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Bulletin Global It Delivery Shifts To Spain

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First Value Shore Bulletin- reviewing the potential IT services available in Spain and getting an advisor\'s view of the considerations for sourcing IT services in Spain.

First Value Shore Bulletin- reviewing the potential IT services available in Spain and getting an advisor\'s view of the considerations for sourcing IT services in Spain.

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  • 1. Issue #1 of the Value Shore Bulletin March 2010 Global IT Delivery Shifts to Spain Spain, Your Destination for IT Sourcing
  • 2. Accenture · Altran · Atos Origin · Capgemini · Delaware Deloitte · Ernst&Young · Everis · Hay Group · IBM · Indra Informática El Corte Inglés · INSA · IOR · Matchmind Neoris · Oesía · PricewaterhouseCoopers · Sadiel · Steria T-Systems · Tea-Cegos · Tecnocom · Unisys · VASS
  • 3. Welcome to this, the inaugural issue of the Value Shore bulletin. Value Shore represents a collaboration of 25 of Spain’s leading IT consulting firms aimed at promoting Spain as a nearshore innovation hub for firms in the UK, Germany, the Nordic and the Netherlands. Spain offers the same proximity benefits as other European nearshore destinations for IT service delivery but suffers from poor perception. A powerful set of competitive differentiators, however, include a large, well-qualified IT labour pool, world- class industry expertise, competitive software development rates Euan Davis (driven by industrialized software factories), and the potential to Forrester Research scale through Latin American resources. Value Shore sees more firms from the Western and Northern Europe harnessing Spain for low-risk software development, functional process expertise, or business process transformation. Firms report that the costs involved from sourcing Spanish IT services correlates to high levels of service competence. This bulletin offers a quarterly update into relevant news and features from Spain as your Value Shore destination. In this issue we interview one of the leading lights from the Value Shore Team and we turn the spotlight on Spain’s banking behemoth Santander to understand how its Spanish factory model has allowed the bank to thrive where others have badly suffered during the past 12 months. So sit back and enjoy this inaugural issue of the Value Shore Bulletin and don’t hesitate to contact Team Value Shore with any queries or follow-ups. In this Issue… 2 / Executive Insights: José de Rafael from Value Shore 5 / How Santander Leverages Spain as a Value Shore Destination 8 / IT news roundup Q1 2010 10 / Key contract information 11 / Diary Dates 12 / Further information about Value Shore All the document has been written by Euan Davis, Principal Analyst at Forrester Research Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 1
  • 4. INTERVIEW Executive Insights: José de Rafael from Value Shore With the inaugural issue of the Value Shore Bulletin we welcome José de Rafael to give us his views. José is the CEO of the AEC— the Association of Spanish Consultants—and was responsible for setting up the Value Shore. José has been active in promoting Spain as an innovation hub for European firms. So José, the obvious question—why Spain? While other localization options are based on low labour costs and the training and level of their resources, Spain offers additional value through business knowledge and experience, specializing in processes and developed sector-specific solu- tions. In addition, Spain’s geographical and cultural proximity to nearby countries with significant technological demand makes it possible to set up closer collaborative working models based on the nearshore concept. So do you think Spain can rival India as an offshore destination? Actually no, I don’t think that Spain can rival India as an offshore des- tination—I believe Spain should be seen as complementary to India or other offshore destinations as each destination and its providers can offer different benefits. The fact is that many companies are now moving to multisourcing so they source providers most apt for the specific needs of a project and thus obtain the best results. Are there specific industries that are tapping Spain for its innova- tion expertise? Yes, and its Europe’s best-kept secret! Several of the larger providers have built solution centers to tap Spain’s dominance in financial services as an example. We believe through Value Shore that this expertise could provide huge benefits to our European neighbours. As I mentioned earlier, Spain harbors some of the most innovative busi- ness practices in the IT sector, and this is one of the principal reasons 2
  • 5. that Spanish companies are beginning to make their mark in industries such as the retail, energy, and of course, financial services across Europe. What about the ICT industry in Spain? Tell me about the techni- cal capability of the Spanish workforce? The IT sector in Spain is supported by our university system and the thousands of students that graduate each year. In Spain we have over 40 telecom universities and 65 IT universities, and approximately 13,500 science and technology students graduate from these universities each year. Almost 20% of 25 to 64 year olds are science and technology graduates in comparison with around 10% in Poland, which is the next-nearest offshoring destination. I hear about Spain’s Factory model for software development— what is it and why is it so successful? Before offshoring was stable and mature, a significant number of global IT firms chose Spain as the right location for software factories to serve European firms. Spain had low labour costs, and providers successfully conducted complex IT pro- grams (see, for example, Accenture’s Malaga software center created over 10 years ago). As offshore took off, these factories continued being competitive because of the quality, reusability, and industry expertise coupled with the industrialization initiatives taking place. Most of these centres are still actively paired with offshore factories marrying together deep domain skills from Spain and lower labour costs offshore. Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 3
  • 6. What about the language—would this be a problem? Language is necessary for communication, but my experience shows that technical language in an IT environment is of an international standard and common knowledge to technology graduates. Textbooks are written in English and make use of specific technical jargon. Don’t forget what is essential for fluid communication is cultural affinity—Spain is a major European coun- try and its culture syncs to other European nations. This cultural affinity reduces misunderstandings and simplifies unspoken communication. What about the Spanish economy—should prospective firms worry? There is a lot of noise about the Spanish economy, and it’s been exaggerated. Only a few industries are really heavily hit by the cri- sis—Spanish real estate and construction. Spain’s financial firms remain in a stronger position than those from other regions, and Spain’s larger firms continue to perform reasonably well. For Spain’s IT companies attrition has dropped, and they feel they can now play a valuable role in helping European companies to be more successful in IT large soft- ware implementations and outsourcing deals—industry know-how, IT expertise, and large program management skills are available at a great value-cost-risk point. It looks good on paper but where should firms start—through an intermediary? There are two ways firms outsource to Spain. Firstly, there are smaller companies nervous about offshoring in India that choose to mitigate risk by nearshoring to Spain. Secondly, there are larger, more mature companies (in outsourcing terms) that include Spanish vendors in their sourcing portfolio to leverage the benefits that Spain offers. In both cases the AEC and Value Shore offers support. Value Shore is a platform to provide outsourcing partner selection service, helping firms identify the right partner to enable them to take advantage of the innovation and cost- savings available in Spain. Value Shore was developed by a combination of both global and local IT consultancies including organizing site visits, providing legal support and offering independent quality control during the course of the outsourcing project. Thank you, José 4
  • 7. ARTICLE Spotlight on Santander: Leveraging Spain’s High-End Skills This quarter we focus on a giant in the world of Banking—Spain’s Santander. From a small bank founded in the Northern Spanish city of Santander to one of the most successful banks to weather the great financial storm—Spain’s most successful bank now owns a commanding presence on the UK high street through its acquisition of Abbey National, among others. The rest of the industry will look at Santander’s IT factory model with envy as it leverages Spain as its nearshore strategy. Fact Box 2009 Profits € 8.9 billion Revenue by geography Continental Europe, 48%; Latin, America 36%; UK, 16% Branch offices 14.000 worldwide Shareholders 3.2 million IT organization Isban—the strategic IT development arm of Group Santander—employs over 10,000 people worldwide IT is at the heart of Santander’s success How important technology is to Santander and how much it relies on Spain as a technology hub is a given. This quote from Santander’s legend- ary chairman, Emilo Botin, demonstrates the importance that technology plays in the bank’s success: “[Our] modern technological platform allows us to establish a compre- hensive relationship with our customers, making it possible to combine a high quality of service with a tightly controlled cost curve.” The acquisition run in the UK will see the bank’s architectural savvy and sourcing model design support the strategic integration of Abbey, among its other UK acquisitions, with Santander’s technology platform. Santander works to deploy standard banking products that are controlled by its various business units. Its banking products need minimal configu- ration for local markets irrespective if they are markets in the UK or Latin America. Technology and a factory model is the key to the bank’s success. Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 5
  • 8. IT efficiency is first and foremost Santander aims to become the most efficient bank in every geographical market that it serves, and this objective goes right to the heart of its IT strategy. IT efficiency for Santander is a trinity between keeping IT costs down; increasing quality of IT ser- vices; and managing the risk from across its IT investments. This three-point focus on efficiency relies on a manufacturing factory model for software development. Santander views this as an internal global delivery model and it has been developed by its wholly owned subsidiary, Isban. Santander’s manufacturing model delivers consistent service Isban is responsible for delivering strategic application development services to business units and the products that each one needs to innovate and build on. Isban represents one-half of the manufacturing model with another subsidiary, “Produban,” responsible for infrastructure support services. What’s clear is that Santander’s manu- facturing model for software development is vital to Santander’s success, and it must adapt to wide changes in demand—right now it is integrating three banks in the UK, two in Germany, and one apiece in Brazil and the UK. Capturing local knowledge is important in addition to running a lean cost structure from its factory model in Spain. 6
  • 9. Spain provides Santander with a nearshore hub Santander’s global delivery model centers on its software labs located in the Spanish capital Madrid. These labs control the architecture and coding work that needs to be done or to support key integration programs. Core development for the banking applications happens in the labs and can be subcontracted to third-party developers around Spain for added capacity. The final code is tested at the hub and then sent to the overseas entity and integrated locally. Although the architecture and development take place in the Madrid hub (which Santander views as a nearshore entity) the architecture best practice is spread around the world through key personnel and a governance layer. A network of local delivery centers supports local integration requirements and can offer the tweaks that local product sets require for compliance. Governance glues the model together Santander recognizes that only strong governance underpins its use of Spain as a destination for high-end service delivery. Santander’s policing of the architecture is vital and it couples to a proprietary delivery methodology and sourcing model. A strong management team ensures the right architectural decisions are followed and connect to a sourcing model that flexes capacity from around the world. Partners are chosen because they know Santander’s business; they understand the systems; and they know what to do to comply with Santander’s methodology. Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 7
  • 10. NEWS IT News Roundup Q1 2010 This section of the bulletin reveals: Spain poSitionS for leaderShip in it Revealing the government’s desire to develop Spain as a nearshore destination saw the advisory board for the Telecommunications and Information Society (Catsi) meet in Q1 to discuss the second phase to the “Avanza” program. The initial Avanza program set out to strengthen Spain’s ICT credentials for coverage and connectiv- ity; Avanza 2 plans to maneuver Spain into a leadership position in the development and use of IT products and services in Europe over the next five years. The Avanza 2 program is organized into five strategic areas of action: infrastructure; trust and security; technology training; and digital content and services. Spain hoStS firSt MicroSoft innovation center for healthcare Valencia will be the location for the first Microsoft innovation center for healthcare technologies. Francisco Camps, president of the Generalitat Valenciana, and Mary Garaña, president of Microsoft Spain, signed an agreement for the formal establish- ment of joint facilities between the two parties. The new center will be designed as a world reference for innovation in healthcare according to both parties—the project sees the government investing over €0.8 million in the first two years, which Microsoft will match with technology, training, software, hardware, marketing, and support staff. innovation for new SMart grid technologieS Acciona and Indra are teaming up to develop new smart grids for recharging elec- tric cars and generating energy from renewable sources. The project, called Serve (Smart System Refilling Electric Vehicles) has been designed as an open platform that can be used by any agent that enters into this sector such as car manufacturers, electrical, and parking managers, among others. Spain’S telefonica joinS conSortiuM to Make telecoM greener A consortium led by Alcatel-Lucent on Monday outlined a research project aimed at tackling climate change by making telecom networks more energy efficient. The 8
  • 11. consortium involves leading mobile phone operators such as AT & T, China Mobile, and Spain’s Telefonica. The “Green touch” initiative has the support of the govern- ments of the US, UK, France, Korea, and Portugal and was presented in London in January. The first meeting of the consortium was devoted to establishing the five- year plan of the organization, which will see the initiative provide a reference network architecture and best practices. SpaniSh integrator indra deMonStrateS aviation expertiSe Indra sets out to modernize air traffic management for Peru, giving Peruvian airports the possibility to significantly increase the number of flights they operate while ensuring the highest level of safety. Indra has been engaged to develop a new control center for air traffic in Lima and deploy a network of stations of secondary surveillance radar covering almost all of the entire country’s airspace. The project has been awarded to Indra by the International Civil Aviation Organization through an international public tender for €24 million, and the implementation will run until December 2011. vodafone Spain in itS bid includeS cloud coMputing froM MicroSoft As a sign of things to come in 2010, expect to see telcos begin to offer cloud- based solutions from Spain. Vodafone and Microsoft gave additional details about their alliance announced over one year ago that offers Microsoft business services and software with the voice and data operator. Spain layS itS claiM to be the beSt place for Mobility The Mobile World Congress held in Barcelona in Q1 has established itself as the great fair of the mobile industry with organizers expecting over 55,000 visitors and 1,300 exhibitors. The event coincides with strong competition between handset manufacturers (Nokia, RIM, Apple, LG, and Samsung) and Internet ISVs (Microsoft and Google) and operators (Telefonica, Vodafone, and Orange) for the projected growth in applications. Spain’S tech Start-upS learn froM Silicon valley Twelve Spanish technology start-ups flew into Silicon Valley in California in March to learn how to innovate like the best of them. Apple, Google, Facebook, Yahoo, HP, Cisco, eBay, and Twitter began life in Silicon Valley, and the organizers of the trip— Spain’s Fundación Banesto with the support of ICEX—aim to help the region’s innova- tive start-ups to think globally and internationalize their business. The trip follows the assertion of Spain’s prime minister that the country leads the field in new technolo- gies—the government has tripled the budget of research and innovation since 2004. Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 9
  • 12. Key Contract Information This section of the bulletin details key contracts won in Spain in Q1 2010. Client Provider Details Length Volume European Agency Everis Framework contract for 3 years € 10 million (Public Sector) application development Saudi Arabia Everis Development of 15 months € 3 million Ministry e-government platform (Public Sector) to support key business processes Pharmaceutical Ernst & Creation and Ongoing € Undisclosed Firm Young implementation of an European procure-to-pay shared service center Real Estate Firm Ernst & Bookkeeping BPO, tax Ongoing € Undisclosed Young compliance, and statutory annual accounts Cash Fulfillment Ernst & Payroll outsourcing Ongoing € Undisclosed Company Young Leader T-Systems Multi-year partnership 25 month € 27 million manufacturer contract to transform in Automotive the IT Baseline based on Sector profound knowledge of customer legacy systems and core processes: Harmonization of baseline services, application management and modernization in order to ensure service quality and adapt market standards and best practices (ITIL). Danone Tecnocom Application support; Ongoing € Undisclosed application maintenance (BI excellence center servicing >30 countries) 10
  • 13. Further Information about Value Shore Value Shore represents: Founded in 2008 by the AEC (the Spanish association of consulting firms), Value Shore represents a collaboration of the 25 leading consulting firms in Spain–active members include VASS, Atos Origin, everis, Ernst & Young, IBM, Indra, INSA, Oesía, T-Systems, and Tecnocom. Supporting members include Accenture, Altran, Capgemini, Delaware, Deloitte, Informática El Corte Ingles, Matchmind, Neoris, PricewaterhouseCoopers, Sadiel, Steria, and Unisys. Value Shore members represent over 80% of the total turnover of the management and technology consultancy market in Spain. Furthermore, they also employ over 60% of the professionals in the sector, represent in the interests of a market that moves €9.5 billion a year, and provide work to over 120,000 employees, 85,000 of whom are university graduates. Value Shore ensures companies have the information they need to shortlist prospective partners—this includes advising on the potential tax breaks offered by specific regions and organizing and funding site visits. Value Shore also has access to lawyers and contract specialists and can provide independent quality control during outsourcing projects to ensure both parties fulfill their contractual obligations. If you have the opportunity to be in Spain in the near future do not hesitate to contact Value Shore in advance. In addition to the original purpose of your trip Value Shore can provide you with the opportunity to better understand Spanish IT capabilities for your industry. Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 11
  • 14. Contact information: Value Shore UK Portland House 16th floor Bressenden Place London SW1E 5RS United Kingdom Telephone number: +44 (0) 20 7869 8071 Fax number: +44 (0) 20 7869 8001 Value Shore Spain C/ Monte Esquinza 34, 2 B 28010 Madrid Spain Telephone number: +34 91 308 01 61 Fax number: +34 91 391 35 93 valueshore@valueshore.org www.valueshore.org 12
  • 15. Value Shore Telephone Number: +44 (0) 20 7869 8071 valueshore@valueshore.org www.valueshore.org