Recent weeks has seen a controversial outsourcing contract at Cornwall council in the news. The controversy has led to council resignations and a vote of no confidence in the leader.

Read this blog to see how the whole saga unfolded: What now for Cornwall Council outsourcing?

I have used the story as an opportunity to run a survey to get peoples' views on outsourcing in local government. I have now had 64 people respond to my survey.

- 48 said that local government services should not be run by private companies.

- 11 said they should and 5 said they didn't mind.

Below is the survey if you want to add your views and some weight to the sample.

The survey asked people for the reason for their answer. Not everyone gave a reason but here are some of the comments already left.

Those against outsourcing local government services said the reasons not to are:

"Security concerns on data."

"Conflict of interests."

"Private companies tend not to be accountable to the public."

"Private companies have the shareholder and profit as there number one motive, public sector, if run effectively, is run for the customer & value for money for the taxpayer."

"Because we are living in a democracy, and the decision needs to be made by the people."

"Local government should not be run for profit. This sort of thing will lead to conflict of interest."

"It's undemocratic."

"Loss of control and worse staff conditions."

"Because private companies over-promise and under-deliver."

"History proves low value - low accountability - no genuine outsourcing of risk."

"Loss of democratic control and flexibility."

"Too many failures and cost to the tax payer."

"Same staff, same salaries, profit for company, how can that be cheaper? By cutting back on staff, which is what Mouchel are doing in IT at Bournemouth."

"Complexity of services will never fit a solely for profit model."

Those that said local government services should be outsourced said:

"Cost savings less bureaucracy."

"Best value."

"Because private companies have access to economies of scale and expertise that no local government organisation can ever access."

"Because private companies use current and up to date practices."

"Better service and better value, councils should be run for their consumers not their employees."

"Many times government needs the employee for short term projects and it's not possible every time to recruit. On that time is better to deal with private company to recruit the people for the short time."

"Why not?"

Those that don't mind if local government services are outsourced said:

"It's about what is best for the resident/citizen and provides public purpose value to them at an acceptable cost.

Judging by this survey there could be a few outsourcing U-turns on the horizon.

What do you think?

It would seem strange if your IT service provider didn't provide its own internal IT services.

Mind you it would be less surprising if it had a different version of IT service for itself.

According to Frank Modruson, Accenture's CIO who I interviewed last week , the outsourcing giant outsources all of its IT to itself. Well apart from certain niches where it uses third parties.

So its departments use the various Accenture delivery units for all its services.

Modruson is internal IT head so, like Accenture's CIO customers, he has responsibility for IT strategy and just outsources the work.

He told me that despite his role not being customer facing he regularly meets customers to discuss issues with them issues they face and he shares with them how Accenture deals with it internally.  Mind you it is not all one way traffic. He says he gets good ideas from customers which he uses.

He said that supplying IT to Accenture's staff means that there are about 270,000 consultants that can do parts of your job watching your every move. But Moduson says this is great. Not only does he supply IT to people that are passionate about IT, but he also gets a lot of free advice.

CIO interview: Frank Modruson. Accenture.

It has been an interesting couple of weeks at Cornwall Council. We have seen the political ramifications of outsourcing public sector services played out at the council.

At the end of last month I picked up a story on www.thisiscornwall.co.uk which revealed that the leader of Cornwall Council was facing a no confidence vote in relation to a proposed shared services deal, with either BT or CSC to provide services such as libraries, benefits, payroll and IT services.
 
Councillors were unhappy about the fact that the council leader was trying to push the decision on the outsourcing contract through the cabinet, hence bypassing a full vote in council. They were calling for a confidence vote over Alec Robertson's leadership of the council.

Councillor Rob Nolan told me at the time that he thought the move to shared services should be a decision taken by the full council.

"We even had a vote of the full council and 46 members out of 123 voted against it, 29 voted for it. But the council counted those that abstained as voting for it," said Nolan.

Nolan said that, although he is not a proponent of shared services, it is the fact that such a fundamental change is not being decided by full council that is the area of contention for him.
See the interview with Nolan here and more from him and another councillor here.

I then blogged about the man driving to outsourcing deal, CEO Kevin Lavery, who has worked for BT and Serco in the past.  It seems Lavery, who is responsible for a £1bn budget at Cornwall council, is a bit of an expert on shared services. Read more here.

Then the deputy leader Jim Currie of the council resigned over the issue. See his resignation letter here.

Then yesterday the confidence vote over Robertson's leadership was held. Robertson lost by 63 votes to 49.

Soon after this it was announced that Jim Currie who had resigned as deputy leader was now leader.

So the deal with either CSC or BT would be dead in the water then? Well according to reports one of the suppliers has pulled out. But who knows?

The proposed outsourcing strategy at Cornwall council looks doomed to fail as the new leader is voted in because he is against the proposal.

Earlier today Cornwall Council's leader Alec Robertson lost a confidence vote following a controversial plan to outsource certain services, including IT, recently. The proposed deal with either BT or CSC is worth hundreds of millions of pounds.

News hot of the press is that his deputy, Jim Currie, who stepped down from the cabinet earlier citing differences of opinion related to the proposed outsourcing, has been voted in as leader.

He is against the outsourcing plan. Read his resignation letter here.  So I don't see that being approved in the near future.

What a day for Cornwall council. And what a day for local government outsourcing.

Tell me what you think of outsourcing local government services to private companies.

If you think outsourcing isn't controversial think again. I have been writing about Cornwall council's plan to outsource certain services, including IT, recently. The proposed deal with either BT or CSC is worth hundreds of millions of pounds.

The council leader Alec Robertson wanted to make the decision in cabinet, bypassing a full council vote. This was his downfall has it led to a confidence vote. The vote today went against him 63 to 49, leaving the council's Conservative party looking for a new leader. His deputy had already resigned from the cabinet over the issue.

Councillors did not feel that something that would change council services as fundamentally as the proposed outsource should bypass full council.

I suppose Robertson was concerned that full council would have voted against it.
This story highlights just how controversial and difficult public sector outsourcing can be.

Read more about the proposed Cornwall council outsourcing deal here.

Do you think local government services should be carried out by private companies?

I wrote an article yesterday about Banco Santander's decision to pull out of a multi-billion pound deal with RBS to take over 316 branches and the accounts tied to them.

There were several reports claiming that problems integrating IT made the deal less attractive and as a result Banco Santander pulled out of the deal.

When I called a few people in the sector the general feeling was that IT was just being used as an excuse. It seems the deal might not be as convenient for Banco Santander as it was.
More weight is added to the argument that IT was used as an excuse if you look at Banco Santander's strong record in integration acquisitions.

In recent years the bank has acquired companies such as Abbey and Alliance and Leicester. Part of this strategy is to make huge IT savings by moving acquisitions into its core banking platform Partenon (see list at the foot of this post for information about Banco Santander's acquisitions and IT migrations.)

OK this is not necessarily an outsourcing story but one reader did point out that if there are integration problems it could be the result of offshoring work. RBS has offshored thousands of jobs and many people with a deep understanding of legacy systems have gone.

One reader said it seems unlikely that IT concerns would be the whole reason for this decision, but that RBS's policy of offshoring IT work might be part of the problem. "On the other hand, any major migration project depends critically on having people around who understand the old system. RBS demonstrated quite forcefully this summer (when systems went down) that after firing most of its UK IT staff and shipping the work offshore, it no longer has much of a clue about how its own IT systems work," said the reader.

In 2008 I wrote an article about the challenges facing German banks Commerzbank and Dresdner Bank in their attempt to merge and make huge IT savings as a result.  German banks use more proprietary systems than UK banks because of the complexities of German banking regulation so IT is even more complicated. It seems the banks have systems that nobody today understands. This is an extreme example but If you outsource or offshore too many people you will lose knowledge.

Banco Santander UK Acquisitions:

October 2004: bought Abbey for £9.5bn planned to reduce costs by £300m

July 2008: agrees £1.3bn takeover of Alliance and Leicester and expects to make efficiency savings of between £30m and £50m

September 2008: £612m acquisition of Bradford & Bingley agreed.

What Abbey's integration to Partenon involved:

All customer records moved onto a single database, reducing the total number from 52 million to 20 million.

Abbey moved ten million savings accounts, four million current accounts and eight million card accounts to Partenon.

Renewed entire branch communications network.

Built more than 45,000 portals for staff and third-party organisations

Created a back-up datacentre infrastructure

Provided face to-face and e-learning, about new ways of working, to 25,000 staff

Earlier this month I wrote about how a plan to outsource services, including IT, at Cornwall Council was causing serious friction.

The council leader Alec Robertson was proposing an outsourcing deal with either BT or CSC to provide services such as libraries, benefits, payroll and IT services. The plan was to push on with the deal even without a full majority vote in full council.

But councillors were very unhappy about this and there were calls for a confidence vote on the leader and a petition was signed by thousands of citizens. Councillors did not believe that a decision that would change how the council provides services fundamentally could be made in cabinet alone. They insisted it should be full council.

But according to this article l  Robertson has done a U-turn, saying of more councillors vote against the deal it will not go forward.

Tomorrow will see the vote of confidence so Robertson might lose his position.
His deputy, Jim Currie, has already stepped out of the cabinet over the issue. I recommend you read a copy of his resignation letter here.

I will get the result of tomorrow's confidence vote and blog about it as soon as I can.

Please fill in this questionnaire if you want to shar your views on local government outsourcing.

I recently blogged about opposition to plans at Cornwall Council to outsource services, including IT.

I took the opportunity to do a survey to find out people's views on local government outsourcing. A controversial subject.

So far I have had a small response. Only 23 have filled in the questionnaire so nothing can really be taken from it apart from the fact that 18 out of 23 said local government services should not be outsourced to private companies.

Two said yes they should and three said they didn't know.

Below is the survey if you want to add your views and some weight to the sample.  Here are some of the comments already left.

The neighsayers said the reasons not to outsource local government services are:

"Security concerns on data."

"Conflict of interests."

"Private companies tend not to be accountable to the public."

"Private companies have the shareholder and profit as there number one motive, public sector, if run effectively, is run for the customer & value for money for the taxpayer."

Those that said local government services should be outsourced said:

"Cost savings less bureaucracy."

"Best value."

Those that don't mind if local government services are outsourced said:

"It's about what is best for the resident/citizen and provides public purpose value to them at an acceptable cost."

Yes banks are more interested in their IT suppliers understanding core business processes than the cloud or specific software. This is a warning to suppliers.

I blogged recently about how banks are the still the biggest spenders in the IT outsourcing sector. I also asked the question what are the spending money on.

Here is the post I wrote: Banks still biggest IT outsourcers but where is the money going?

It was based on the findings of a large report from KPMG.

Fujitsu have this time kindly provided information about what bank CIOs are planning over the next few years. The banking sector is not just the most interesting IT outsourcing sector because its massive spend but also because it was hit hardest by the downturn. It has had to change the most as a result of the crash, particularly as it was partly blamed.

Here is an article I wrote about Fujitsu's Financial Services Report.

Click the image below to view the entire report.

When outsourcing IT we all know that the challenges go far beyond choosing technology and suppliers.

Getting internal acceptance of an outsourcing agreement is, to the executive driving it what The Chair is to a horse running the Grand National.

At the Gartner Outsourcing Summit this week analyst Linda Cohen did a session on this.
She said as a result of IT outsourcing most IT departments are a hybrid of in-house and supplier staff. But she says to make outsourcing work they have to appear to the business as one.

Add to this the fact that you have multiple suppliers in a multisourced IT environment and you have a real mix of people. If these people cannot work together the business will notice.
She talked about the changes that outsourcing brings as being in three groups. These are obvious changes, subtle changes and inflammatory changes.

It is the inflammatory changes that have the biggest derailing impact on outsourcing projects and will remember. "Internal teams are wired for negativity and will remember the bad things more than the good things."

Cohen said change management must be carried out throughout the outsourcing process.
She said finding the right people to manage the process is essential. "Do not just put the people in charge of the part being outsourced in control."

She said watching someone else do your IT better is not pleasant.

I met up with Accenture's CIO today. Frank Modruson is the person responsible for the outsourcing giant's internal IT. I will be writing a long interview piece for Computer Weekly but I will blog a selection of what he said.

I thought his view on desktop virtualisation was controversial enough to blog about first.

He has been global CIO at Accenture for ten years and before that, from1987, he worked on the customer facing side at the company. So he has a good view of what CIOs want and what IT service providers can offer.

My title was intended to shock a bit. It is a bit controversial to describe one of the fastest growing technologies as a stop gap but when I asked Frank Modrusom about whether he was using it internally he said no.

"I do not need virtual desktops because in 2001 my predecessor decided to move to browser based applications," he said. He added if he bumped into that person today he would give him/her a big hug.

I listened to another CIO present recently at Computer Weekly's CW500 Club. He said the company does use desktop virtualisation so staff can access the applications they need from any device anywhere, providing they have an internet connection - but that in time he sees it as an interim technology that will eventually be discarded. So same functionality but different name.

Mind you Modruson did stress that if an organisation has not got the functionality required to enable applications to be accesses anywhere desktop virtualisation is a very effective and fast way of doing so.

"It is a way to get to the same situation quickly."

So how long will desktop virtualisation be a buzzword?

I have blogged recently about the trend for companies to outsource software testing. IT services forms are increasingly investing in their software testing capabilities.

This involves resources used to test whether the functionality is right, whether it does what it is supposed to. Suppliers are buying into methodologies such as the independent Test Maturity Model integrated (TMMi), which has five stages and ensures testing is carried out throughout the development process rather than when it is finished.

But service providers are also investing in technology to check the structural quality of the code well before the functionality testing takes place.

This is important because although software might be functional and do what it is supposed to, it might have little errors hidden away that become problems in the future.

I am not saying that banking failures such as, most recently a system error at Lloyds TSB causing customers problems, are the result of structural problems with software but if it is taking time to explain problems it could be.

Back to my point about IT services firms investing in analysing the structural quality of software. I met up with Lev Lesokhin from Cast Software yesterday. The company does analysis of the structural quality of software to find if there are errors that are overlooked in development that might cause future problems. It describes these as "critical violations".

Cast sells its services to both suppliers and direct to end user businesses. About 60% of sales are direct to end user businesses.

Its business customers include Wells Fargo, Deutsche Bank and the US army. These companies scan their software using the Cast software to catch potential future problems. This will save a lot of money that will be required for fixes, not to mention reducing the risk of reputational damage caused by failures.

Lev told me about the growing number of service providers that are now taking on the service. IBM and Capgemini have been customers for a while. It also works with companies like HCL, Mahindra Satyam and Steria. These companies are using this within their own software development teams to test quality and are offering the Cast product as a service. It has become a calling card for some.

I wanted to get people's views on this so please leave comments about the processes you use to check the structural quality of applications.

"No matter how angry you are don't smack your IT suppliers and make sure they don't play with each others' toys"

Multi-sourcing is embedded within most IT departments within large companies. Today it seems that the key question to answer for CIOs, rather than what to outsource, is: how do I manage multiple suppliers and ensure I get the best value?

Bringing in multiple suppliers to provide IT services introduces competitive tensions which, might lead to lower costs. The problem is the level of service might drop as suppliers have a smaller share of work.

I was at the Gartner Outsourcing Summit on Monday (08 September) and I went to two interesting presentations about managing multi-sourced IT delivery.

The presentations were from Jonathan Apted, global IS strategic relationship manager at agri-business Syngenta and Richard Boynett, CIO long-term savings at finance firm Old Mutual . These presentations were all about getting the best out of suppliers in a multi-sourced environment.

Read the Old Mutual case study here.

Read the Syngenta case study here.

It reminded me of an article I wrote after the Gartner event last year which was all about how BP manages its service provider ecosystem. BP is big enough to boss its suppliers but the principles are the same.

The recurring theme in both of Monday's presentations were how suppliers and their business customers should communicate well and how businesses should incentivise suppliers through opportunities rather than the risk of punishment. It's simple "if you do this job well you will have a good chance of winning a bigger job later on."

It is also important that suppliers within an ecosystem are not too competitive and stay in their own service tower. It's a bit like raising kids really.

Here are some of the key tips from people that have successful strategies to manage outsourcers.

-ensure relationships are mutually beneficial
-ensure internal that staff understand why things were changing. They might have relationships with suppliers.
- create separate groups of services and suppliers for them
- give suppliers the opportunity to expand that role in the future
- make it clear that you would rather have the service you paid for than the penalty money for failed delivery
- continuously engage with all the suppliers
- share information with suppliers about what you want from the deal and ask them what they want
- large penalties for missed targets can cripple partners. Make penalties progressive and allow suppliers to earn back penalty money if they have quick sustainable fixes
- work with the suppliers when you create SLAs and reduce there number
- invite suppliers to come forward with ideas for mutually beneficial approaches
-understand that both parties have to profit

Tell me about your multi-sourcing experiences.

I attended day one of Gartner's annual outsourcing summit in London.

I have been every year for about the last 5 years. The first thing I must say is that it was very busy.

So busy that another room had to be made available so everyone could at least hear the keynote and the guest keynote slot.

The guest speaker was Magnus Lindkvist, a trend spotter and futurist according to Gartner's programme. His presentation was very funny, unexpectedly so given that I was at a conference about outsourcing. Some people have a way of engaging an audience and Magnus Lindkvist is one of them.

He talked about why businesses should not just concern themselves with their competition but be creative.

Lindkvist said the problem with creating new things is scepticism from others who think a new idea won't work.

He also said businesses should not be afraid of failure and have a long term view on innovations. He said businesses have short term and that patience is a missing ingredient.

He said failure should be treated with respect and can be beneficial to future developments
He talked about how if Apple had given up on making mobile phones after its first attempt. Apple and Mortorola developed a phone known as the ROKR Phone in 2005. Lindkvist said there is one word to describe the phone and that is "shit."
 
But Apple didn't give up and look at its phone business now. Its iPhone business is bigger than Microsoft's entire business.

Lindkvist used another clever example of why business shouldn't give up on something that doesn't work out. He said the music single Torn, made famous by Australian singer Natalie Imbruglia had already been released by various Scandinavian bands with different levels of success until Imbruglia made it massive.

But then he showed a video which I found hilarious. It is all about starting off a trend but involves doing silly dances on hills.

See it for yourself.

I will blog more about my day at the Gartner summit and have a few articles to write. The biggest trend I noticed, which is by no means new, is the increased maturity of multi-sourcing models. In the past a multi-sourcing strategy meant using more than one IT services provider but today it is far more complicated and businesses are spending a lot of time putting together the rules and guidelines underpinning multi-sourcing strategies.

I saw presentations from finance firm Old Mutual and agri-business Syngenta about this which I will write about. But what are your experiences of multi-sourcing.

Today Lloyds TSB is having problems with ATMs and online banking  as a result of a yet to be identified system error.

See the article I wrote.

The interesting thing from an outsourcing point of view is the fact that back in July, when the Co-operative bank acquired thousands of Lloyds current account customers, Lloyds TSB agreed to provide a managed service to the Co-op for the accounts taken over.

And it turns out that the Co-operative bank is also having problems today. Mind you I called the press office and they said it is a complete coincidence and the Co-operative problems are completely unrelated to the Lloyds problems.

HP CEO Meg Whitman has said poor internal IT systems have hampered the business. She blamed the lack of compelling sales and customer relationship management (CRM) systems within the company for some of HP's problems. See her comments in this story.

Not only is this a poor reference for anyone thinking of outsourcing IT to HP but it also puts some blame on former CIO Randy Mott.

Perhaps Whitman is just having a dig at Mott because of his decision, as General Motors CIO, to insource all of its outsourced IT. Most of which is done by HP.

Whitman was talking about turning HP around when she mentioned the poor IT. Maybe she is thinking of outsourcing HP's internal IT. Who would be up for that job? EDS? No that one's lost its reputation. Perhaps IBM.

In my role at Computer Weekly (services editor) I unsurprisingly spend a lot of time speaking to IT service providers.

One of the things they have been talking about recently is the demand from customers for services in mobile, cloud and social media.
 
For example Cognizant talks about what it describes as the SMAC stack. This is social, mobile, analytics and cloud.

When you speak to suppliers as a journalist you obviously have to take things with a pinch of salt.

But last night I got to hear IT leaders within businesses talking about mobile, cloud and social media.

The CW500 Club featured presentations from two IT heads. Chris Hewertson, the CIO of Colt Telecom and BA's head of Service Transformation at British Airways  Glenn Morgan.
It was great to hear about the large amount of working being put into enabling both staff to use mobile devices to do their work and customers to consume services. The cloud and social media is enabling a lot of this.

Chris Hewertson, CIO at Colt, talked about the company's bring your own device programme (BYOD) and the challenges associated with introducing that. This programme includes introducing Wi-Fi, enabling staff to use any device they want and Colt paying for the support. He talked about desktop virtualisation and the importance of workers having the same tools to work regardless of where they are.

He said the company had focussed its investment on the technology that serve its customers and is now investing in technology to support its own operation.

Meanwhile Morgan talked about the criticality of mobile to BA and its customers. He talked about mobile applications for customers, such as check in and choosing where to sit as well as providing staff with the devices they want.

So it seems big companies are now spending on social, mobile and cloud rather than just thinking about it.

What are you doing in these areas?

Interesting story today that India's biggest IT services firm has won a major government contract from under the nose of the UK's Capita.

According to the Public and Commercial Services Union, "Capita members who work on the Criminal Records Contract in Liverpool have been informed that the Home Office has announced its intention to award the DBS contract to Tata Consultancy Services (TCS). The Home Office is currently finalising discussions with TCS on the implementations plans of the 5 year contract which will start in 2013."

Capita has been running the Criminal Records disclosure service for over 10 years. The contract is worth hundreds of millions.  It had been shortlisted for a contract on the government's new Disclosure and Barring Service (DBS). But it looks like TCS has got it.
DBS is the merger between the Criminal Records Bureau, that helps employers make recruitment decisions, and the Independent Safeguarding Authority, which prevents unsuitable people from working in certain places.

With cost cutting on the agenda in government it was only a matter of time that Indian firms started winning government contracts. Even sensitive ones it seems.

How far will the coalition go in its bid to get the best price it can for services?

I have just had an interview with the CTO of WorldPay, Erik Toivonen, for a case study I wrote for Computer Weekly.

He told me about how the company is flexible about whether to insource or outsource and how some things are better done yourself.

When two investment companies took the former RBS division off the bank's hands when it was forced to sell assets, Toivonen was brought on board to create an IT infrastructure for the payment processor.

The reason I am blogging about it here is that fact that the project to create an IT infrastructure for a business that requires the tightest security and cannot afford downtime has an interesting take on outsourcing.

When WorldPay went it alone after breaking from RBS it had no IT infrastructure to run its payment processing business. It agreed with RBS to keep the transaction processing on its IT infrastructure until it could build its own.

This was a big job for a business that requires an infrastructure that is highly secure and always available.

To make matters worse it had 149 IT staff who were mainly software engineers and project managers with no IT infrastructure expertise.

So outsource you would think.

This is where it is interesting. It has used a mixed bag.

The first decision to make was about datacentres. It went for a co-location datacentre from SunGard. This was the two buildings only. Then it looked at system integrators to see who could build the IT infrastructure to sit inside.

Toivonen said it was the usual suspects. The likes of HP, IBM, Capgemini, Infosys etc.
But in the end WorldPay decided to build the IT infrastructure itself and hired people with the right skills to do so. It now has a total of 350 IT staff including those working via an outsourcing supplier.

Toivonen said the reason it did it itself was because of the risk. He says it would have been really difficult to get a supplier to sign up to the level of risk required. Any downtime or security breach to a service that transacts millions of people's banking details is about as high risk as it can get.

So it outsourced the building of the datacentres and insourced the building of the IT infrastructure that sits in it. It did however hire the expertise of a consultancy, Xceed Group, to help it plan the infrastructure and used a system integrator for what Toivonen described as discovery, which is about working out what you need.

He also says the company outsources other functions where appropriate. This includes security, although the overall security leadership comes from Toivonen and his internal team.
So it is a bit of a pick and mix and shows that the options are there for outsourcing whatever you want. It is also a good example that helps explain why multi-sourcing is on the up.

Is there a company in the world that doesn't outsource something? I doubt it. Even companies like WorldPay with extremely high risks and security demands can outsource. It is a case of outsourcing where appropriate and retaining checks and balances.

Back in March I reported about HP losing its big contract with Rolls Royce. This was a contract to provide all of its outsourcing needs, which was won by EDS 12 years ago.

Capgemini was named by Rolls Royce as its service integrator to manage its multi-sourced outsourcing environment. This was a blow to HP, which is attempting to boost its reputation as an IT service provider on the back of EDS's good name.

It meant that a lot of HP contracts at Rolls Royce could be under threat.

But news today that HP has won a contract renewal from Rolls Royce to host its applications in its datacentres as well as manage the Rolls-Royce remote server and storage environments in Brazil, Canada, France, Germany and Norway, shows that all is not lost.

Robert Morgan, director at sourcing broker Burnt-Oak Partners said at the time of the Roll Royce deal with Capgemini that it did not mean that HP has lost everything but a case of HP  losing the moral high ground.

But he did say it could be the beginning of a gradual reduction in the amount of revenue HP gets from Rolls Royce. He expects perhaps a 30% reduction in HPs revenue with Rolls Royce quite quickly.

Changing datacentre provider would have been a big step. With a highly commoditised service such as this it is difficult to look further than the big players such as HP or Fujitsu. But in other areas, such as the cloud, HP might find it difficult to compete.

HP has not had the best of times with its EDS acquisition. It recently wrote down $8bn from its EDS business, which it acquired for $13.9bn.