Indian tech firms cement
hold in the UK

ADITH CHARLIE

European service providers hit by outdated business models as competition rises

MUMBAI, DECEMBER 22 2014:  

Peter Schumacher, Chief Executive Officer of management consultancy firm Value Leadership Group, says European IT services firms have fallen behind the pack because they are trapped in out-dated business models.

“While European firms were busy restructuring, offshore firms were outperforming the European firms in all key financial metrics by a factor of 6. Additionally, they used their financial strength to accelerate the pace of change,” Schumacher added.

Analysts see Indian providers giving tough competition to their American counterparts not only in UK but also rest of Europe and Asia. “Our closed-door strategy meetings with 200 top customers in the UK, USA, and Asia underscore that Tata Consultancy Services is now being seen as the most formidable challenger to IBM Global Services,” said Schumacher.

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Danske Bank latest to take
offshore IT in-house

Karl Flinders
Tuesday 02 December 2014 12:44

“Danske Bank's decision to establish a large captive underscores how European firms are taking a strategic view and are committed to implementing globally distributed IT organisations and work models,” said Peter Schumacher, CEO at management consultancy the Value Leadership Group.

“Mature customers of offshore IT services, such as Danske Bank, believe they have gone too far with outsourcing and that too much business IP now resides with the suppliers. Additionally, captives offer lower operating costs and enable time-to-market gains - in particular for smaller projects - and provide an efficient platform for experimentation and innovation in new services, capabilities and skills.

“Bangalore has become a huge knowledge hub. In fact, no other location in the world has such a diversified base of technology and services companies from around the world and across sectors. The incredible pool of talent in Bangalore gives Danske Bank a powerful platform for intellectual arbitrage - access to the latest expertise in new and different technologies at an enormously attractive price point.

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Mature Indian offshore IT services firms take larger chunk of market as US giants collapse

Karl Flinders
Monday 24 November 2014 12:45

TCS squares up to IBM

Peter Schumacher, CEO at management consultancy Value Leadership Group, recently told Computer Weekly that TCS is the main challenger to IBM Global Services. 

He said that, based on meetings with about 200 large outsourcing customers around the world, IBM was losing ground to offshore-based firms. 

He said pricing is one reason but added that top customers also cite IBM's "arrogance" and weaker partnership capabilities as key reasons. “In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy,” said Schumacher.

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Europe is Cognizant’s soft underbelly

The US-based firm has been unable to forge the same kind of success in Europe, and not for lack of effort

Pankaj Mishra 

First Published: Wed, Nov 14 2012. 11 15 PM IST
Updated: Wed, Nov 14 2012. 11 16 PM IST

“While customers believe Cognizant has a strong sales and marketing engine, some see Cognizant as being too sales-driven and lacking the strong engineering capabilities and advanced platforms of the Indian firms,” said Peter Schumacher, chief executive of Germany-headquartered Value Leadership Group Inc. His firm advises service providers on doing business with European customers.

“These last nine months, Cognizant’s European growth has been the weakest of all tier I firms, and even tier II firms like Hexaware and Mindtree have achieved much higher growth rates,” Schumacher said.

According to an analysis by Value Leadership, this calendar year, TCS’s continental European revenue will exceed $1 billion compared with about $425 million for Cognizant. In the UK, the gap is about the same, with TCS likely to achieve revenue of about $1.85 billion versus $750 million for Cognizant.

“More importantly, Cognizant has lost momentum when compared to TCS—with TCS outperforming Cognizant in terms of growth by a factor of 3 in both the continent and in the UK these last nine months,” Schumacher said.

“Many European banks are far smaller than US banks and spread across many countries. So to win scale, you need a much broader client portfolio across multiple countries,” Schumacher said.

Cognizant’s strategy of hiring local professionals to lead different country markets in Europe has not really helped it score over TCS, he said.

“While Cognizant is hiring local consultants from traditional IT services firms such as Logica Plc and Cap Gemini SA, TCS’s recruiting strategy combines mature executives with deep domain experience gained in industry with consultants. Many customers perceive the TCS approach as enabling stronger relationships and more pragmatic solutions,” Schumacher said.

Cognizant has also relied heavily on local alliances with firms such as T-Systems, an outsourcing unit of Deutsche Telekom, for gaining more business in the region. This hasn’t really worked out, Schumacher said.

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CIOs have erratic IT services
pricing on their side

Karl Flinders
Wednesday 05 November 2014 12:04

Peter Schumacher, CEO at management consultancy Value Leadership Group, which has spoken to hundreds of large European businesses about their IT outsourcing plans, said while there is still a lack of understanding about just how big some of the Indian suppliers are, it is beginning to sink in.

“In Europe, customers recognise that offshore firms offer significant operating model advantages over western IT services companies, which are seen as still struggling to adapt their largely conventional and fragmented country-focused model to the new competitive realities,” he added. 

“Meanwhile, the offshore firms have established very strong positions in key sectors, where the biggest customers see them as being on par with companies like IBM,” said Schumacher.

He said this is giving CIOs a bargaining tool when contracts are up for renewal with the large western service providers, which is causing erratic pricing. 

“The stronger presence of the offshore firms has given clients enormous bargaining power, which they are using to extract pricing concessions and renegotiate contracts,” Schumacher added.

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Are Indian suppliers IBM Global Services' biggest threat?

By Karl Flinders on November 3, 2014 10:53 AM 

While IBM Global Services is always a default consideration businesses outsource IT it is not winning as many deals as it used to. Peter Schumacher, Value Leadership Group, said conversations with large corporates in Europe reveal that Indian suppliers are now  now IBM Global Services's biggest competitor, and TCS is the biggest of these. 

"In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy," says Schumacher.

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ANALYSIS

IBM India staff reductions are sign of shift in outsourcing sector

Karl Flinders – October 31, 2014

“In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy”
Peter Schumacher, Value Leadership Group

According to CEO at management consultancy Value Leadership Group Peter Schumacher, based on meetings with about 200 outsourcing customers around the world, IBM is losing ground to offshore-based firms.

“Pricing is one reason but, perhaps more importantly, top customers also cite IBM's arrogance and weaker partnership capabilities as key reasons. In other words, IBM is seen as lacking price competitiveness, operating flexibility and customer intimacy. These are a complex mix of interrelated challenges and overcoming these can take years to resolve,” he said.

The stronger presence of the offshore-based firms has given clients enormous bargaining power over IBM, added Schumacher, and they are using this to extract pricing concessions and renegotiate contracts. He said TCS is the main challenger to IBM Global Services.

“In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy,” he said.

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In-sourcing of IT operations
gains traction

Updated: Oct 24, 2014 12:35 AM, By Sanjay Vijayakumar

“The shift to captives represents a long-term commitment to offshore-based services. Overall, companies in Europe and the U.S. are looking to perform more work offshore in India, not less. Captives are not a threat for vendors, but, in the short-term, can cannibalize a vendor's business,” said Peter Schumacher, President and Chief Executive of Germany-based consulting firm Value Leadership Group Inc. “Offshore services firms with strategic vendor status, and those that are organizationally agile and collaborative, are likely to be least impacted - some may even benefit.”

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German multinational to transform IT infrastructure

Karl Flinders Friday 24 October 2014 13:34

Peter Schumacher, CEO at management consultancy Value Leadership Group, said this type of transformation is becoming common in European businesses. 

“For many large European organisations it is becoming a strategic imperative to transform their ICT, reposition them vis-à-vis the business, and gain more value from IT,” he said.

"The Vorwerk deal underscores that medium-sized, globally operating European companies stand much to gain from the global delivery model. Our discussions with companies in this segment across Europe show that globally integrated services models offer enormous business advantages. Besides significantly lower costs, they benefit from global standards, greater flexibility and intellectual arbitrage," added Schumacher.

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ANALYSIS

HP should use split to make up lost ground in IT services

Karl Flinders
Thursday 09 October 2014 09:00

HP preparing for restructure

Peter Schumacher, CEO at management consultancy Value Leadership Group, said the split at HP is probably just the beginning of years of restructuring. 

“This announcement is just going to open the door. Once it is split, it will more manageable sizes and will be able to restructure them, including the services arm,” he said.

Schumacher said the momentum is with other IT services suppliers, particularly those in India, and HP services needs to restructure if it is to compete. “Up to now, since the take-over of EDS, HP has just cut costs by reducing the headcount,” he said.

He added that the IT services business – the former EDS arm – could eventually be spun out or parts of it could be sold.

HP needs to become more flexible and agile

Schumacher believes the timing of the split could be unfortunate. As it will probably trigger years of restructuring, he said, the IT services arm might miss out on the increased IT spending planned by large businesses over the next couple of years. 

“A lot of European organisations have moved from just spending on IT to keep the lights on to spending on IT to change the business through technologies such as cloud, social analytics and mobile technologies. All the HP restructuring will come at a time when many of the big companies are spending money,” he said.

Schumacher’s claim that HP is being left behind is backed up by Forrester analyst Peter Burris. “We don’t routinely see HP show up on the shortlist for crucial application and transformation services deals. We also often hear from clients that existing HP service agreements don’t do enough to help CIOs deliver more modern, agile services to business," he said.

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Volkswagen to open Indian IT development centre

Karl Flinders Wednesday 08 October 2014 13:04

Peter Schumacher, CEO at management consultancy the Value Leadership Group, recently told Computer Weekly the ideal corporate sourcing executive is now expected to apply a broader business-oriented understanding and approach for value creation and capture, taking into account internal operations, captives and global suppliers.

“The many new investments in large captives underscore that European firms are taking a strategic view and are committed to implementing globally distributed IT organisations and work models,” he said.

“Large companies, like VW, are selectively rolling back some supplier relationships as these firms believe they have lost important technical know-how and capabilities to their suppliers,” added Schumacher.

But he warned that although captives offer a compelling value advantage, that often comes at the expense of prudence. 

“Many companies underestimate the upfront and ongoing investments required to establish the organisational capabilities needed to scale and sustain excellence to create and capture the added value they aspire to gain,” he said.

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AstraZeneca takes in-house transformation offshore

Karl Flinders Tuesday 23 September 2014 13:29

Peter Schumacher, CEO at Value Leadership Group, said the management consultancy  recently met with 40 of the world's largest customers of offshore services in the USA and Europe. "While maturity levels vary and business imperatives differ, a common theme is that large buyers are now taking a more sophisticated, global, and integrated view of their sourcing options across their operations and global locations.

"The ideal corporate sourcing executive is now expected to apply a broader business-oriented understanding and approach for value creation and capture, taking into account internal operations, captives, and global suppliers.”

He added that the most sophisticated corporations are striking a healthier and more differentiated balance between procurement, operations, and organisational development.

“At these companies the belief is that procurement became too powerful which has resulted in a bias toward short-terms results that has benefited suppliers. Many companies are now trying to re-build critical organisational and technical capabilities that they have lost to their suppliers.”

He said recent announcements around insourcing and captives needs to be seen in context. “Offshoring among large corporations will continue to increase, most rapidly among those in continental Europe. While some services are moving back on-shore, still more volume is going offshore.

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ObamaCare may spell healthy
buys for IT cos

ADITH CHARLIE

MUMBAI, SEPTEMBER 15 2014:  

So what’s driving this optimism? “One, the US healthcare sector is a huge industry representing more than 15 per cent of GDP. Two, the healthcare IT sector remains highly fragmented,” said Peter Schumacher, CEO of Value Leadership Group, a management consulting firm.

For acquirers, the downside is that healthcare IT companies command steep valuations. “Only time will tell if these bets pay off for shareholders,” said Schumacher.

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Holcim’s data centre consolidation drive may benefit Indian IT firms

ADITH CHARLIE

Names of IBM, TCS, Infosys, NIIT Tech and Wipro doing the rounds

MUMBAI, AUGUST 21 2014:

“Holcim has been on a leadership journey for several years with the aim to improve its financial and operational performance. Improving the efficiency and effectiveness of its IT systems, including data and shared services centre consolidation in Europe and around the world, are key focus areas of this operational excellence program,” said Peter Schumacher, Founder and Chief Executive Officer of Value Leadership Group, a management consulting firm.

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Infosys tweaks executive selection process

Varun  Sood, ET Bureau | Jun 4, 2014, 05.13 PM IST

"It is critical that this is a forward looking process, and not a one-off initiative aimed at filling an open position," said Peter Schumacher, the founder of Germany-based Value Leadership Group.

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A look back at Narayana Murthy's first year in his second innings at Infosys

Experts believe he must 'think big and act bolder' to achieve his targets

Itika Sharma Punit and Shivani Shinde Nadhe | Bangalore / Pune  
May 31, 2014 Last Updated at 18:20 IST

“Infosys is still not on track and many large customers are disappointed and believe that Murthy’s return has not brought the expected positive impulse,” said Peter Schumacher, founder of Germany-based Value Leadership Group. “They see his three-pronged agenda as tactical cost-focused initiatives that are skewed toward benefiting Infosys and have little added customer value.”

Schumacher of Value Leadership Group also believes that Murthy’s agenda is “too narrow, inward focused, and does not provide a compelling vision for the future”.

“As a company with the intent to lead its industry, Infosys must set goals that are broader and connect also to the passions of its employees and customers,” Schumacher said.

Quoting from the letter that Murthy had sent to Infosys employees asking them to “think big and act bolder”, Schumacher says, Murthy must change Infosys more fundamentally and “thinking bigger and acting more boldly may just be a starting point”.

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Murthy says changes in best interest
of Infosys

In a letter to employees, founder warns of further leadership transition

Itika Sharma Punit | Bangalore  
May 31, 2014 Last Updated at 00:57 IST

“BG’s departure raises Infosys’ risk profile even further,” said Peter Schumacher, founder of Germany-based Value Leadership Group.

"It is a big blow to Murthy's credibility. Clients are concerned. However, in information technology services relationships cannot be switched quickly. Clients are insisting on pricing discounts as a condition for renewal. This undermines Infosys' image of a premium provider," he added.

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Infosys may settle for internal candidate as chief executive

Sandeep Dadlani top contender for the job; Sanjay Jalona and Mohit Joshi also make it to the list of probables

Itika Sharma Punit & Shivani Shinde Nadhe | Pune/Bangalore  
May 30, 2014 Last Updated at 00:57 IST

"Those calling for an external CEO believe Infosys needs fundamental change - a shake-up - that only an outsider can trigger. However, outside CEOs generally come with much higher risks and more often fail to lift performance sustainably. Infosys is an extremely inward-focused organisation with an elitist mindset that has little experience with hiring external candidates. Any external candidate with a strong track record of success will have a hard time and additionally demand a huge premium and severance package," said Peter Schumacher, founder of Germany-based Value Leadership Group.

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Concerns over leadership vacuum may hurt Infosys

Stock falls 8% after Srinivas' resignation, more exits feared

Itika Sharma Punit | Bangalore  
May 30, 2014 Last Updated at 00:24 IST

“BG’s departure raises Infosys’ risk profile even further. It is a big blow to (co-founder) N R Narayana Murthy’s credibility. Clients are concerned, however, in the IT services sector relationships are sticky and cannot be switched quickly. Clients are leveraging their bargaining power and insisting on pricing discounts as a condition for renewal. This undermines Infosys’ image of a premium provider,” said Peter Schumacher, founder of Germany-based Value Leadership Group.

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Infosys president B.G. Srinivas quits, limiting insider CEO options

Srinivas will stay with Infosys till 10 June

Anirban Sen 

FIRST PUBLISHED: WED, MAY 28 2014. 05 53 PM IST

“The bloodshed at the top has strengthened the competition and that’s going to have an impact on the recovery of Infosys,” said Peter Schumacher, founder of Germany-based Value Leadership Group that advises companies on their Europe strategy. “Customers are already concerned and they will be more concerned now (with this latest exit).”

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FIRST PUBLISHED: WED, MAR 05 2014. 11 25 PM IST

Top Indian IT firms pip multinational rivals in incremental revenues

Over the past 4 years, TCS and Cognizant Technology Solutions Corp. have seen incremental revenues grow faster than IBM or Capgemini

Anirban Sen 

“Indian IT firms are not only able to offer more cost-effective services but also offer better quality,” said Peter Schumacher, founder of Germany-based Value Leadership Group that advises companies on their European strategy.

“The offshore firms are very hungry for business, while many incumbents remain strategically asleep. Buyers see the offshore firms as being much more flexible to do business with,” he said.

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IT OUTSOURCING

AstraZeneca to bring IT in-house but remain offshore

Karl Flinders
Tuesday 18 February 2014 11:15

Peter Schumacher, CEO at management consultancy Value Leadership Group, said IT buyers are looking for more value and offshore captives can offer this. 

"Captives are low cost, have deep domain expertise and can be more experimental,” he added.

If a business wants to try things out on a small scale, it can use its captive to do this at low cost with the right skills, said Schumacher.

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IT firms seek the gift of tongues

ADITH CHARLIE

Encourage Indian staff to master European languages and talk up the business

MUMBAI, FEBRUARY 18 2014:

“Employees in India who know European languages will feel even more involved in the projects. Collaboration and coordination will become easier between the European and offshore organisations,” said Peter Schumacher, CEO of management consultancy firm Value Leadership Group.

Cultural Bridge

Mastering a client’s native language also helps bridge the cultural gap while promoting acceptance, trust, bonding, and open-mindedness — critical factors for success in global virtual teams.

“While many Europeans believe Indian employees often over-commit, many Indian employees are uncomfortable with the bluntness of Europeans,” said Schumacher.

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First Published: Wed, Feb 12 2014. 04:57 PM IST

India’s mid-tier IT sector
faces mid-life crisis

Most mid-sized IT firms are grappling with unpredictable profitability and struggling to add new clients

Anirban Sen

“The industry’s tradition of linking the perception of a firm’s quality to revenue is arbitrary and not relevant for many customers. Where size is not critical, customers differentiate between firms based on capabilities and maturity. When using relevant and comparable metrics as a measure of goodness, many customers believe that the gap between many tier I and tier II firms has shrunk,” said Peter Schumacher, founder of Germany-based Value Leadership Group that advises companies on their Europe strategy.

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