Archive for April, 2011

Cisco losing ground to competitors?

April 27th, 2011

Cisco Systems’ chief executive has announced plans for a company shake-up in the face declining investor confidence. In the e-mailed call to action to Cisco’s 73,000 employees, John Chambers said that while company’s strategy was sound, aspects of its operational execution were not. “We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders. That is unacceptable,” he wrote.

Chambers said Cisco would refocus on its core markets in routers and switching, collaboration, datacentre virtualisation and video. Investors are concerned about Cisco’s perceived over-expansion into new and low-margin businesses such as consumer products. Investors are also concerned that competitors such as HP, Oracle, Juniper Networks and Aruba Networks and China’s equipment maker Huawei Technologies are starting to eat into Cisco’s core switch and router markets.

While the Nasdaq Composite has risen 15% in the past year, Cisco’s share price has fallen 35% as the company missed sales targets and profits declined. Chambers did not detail what form the shake-up will take, but analysts say it is likely that Cisco is preparing to cut back in consumer products after years of expansion.

Sounds like a great time to be negotiating aggressive discounts from Cisco!

Cloud contracts stalled by existing support/maintenance

April 20th, 2011

A survey of 200 IT directors within large enterprise organisations has found that IT directors are worried about the potential management headaches of cloud computing. The Vanson Bourne survey reported that 71% of IT directors are concerned about the potential management complexity cloud services will bring.

Current maintenance, support and managed service contracts act as a barrier to moving IT services into the cloud among 57% of IT directors surveyed. Such contracts would lead to delays in them deploying some cloud services.

Often organisations will have three-year to five-year fixed-term contracts for in-house software or hardware maintenance and support. Many will be worried that if they migrate to a cloud model now they will still be committed to legacy contracts that they will not utilise.

If cloud adoption is to be accelerated, this problem must be addressed by suppliers and service providers. With the rate of change increasing, and new delivery and financial models coming to the fore, a more flexible approach to contracts needs to emerge.

The concern now is how to make it work for the business and how to manage cloud-based services once they are implemented.

CSC to acquire troubled NHS supplier iSoft

April 12th, 2011

IT services giant CSC has agreed to acquire troubled healthcare software firm iSoft after the latter suspended shares and put itself up for sale last month. Experts say the acquisition was necessary for CSC to preserve its contracts with the NHS, which are under intense scrutiny after continued delays.

The Department of Health (DH) recently said it was considering scrapping its contract with CSC to implement iSoft’s Lorenzo Care Records Service for the NHS.

The DH has formally notified CSC that it has breached its contract by missing a key milestone and is considering whether to terminate the contract.

Anyone else using iSoft should be checking their contract to see whether CSC can increase iSoft support costs while also reviewing the value that the software brings.

Supplier reduction programmes – Do they work?

April 5th, 2011

Leverage is a powerful procurement tool and using that appropriately may well mean fewer suppliers as buyers look to concentrate volume and get a cost reduction in return.  But other justifications for cutting supplier numbers are often somewhat spurious; the real administrative savings (as opposed to the claimed) from simple reduction in numbers is limited, and the ‘management focus’ argument is weak; does I really matter if you have 10,000 or 6,000 or 2,000, unless you have a very large procurement department you’ll never really ‘manage’ more than a couple of dozen suppliers really well.

And the negatives? Forcing suppliers into moving down the supply chain to work through a Prime Contractor relationship which actually adds cost (the Prime’s margin for a start) just to be able to claim a ‘supplier reduction’. It reduces competition and increasing reliance on a small number of suppliers. And it kicks out potentially valuable, innovative suppliers.

So how many suppliers do you need? OK, that is probably fewer than you have now. But that may not be the case for all categories.