BT Global Services has until very recently been a shining star of the telecoms giant, and even after its shock profit warning last week, the division still accounts for £9bn of the group’s £20bn revenue.

In all the recrimination, resignation and share price falls since the financial announcement, one potential aspect of Global Services’ problems has been little discussed.

I’ve heard a few people wondering how much of the division’s troubles are down to its involvement in the NHS National Programme for IT (NPfIT).

BT is one of only two major contractors still involved, along with CSC. Accenture and Fujitsu have already pulled out due to concerns over potential losses, and BT had been expected to pick up the region ceded by Fujitsu’s departure.

Former NHS IT director general Richard Granger negotiated some tough terms and conditions for the key suppliers to the programme – in particular, that payments would be made on delivery of finished product. This is great news for the NHS – now that key parts of the project have been delayed, it doesn’t have to worry about the costs of software and services that are not yet fully operational.

This was a big factor in Accenture’s withdrawal as the supplier saw its costs increasing and its revenue being pushed further into the future.

In the early days of NPfIT, former BT chief executive Ben Verwaayen was asked by reporters about the impact on the firm’s bottom line, and he proudly explained that BT had not budgeted for a profit from the programme for some time ahead, seeing it as a long-term investment. A wise move – but one now wonders exactly when those profits were expected.

The core part of NPfIT –electronic patient records – is an area BT is most exposed to, and is the area most delayed. Recent reports suggested that many NHS trusts are refusing to implement software until they can see it working elsewhere. Considering that one of the BT pilot sites, the Royal Free Hospital in London, has just revealed it lost £7.2m due to the project, it isn’t looking promising.

BT meanwhile, is funding development and providing services to implement software and try to make it work – essentially without getting paid for it.

There has been no official word from BT one way or the other, but observers cannot help but speculate that the troubled National Programme may be a factor in Global Services' current struggles.

And if it is, and BT feels it has to reconsider or renegotiate its involvement, then the risks to the NHS IT scheme would be significant.

The turmoil engulfing the financial services sector is causing a lot of head scratching and navel gazing across the IT industry.

Vendors are worried about the effect on sales in their most profitable market. IT professionals are worried about their jobs in the light of Lehman Brothers’ collapse and dire warnings of 100,000 job losses in the City of London.

Certainly few people will be worrying about skills shortages in the City – there’s likely to be plenty of spare IT staff looking for work.

But one area of the IT industry is almost certainly smiling – it’s time, once again, for India to benefit.

Computing blogger Mark Kobayashi-Hillary has speculated a lot about the effect on offshore outsourcing, and I’d tend to agree with his view that many finance firms are going to look overseas to help cope with the crisis.

The pressure will be on struggling banks to cut direct costs (which means people), reduce capital spending (which means big IT purchases), and generally to cut operational budgets.

Most big financial services firms have experience of offshoring work by now and understand the pitfalls and opportunities it presents. In tough times such as these when difficult decisions have to be made quickly, there are two easy, quick wins.

One is to say to an IT services company – can you run some of our proven processes in exactly the way they operate now, but cheaper. Effectively, keep the lights on, but do so for less cost. So, IT support, systems management, network management and other aspects of technical infrastructure support can easily be transferred to lower cost centres in India.

The other action is to look at transformational IT projects and ask two questions: Do they need to be staffed with in-house resources, and can hardware infrastructure be externally hosted? If the same benefits can be delivered from these important initiatives by offshoring more of the development work to India, or by outsourcing the hardware operation, then it becomes an easy move to make in the current climate.

I met with Pradipta Bagchi, the head of global communications for India’s number one IT company Tata Consultancy Services (TCS) earlier today for a catch-up. Bagchi certainly sees opportunities for TCS and others from the financial upheaval. Most of the big Indian vendors have established relationships with firms in the sector and are ready to take advantage of any opportunities that arise.

Bagchi said that TCS already has experience of the complex integration and separation tasks involved in mergers and acquisitions among finance firms – another area of expertise that is likely to be in demand. TCS is one of the major suppliers to ABN Amro, in a deal signed before the Dutch bank was bought by a consortium of Royal Bank of Scotland, Fortis and Banco Santander.

Imagine how valuable that knowledge will be if, say, Lloyds TSB and HBOS merge, or when banks pick apart the remains of Lehman Brothers and take over parts of their operations and want to merge them with their own.

A global crisis in the most globalised sector of all will inevitably lead to opportunities for the most global of IT suppliers – and they are increasingly found in India.

Yet again the theme of ruthless standardisation has come through strongly in interviewing some of SAP's biggest customers here at Sapphire.

Kraft Foods is one of the very biggest – 12,000 users in Europe, 30,000 more in North America by 2010, Asia Pacific to follow later, and with the software in use since 2001.

Kraft used to have disparate systems in every country in Europe, but was very much an early mover in adopting a single, standard, unmodified version of SAP across the continent.

One of the great benefits of this was realised in October last year. The firm wanted to upgrade to the latest release of SAP to take advantage of new functionality. For most companies, the prospect of a major version upgrade to 12,000 users in many countries would make them shudder. The cost and complexity of such a project is what has historically kept too many organisation stuck on older versions of applications, with a system update taking on all the characteristics of a total re-implementation.

But for Kraft, the decision to standardise paid off – the entire upgraded system was built remotely, offsite, and implemented in just three months.

To add to the achievement, the food giant also chose to change its whole IT infrastructure at the same time – and completed that in the same three month period, working with outsourcer EDS and key supplier IBM.

Kraft senior director, SAP competency centres, Jan Ziskasen, is so laid back now about his standard implementation blueprint for SAP that he was able to be in Berlin this week despite a major part of the US project about to go live this weekend.

How many IT directors would be confident enough in an impending deadline to be happily thousands of miles away on another continent?

“We have a goal to double our services business in three years, and that will make us number two in that market, but IBM will still be bigger.”

HP UK managing director Steve Gill revealed this objective to me in an interview with Computing in February 2004. It seems he was only a year or so too ambitious.

Now that HP’s $13.9bn acquisition of EDS is going ahead, it will establish the combined company as global number two in IT services and outsourcing.

The previous year, in May 2003 on the first anniversary of HP’s £12bn acquisition of Compaq, Gill predicted that the firm would overtake IBM as the world’s biggest technology supplier within the next year.

This milestone took a little longer – until 2007 – and needed IBM to sell its PC business to Lenovo along the way, but nonetheless HP got there.

For a company that has, at times, hit the headlines for all the wrong reasons – a spying scandal in 2006 that led to the departure of chairwoman Patricia Dunn; the ousting of former chief executive Carly Fiorina; the acrimonious purchase of Compaq against the wishes of one of HP’s founders’ family – current chief executive Mark Hurd has quietly gone about doing the business in the areas that matter.

HP is today a very different beast from the rather fuddy-duddy firm that entered the new millennium and had its foundations shaken during Fiorina’s often controversial tenure.

The combination with EDS will  give HP serious presence in every major boardroom conversation about IT - and lead to fevered speculation about further mergers in the sector.

Watch out for moves by the big Indian outsourcers to buy second-tier US or European rivals such as Atos Origin, Logica or CSC. Will even Accenture find itself a target – or decide it has to be an acquisitor – to compete long term with IBM and a joint HP/EDS?

And don’t rule out HP from further quiet but influential purchases along the way.

I wonder what Steve Gill is predicting now?

I’ve just been compiling Computing’s news reviews of 2007 for our web site, looking back at the big stories that made the headlines during the year. With such an overload of articles, how can the past 12 months be best summarised?

Well, to be honest, it’s been something of a case of same old, same old. What have we learned this year? 

The government continues to embarrass itself where technology is concerned, sadly negating all the good work that is increasingly taking place in public sector technology. 

Green issues have leaped to the top of IT managers’ agenda, and rightly so. But really, most of the current advice available is simply common sense, good practice IT operational management. We are still painfully short of genuine vendor-free best practice green computing – although there are a few leading companies that are starting to write the rulebooks. 

IT security is just as much of a pain as it has been, but the law enforcement community seems to be drifting further away from being able to address the concerns of business leaders. The great fear is that e-crime will only be tackled once something really bad takes place to make the authorities act. 

What else? 

There are still skills gaps; the profile of the IT leader continues to change; more work is being outsourced; and offshoring is expanding faster than ever. 

Web 2.0 has become the new internet and e-commerce buzzword; stock market valuations for online companies are becoming very silly again; and broadband is an increasingly important economic driver (so let’s hope we get moving on the next-generation infrastructure). 

All in all, it sounds very much like how you would summarise any other mature, business-critical sector of the

UK

economy. The more things change, the more they stay the same, as the French would say if they translated into English. 

In that light, perhaps the most important story of the year came just this month, with news that the UK IT sector is now the second biggest industry in the country, after financial services, contributing 6.4 per cent of the economy – some £66.5bn. 

Maybe in years to come, we will look back at 2007 as a pivotal time, one when IT continued to grow up and establish itself as central to the UK's international success. Technology is increasingly just a part of business, it flows with and influences our lives every day, and perhaps it is a good thing that as the year ends, we are not looking back on any one trend as a defining influence. 

Just another year for a vital part of the way we live, work and play. 

Merry Christmas from everyone at Computing, and best wishes for a prosperous and incident-free technology new year.

 

I am delighted to announce that our web site, Computing.co.uk, has been relaunched today with a new, easy-to-use design and a range of additional content to make the site your essential guide to business technology.

For nearly 35 years, Computing journalists have brought you the latest news and analysis on UK IT. Now, through Computing.co.uk, we want to make our readers part of the story too, by giving you the opportunity to let us know what you think about the latest trends, issues and technologies.

Today sees the launch of:

Reader Comment – Every news and in-depth article on the site now features a reader comment function that allows you to post your views on the stories that matter to you. Have your say on all the latest developments in IT – and find out what your fellow readers think too.
Visit Computing.co.uk/news

Computing Comment – The most extensive collection of expert blogs in IT. Some of the most influential IT leaders, academics and business groups in the UK bring you their views, along with blogs from the Computing team. Have your say – this is your chance to enter into debate with some of the most senior individuals in IT.
Visit Computing.co.uk/comment

Computing TV – A regular weekly video programme examining the latest trends and technologies, plus exclusive interviews and case studies. You can also watch daily business and science TV news bulletins from Reuters and Associated Press, and attend regular live web seminars examining key IT issues.
Visit Computing.co.uk/audio-video

Computing podcasts – Listen or subscribe to our weekly discussion show, featuring the Computing team examining the issues behind the latest IT news.
Visit Computing.co.uk/audio-video

Computing Community – Meet, discuss, and share your experiences with fellow IT managers and professionals through our exclusive forums. Take part in our Forum of the Week and regular online polls.
Visit Computing.co.uk/community

Knowledge Centres – Everything you need to know about the hot topics in IT, all in one place. Twelve knowledge centres combine all the news, analysis, comment, videos, podcasts, white papers and jobs into one easy-to-find web page.
Visit Computing.co.uk/knowledge

Best of the Web – A round-up of the stories from around the world that have caught our eye. Let us do all the searching for you about news on the latest emerging IT trends.
Visit Computing.co.uk/news

Plus you can still find the same high-quality journalism, breaking stories, exclusive news, insightful analysis and career development advice that you have come to expect from Computing, in print and online.

And in keeping with the spirit of reader feedback that underpins Computing.co.uk, we want to know what you think about the new content and design – please leave your comments on this blog or send an email to feedback@computing.co.uk.

I hope you enjoy the new site.

What do you buy from Amazon? Books, CDs, DVDs, games, perhaps. But how about a bit of spare processing power, or some storage, or maybe even a few virtual server environments?

Amazon, one of the web’s biggest and best-known retailers, could be about to become part of your IT department, and not just because it sells the latest Microsoft certification manuals.

Last month, the company quietly launched in the US a beta-test version of a pay-as-you-go utility computing service, with the rather obscure name of Elastic Compute Cloud. Amazon describes this as a ‘true virtual computing environment’ that allows users to run up to 20 virtual servers within the firm’s own data centre, each the equivalent of a system with a 1.7GHz Xeon processor, 1.75GB of memory, 160GB of local disk and 250Mbit/s of network bandwidth.

The whole shebang is managed and controlled using a set of standard web services commands, charged only on the basis of what is used, and can be set up and switched off as you like. For example, each virtual server costs just 10 cents an hour; internet traffic is charged at 20 cents per gigabyte, plus 15 cents per month for each gigabyte of Amazon’s on-demand storage. Customers can use the system as they like to run applications, host web servers, store databases or just use spare disk space. How does that compare with your operational running costs?

The service sounds as close to the goal of genuine utility computing as you can find, only from an online department store. Plenty of major suppliers, notably IBM, HP and Sun Microsystems, have talked for some time about the goal of IT as a utility, provided in the same way as electricity or telephony. In most cases, the pay-as-you-go aspects were often a commercial or contractual fudge, spreading the cost out over a period of time for fixed resources with an element of spare capacity when needed. Sun launched a ‘$1 per processor per hour’ grid computing service in 2004 but achieved limited take up. Specialist software-as-a-service providers such as Salesforce.com also offer business applications on a per-user model.

The potential for major IT users offering a utility service has intriguing possibilities. There have been rumours that Google will soon offer something similar as it builds out its giant data centre in Oregon. No doubt eBay is also paying close attention. Who next? Value Computer Power coming soon from Tesco, bonus loyalty points available? Amazon’s move suggests that widespread pay-as-you-go utility computing may not be so far away.

About three or four years ago, offshore outsourcing was a hugely controversial topic – enough to make the front page of the Daily Mail if a major call centre was outsourced to India.

Even within the IT community, it was a subject that induced much fear and loathing. Any writers for this magazine’s mothership, Computing, who dared suggest that offshoring was actually a good thing, and that the real issue was not jobs being sent to India, but the lack of skills training and development in the UK, were met with a vociferous response from certain readers.

And I mean really vociferous, sometimes personal, occasionally offensive, and all too often not without a hint of xenophobia. Today, an article on offshoring raises barely a whisper.

When Computing first visited India in 2003, executives at outsourcing vendors in the subcontinent were openly fearful of the backlash – Western firms turning against offshoring, especially in the US where George Bush’s Presidential re-election campaign had majored on a protectionist attitude to IT jobs.

Today, Indian companies are starting to maintain and create jobs in the UK – witness Tata Consultancy Services’ takeover of Pearl’s insurance business last year.

There can be few areas of the IT industry where attitudes have changed so dramatically in such a short space of time. At last, the debate is turning to the challenges and opportunities presented by the rise of the Asian IT industry.

For UK IT leaders, it will become increasingly difficult to ignore the effect of India and China. More and more firms bringing in suppliers to help with software development, application maintenance or technical support will find that at least part of that service is delivered from India. And more of the hardware being purchased will be manufactured in China.

An understanding of the Asian effect will be an important part of the role for chief information officers (CIOs).

Employers and headhunters will be attracted to those IT experts that can demonstrate experience of dealing with Indian firms and an appreciation of how they can help improve IT strategy for the good of the company.

And for some of the most ambitious CIOs, time spent working or on secondment in China and India will make for a powerful CV.

The acceptance of offshore outsourcing is a good thing. The opportunity for CIOs that India and China offer is even better.