwark Crown Court heard.
One of the first things he did was recommend outsourcing of various IT functions, suggesting three companies to Achilles' board for the £22m SPTL and Systems Plus IT contracts.
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