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A 38 pages term paper on IMPACT ON I.T. INDUSTRY FROM THE SEPTEMBER,11,2001 TERRORIST ATTACKS

The terrorist attacks of September 11, 2001 are unique in their scope and frightful impact. Even though if we do not have any loved one who died in that traumatic attack, we all have been touched, at least indirectly by their deaths. Since, our country has never experienced event of this extent before; we are left with a very little information as how the people could have coped with this act of terror. In a year that saw dot-com turn to dot bomb, North Americans embraced technology into their lives in droves, almost to grudge the stalling economy. Then, when it seemed innovations could do no harm, North Americans watched in despair as technology dropped the ball on the day they needed it most. When future academics look back on last year, they will remember it for one disastrous event, though it was a year that saw landmarks in many aspects of the industry. And, as analysts and industry participants alike will say, there were problems looming at large long before September 11.

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The majority of channels shifting from direct loss of life and property to the impact on commodity markets reflect the complex web that constitutes the global economy. Prior to examining the channels in more detail it is worthwhile to have a look at the background in which the terrorist attacks occurred. The global slowdown in many technology businesses that had occurred in the United States in 2000 had, by mid 2001 had a synchronized economic slump across almost all regions of the world. This left the global economy to a susceptible negative impulse like wearing away of financial position of customers, corporation and government. Such difficult times are those, which also correlates to sentiments affected by negative shocks leading to abrupt decrease in private spending. In short, the fundamental impact of the terrorist attack was probably enhanced by particular controlling factors in which it occurred. Bearing in mind the attacks, the macro-economic conditions were hampered in following respects.

Life and Property:

This includes the sorrowful loss of human life, the cost of replacing buildings and equipment demolished in the attack, and the disruption of activities after the attacks on September 11, 2001.Furthermore the list of disruption includes the airline industry and related service provider industries like hotels, transportation, tourism, and restaurants, as well as the postal service in the wake of the anthrax scare.

The confidence channel:

An abrupt attack of the magnitude of September 11 changed the assessment of consumers and businessmen in a negative way. This consequential decline in the confidence about the future can reduce spending as opposed to savings.

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Financial Market Response:

By their nature, a financial instrument involves pledge over time and thus is affected by perception of future. Derivative markets render an insight into the level of skepticism in the market. Therefore, the September 11 attacks are of immense interest for the investors.

Commodity market:

Due to attacks on World Trade Center the commodity prices has decreased drastically, notably for the prices of oil. Slow activities after the attacks will decrease the demand for commodities and other goods sold in similar markets most notably the computer chips.

Here we will take into account the perception of different people who run affairs of their respective companies.

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The CEO of Markham, Ontario-based data-backup company Datamirror Corp., Nigel Stokes thought things were on the upswing after September 11 attacks. He has a firm belief it’s going to be a difficult first half of 2002, but they will be able to come out of this with a sense of purpose and hopefulness. It's easier for Stokes to be more optimistic than many CEOs because his business has seen an upturn since the attacks.

Jonathon Eunice, president and principal analyst at research group Illuminata Inc. said the downturn was well on its way before September. Sept. 11 just really transfixed the recession and indicated there was more of a malaise in terms of customer spending. Times were not great prior to the WTC disaster. For security, particularly for the biometrics folks, there was an immense uptake.

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Last year also witnessed personal computer sales drop off for the first time. In a year where economic woes were the norm, the technology industry scrambled to compete. Some attempts, like Microsoft's launch of its new operating system, XP, failed to attract buyers, a failure made worse by the lack of PC buyers. Survival is going to be the big theme after these attacks. There is quite a lot of growth opportunity, but getting at that opportunity is going to require fundamentally different approaches than have been successfully exploited in the past. Now, the industry has to understand the business problems that can be addressed with technology and apply in a meaningful way to business managers.

In a trend already occurring in worldwide workplaces, less travel and more reliance on electronic solutions to communication and meeting needs, the attack will accelerate their implementation. More organizations are working with video conferencing, Web conferencing, email, mailing lists, in-house or Intranet discussion boards and cell phones. The available technology, while not excluding the need for the human touch, is transforming how people meet and communicate in the workplace. Online training, CD training and virtual universities are also replacing some need to travel. This trend will accelerate over the next few years.

Personnel Loss:

Among those on the four planes hijacked Tuesday were employees from technology companies Cisco Systems, Oracle, Applied Materials, Compaq Computer, Akamai Technologies, Metrocall, MRV Communications, Netegrity, eLogic, Raytheon Company, Sun Microsystems, NextWave Telecom, BEA Systems, Vividence and 3Com.

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Cisco said Thursday that executive Suzanne Calley was among those killed when American Airlines flight 77 crashed into the Pentagon on Tuesday in Washington, D.C. Calley, 42, was in strategic marketing for the networking giant and was in the midst of a business trip.1

Software maker Oracle confirmed Thursday that Sales Account Manager Todd Beamer, 32, was onboard United Airlines flight 93, which crashed about 80 miles southeast of Pittsburgh, Penn.

Oracle continues to search for six consultants who were scheduled to be in the World Trade Center at the time of the attacks.

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Beamer, from Plainsboro, N.J., was the father to two boys, and his wife is due to give birth to a third child in January, Oracle Chief Marketing Officer Mark Jarvis said. "He was one of those guys excited by life and excited by Oracle," said Jarvis, who added that Beamer was always wearing a smile.2Applied Materials, the largest maker of chip manufacturing equipment, confirmed Thursday that one of its employees, Alona Avraham, perished onboard United Airlines flight 175. That was one of two planes that crashed into and destroyed the World Trade Center's twin towers. Avraham, 30, had been with the company for about a year as a manufacturing engineer associate, according to the company.

"Our hopes and thoughts are with the victims of these terrible tragedies and the families that they leave behind," James Morgan, chief executive of Applied Materials, said in a statement. "We are deeply saddened by the apparent loss of one of our own employees, Alona Avraham, who will be greatly missed.”3

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Compaq confirmed Thursday that Jeff Coombs, 42, was killed on American Airlines flight 11 bound from Boston to Los Angeles when it hit the World Trade Center. According to American Airlines, 92 people were on this flight.

Compaq said Coombs, who lived in Abington, Mass., served as a technology consultant for Compaq's global service division.4

Akamai, a Boston-based Internet infrastructure company, confirmed Wednesday that its co-founder was onboard one of the hijacked flights that crashed into New York's World Trade Center on Tuesday.

Daniel Lewin, Akamai's co-founder and chief technical officer, was onboard American Airlines flight 11, the company said.

"Danny was a wonderful human being. He will be deeply missed by his many friends at Akamai," Akamai Chief Executive George Conrades said in a statement. "Our thoughts and prayers are with Danny's family, friends and colleagues during this time of national tragedy and personal loss.5

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The attacks also affected the type of products in necessity. Interest in machinery for safeguarding PCs and networks increased slightly, while equipment for securing buildings, principally at airports, rose dramatically. Furthermore, in demand is applicant screening services, which fingerprint current and potential employees and run the results against a FBI database of, known offenders. Fresh concerns about security have put fingerprint readers, iris scanners, and other biometrics gear on the front burner, allowing businesses to choose on from a raft of products for securing access to buildings and computer networks. In the workplace, biometrics offers a mode to deal with ever- proliferating passwords as well as locking down applications. The biometrics industry earned some $523 million after the terrorist attacks, increasing to $729 million in 2002. A survey of end users found people were at ease having their fingerprint scanned, followed by their voice and their face. Biometrics isn't the only means for security issues. Finding name of a criminal through screening services depends on their fingerprints already being stored in a database of offenders. More advanced systems check for signs of life as well as a fingerprint match.

Democratic Senators are developing a $20 billion economic stimulus proposal that may allocate $1 billion for an IT fund. The money would be used for projects that serve to strengthen the security of critical infrastructures, federal computer systems and protection from catastrophes. People believe that there is no better use than bolstering our homeland defense through an IT Fund," says Leslie Phillips, communications director for the Senate Government Affairs Committee. Sources close to the matter say that IT companies may receive a large share of the overall-spending package as well.6

The slump in the tech sector has hit male and female professionals hard, but women seem to be losing more, according to a Catalyst study. Many of the top female executives in Silicon Valley have resigned or been laid off. There are differences of opinion on how women can rise in the industry, notes Catalyst President Sheila Wellington. Men consider that their promotion is based on merit, whereas the women polled believe it is more a matter of "who you know." Women have the added disadvantage of losing online communities, such as Girlgeeks and Women.com, as a result of the downturn. However, there is less evidence to suggest that gender issues are responsible for women finding it hard to attract venture capital. "I don't know that women are having a harder time getting funded than men," explains Denise Brosseau, director of the Foundation for Women Entrepreneurs. "There's no money to be had."7

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Rebuilding the IT infrastructure destroyed at the World Trade Center last month will cost $15.8 billion, according to research firm Computer Economics. Because the financial institutions housed there are so technologically dependent, the physical infrastructure losses are extremely high, including $8.1 billion to replace in-house operations and equipment. Additionally, telecommunications hubs and systems housed beneath the Trade Center will have to be replaced over the coming years as rebuilding continues. Computer Economics also predicts that the large companies displaced by the attacks will use this as an opportunity to bolster their IT infrastructure, especially in redundant Web hosting and data storage services. Computer Economics VP of Research Michael Erbschloe says the Nimda virus, released on Sept. 18, and the terrorist attacks highlight the security concerns of a combined physical and information-related assault.8

A host of technology firms have visited Washington in order to hawk their products that they say will help boost national security. Tech firms have lost considerable influence in Washington since the beginning of the downturn, seeing far less politicians visiting Silicon Valley to enlist support and cutting lobbying budgets. But some lawmakers, such as Rep. Mike Honda (D-Calif.), have sought the advice of tech firms in bolstering security measures. Federal Aviation Administration administrator Jane Garvey says her agency has taken 23,000 suggestions for new airline security measures since last month's terrorist hijackings, for example. Qualcomm is pursuing government contracts with super mobile phones for lawmakers in case of emergency, a national tracking system for hazardous materials trucks, and a real-time surveillance system for airplane cockpits. Smaller companies are offering other technologies with security applications, such as Vocent's voice-identification system.” 9

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“Computer security experts say cyber-stakeouts are on the verge of dying out because companies would much rather secure their system's entry points and lock out intruders altogether. One reason for the unwillingness of companies to track down hackers and prosecute cyber criminals is because corporations believe admitting a breach has occurred will ultimately have a negative impact on their business. Often time’s companies have the attitude that hackers are just using their system as a launching pad for an attack. What is more, companies tend to lack the computer forensic skills needed to track down hackers. The honey-pot server approach has emerged as way to trace the movements of system intruders. The approach baits hackers to connect to "easy target" servers and systems so that computer security professionals can follow and study the actions of intruders, and ultimately obtain enough information to substantiate charges. Most of the information that companies use to prosecute cyber criminals comes from private and educational institutions. Computer security experts still realize that the legal framework must be in place if their effort is to be successful; in addition to illegal access, they say cyber crime should include fraud, espionage, child pornography, cyber stalking, and the releasing of viruses.”10

A fresh waves of job cuts hit the telecomm and banking industries yesterday after Motorola and Goldman Sachs reacted to the global economic downturn, which has been accelerated by last month's terrorist attacks.

Motorola announced it was cutting another 7,000 jobs on top of 32,000 already planned, while Goldman appeared to be about to join the growing list of Wall Street banks reducing staff to cut costs.

Chicago-based Motorola announced a gloomy outlook for the fourth quarter and said that as a result it would cut 39,000 - 26% of its workforce. The firm has already been criticized for closing its Bathgate plant in Scotland where 3,100 people made mobile phones.11

Investment banks face enormous pressure to fire employees during quiet peril odds because the cost of staff is much larger than in other industries - in some cases as much as 60% of the entire costs of the firm. Banks also deal with lower profits by slashing annual bonuses, which this year are expected to be substantially lower.

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Analysts on Wall Street are gloomy about their job prospects. Research by the Sanford C Bernstein brokerage predicted a 9% fall in jobs - about 34,000 positions - next year. The Securities Industry Association is also painting a stark picture. The SIA is reversing its prediction for profitability from Wall Street firms in the third quarter from $1.4bn (£960m) to losses of $200m.12

Suddenly, the vulnerability of almost every business' IT infrastructure has become a matter of national security. Following the United States' first strikes against sites in Afghanistan, Attorney General John Ashcroft said last week that the FBI and other federal law-enforcement officials had advised thousands of Coos, chief technology officers, and IT managers that their IT systems may be targeted in retaliatory terrorist attacks-or used to launch them. As companies heed Ashcroft's advice to maintain "the highest state of alert," the way they do business may change.

Companies have always faced the risk of hackers stealing sensitive data or launching virus and denial-of-service attacks. But now the stakes are higher and may lead businesses to question the whole idea of Internet collaboration. Richard Clarke, who last week was appointed special adviser to the president for cyberspace security, told InformationWeek, "The terrorists aren't out to hurt us symbolically-they're out to hurt us in ways that hurt our economy." For instance, viruses could exploit security holes in networks to create a large, orchestrated attack on corporate IT systems, he says. 13

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Leading IT services vendors say requests for IT vulnerability assessments and other security services have more than doubled in the wake of the Sept. 11 terrorist attacks, indicating that enterprises are willing to spend on security upgrades despite the faltering economy.

EDS' security business has picked up 150 percent in the wake of the attacks, said Al Decker, the director of worldwide security and privacy services for EDS.

Firms report increased requests for all types of security services, including risk and vulnerability assessments, intrusion detection and emergency response services, certification audits and the development and implementation of new procedures and technology.

In the weeks following the attacks, Computer Sciences Corp. got requests for more than twice the number of risk assessments and vulnerability assessments it typically sees.14

Last month's attacks, in which four commercial planes were hijacked and crashed, sent the travel industry into a collapse. Although the airlines have attempted to boost up sales by slashing prices and offering promotions, the number of airline trips booked online is still down. The company also notes that although discretionary purchases such as books and event tickets are still below pre-attack levels, essential goods such as apparel health and beauty products are in fact posting higher sales than they did before September 11. In the week following the attacks, essential goods dipped 27 percent, sales of discretionary items slipped 24 percent following the attacks.

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Bush administration officials feel that the greatest threat facing the technology industry isn't the economic downturn that has savaged dot-com and telecommunications companies, but foreign competitors who are learning from the U.S. The crash of the tech stock bubble has wiped out $5 trillion in paper wealth. Business rate of investment in new equipment software has decreased from a positive 18% to a negative 14.5% in just 18 months. But this statistics is not the corresponding as an end to revolutionary changes brought by the underlying technology. Even as markets were plummeting last year, global Internet usage grew by more than 67% and B2B e-commerce grew by 132%.

Several shocks, the foreign exchange rate, and the price of U.S. currency against other nations’ currencies rose causing manufacturing to slump that caused this recession. Rising energy costs and a downward stock market also affected the economy.

Buildup of inventory also hurt the high-tech sector. When the downturn hit, none foresee how many inventories had been overbuilt. Given this increase in capacity that was way overdone, it will take some time to continue to pull down that inventory correction and to return to production again. The digital economy can't prevent these shocks. The economy is now working through the slump in demand, so this year looks bleak. The high-tech industries return to higher productivity will be a defining feature of the New Economy. Because this downturn is overwhelmingly focused in the telecommunications and IT sectors, the Bush administration and lawmakers need to address the problem on a microeconomic level, with tax allowances and other actions to aid struggling sectors.

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Following the Sept. 11 terrorist attacks the U.S. government is more reliant than ever on the private sector to provide key technologies for use in securing and strengthening the country. And that means greater opportunities for those IT companies that can master to cater to the government's needs. Governments has long been one of the largest consumers of information technology in the world, there is greater stress today on deploying products and services to share crucial and meaningful information and to plug the nation's security holes that were exposed by the terrorist attacks. A significant increase in defense spending, also spurred by the terrorist attacks, is yet   another factor why more government dollars will be devoted to IT. The increased defense spending is going to have a huge impact on the economy; a lot of the money will end up being spent on information technology through outsourcing to private companies. And these opportunities aren't open just to U.S. I.T. companies; take into consideration the Japanese based Sony, for instance, which supplies the U.S. government with technologies such as digital audio recording equipment and video conferencing systems.

A newly developed data-recovery technique could also help trace suspicious financial transactions made shortly before the terrorist attacks in the U.S. on Sept. 11. An unexplained surge in transactions was recorded prior to the attacks, leading to speculation that someone might have profited from prior knowledge of the terrorist plot by moving money. But since the facilities of many financial companies processing the transactions were housed in New York's World Trade Center, destroyed in the blasts, it has up till now been impossible to substantiate that doubt.

Businesses in the next eighteen months will be facing a tough time. The increased potential for market downside risk resulting from the terrorist attacks of 11 September 2001 makes planning for the next two years extremely challenging.

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According to Insignia/EST’s third quarter 2001 Long Island office market report, a slowdown in the US economy during 2001 and the aftermath of the terrorist attack on the World Trade Center has not directly impacted the Long Island office leasing market in the third quarter of 2001. The office market remained relatively healthy, registering little change in key indicators during the year from quarter to quarter.

According to Fred Trump III, managing director of Insignia/EST’s Long Island office, "The most significant trend in 2001 has been the continuing increase in high-quality sublease space coming back on the market." Sublease space accounted for 21% of all available space on Long Island at the end of September, up from 18.5% at the end of the second quarter.

Key statistics and market activity revealed in the report include:

Leasing activity was fairly constant throughout the last two quarters, averaging almost 520,000 SF per quarter; at 11.2%, Long Island's office availability rate remained close to equilibrium, rising moderately from the previous year when the nation's office leasing markets were booming; and asking rents have been extremely stable in the past year, increasing only 32-cents per SF.

"The sustained leasing activity level from second to third period is an excellent sign for the Long Island economy," commented Trump. "Considering the widespread talk of recession in recent months, this positive activity level leads us to believe that Long Island may be somewhat outside the main path of a nationwide slowdown."

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The report provides critical intelligence and analysis on Long Island office market trends, discussing leasing activity, major lease transactions, net absorption, sublease space, availability rates, asking rents, investor interest, and other vital indicators of the market's health. 15

Terrorist attacks in the United States have a dampening impression on global distribution. With a massive direct attack on U.S. citizens, some electronic distributors may review their efforts to follow customers wherever they may work with a contract manufacturer. Some in the industry conclude there will be no long-term impact, while others question whether companies will be inclined to support a manufacturing site in an unstable region. Well this will slow down things a bit because of security overseas. Some believe that globalization is such a big force it cannot be easily deflected by military and political events.

The war on terrorism declared by global leaders will concern the telecommunications industry in a wholesale re-evaluation and revision of the regulatory framework to improve national security. That will mean critical changes in the way carriers work globally, and it will mean notable extra costs for enterprises. Industry will need to appropriate intellectual and financial resources in order to make a contribution to improving security standards in line with shifting definitions of civil society. Telecommunications carriers and their customers, no matter where they are in the world, should anticipate a new regulatory framework, which will to a large extent affect the way they do business. Their principal effort should be to work with government, regulators and other interested parties to develop the framework that best addresses everyone’s proceedings. The recent terror attack will most likely move the United States to act more quickly than other nations, but many of these changes will expand to the rest of world, creating a new purpose for agencies like International Telecommunication Union.

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The stock market rebounded from its post- September 11th sell-off in typical fashion. But the fourth quarter bounce back was too little, too late. For the first time since the 1970s the stock market showed negative returns for two consecutive years. Although growth stocks outperformed value stocks in the fourth quarter, for the year as a whole value stocks outperformed growth stocks across all market capitalization groups. Much of the decline in growth stocks over the course of the year came from the technology sector, a sector that has recently begun to climb out of the pit of despair. Although portfolios that were overexposed to tech stocks were hit especially hard, investors who panicked by selling at the bottom in late September only added to their misery. Those who maintained appropriate weighting in technology stocks, through the ups and downs have fared better.

The terrorist attacks of September 11, 2001 and the subsequent threat of war also had an impact on the opinions and attitudes of this year's investors.

  • Favorability toward the securities industry rose 12 percentage points among those interviewed after the September 11 attacks.
  • Investors interviewed after September 11 were less optimistic about investing in 2002.16

Conclusion:
The scientists’ and technologists’ responsibilities need to change following the terrorist attacks on the World Trade Center. Scientists have a responsibility to consider the aftermath of the technology they develop. By nature of their unique understanding of the technical potentials of their research, it is the dependability of the individual to make systematic predictions of the hazards and the opportunities of new technology. Advances in nanotechnology, for example, can lead to improvements in medical technology, wealth-creation and computational technology. However, nanotech advances also can make acts of bio-terrorism more conceivable. Since scientific communities pursue scientific and technological advancement, it is the responsibility of these communities to form networks of individuals to discuss the implications of their research. Still, the mobilization efforts will affect business substantially. Enterprises have felt some impacts immediately and directly, such as by the loss of key workers activated as military reservists or National Guard members. Other effects will be more indirect, such as a return to rough supply and demand wrought by the supply chain disruptions and shortages of materials that a war effort might produce. Smart enterprises in both the public and private sectors should try to assess the impacts of this uncertain, evolving economy and make adjustments in operations, strategies and even business relationships.

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Outsourcing

. Outsourcing is one of the fastest developing services in today's global economy. Souring amounts to renting the skills and competencies to a potential competitor. The technologies that will be most successful will resonate with human behavior instead of working against it. In fact, to solve the problems of preserving and assimilating new technology into the workplace, we must look to the way humans act and react.

To remain competitive and ambitious numerous companies outsource as a way to reduce costs, increase efficiencies, and refocus critical resources. This way the companies only have to focus on their core competencies leaving rest of the business activities to their outsourcing partner. Outsourcing can be defined as contracting out the management of an operation in which the customer controls the overall process.

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A multi-million dollar decision to outsource IT infrastructure, application expansion, or key business processes is surely not one to be taken easily. Outsourcing projects within large organizations are generally international in scope. Issues of logistics, language and culture, and office politics must accordingly be addressed. By virtue of preferred resources to manage diverse geographies and put more feet on the ground in any given vicinity, the vendor can take the lead in managing and setting the tone of the proceedings. For example, if an issue regarding a satellite site arises at the negotiating table, the outsourcing team is better positioned to track any discussions that have occurred at the local level, and to report its version of the consequence. The client, at the same time, may well be unable to verify if in fact its position and interests have been decently represented. Not to suggest that outsourcers commonly engage in intentional misrepresentation, but a vendor organization typically is better positioned to broadly deploy a well-coordinated team and to present its interpretation of the information.

Different types of exchanges are taking place with special offerings. Industries will need to adapt to different multi- exchange environment and also device the criteria for choosing the type of exchange. Early B2B exchanges were limited by some loopholes. They were too pricing sensitive. As the industry matured the vision for B2B offering is becoming viable.

In late 1999, the Royal Bank of Scotland (RBoS) and its largest corporate customer, ScottishPower (SP), decided to combine forces on an Internet joint venture. RBoS already had one of the highest-rated Internet banks in the UK, and SP was an active player in the UK's Internet and telecom sectors. By setting up a separate Internet company, the parents hoped to capitalize on their strengths in new ways through the "hot-house" atmosphere of a dot-com. And so "Project Kite" was born. Soon after, the new company incorporated as Roboscot (38) Ltd, or R38 for short.

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R38's first Internet venture took the form of a B2B site for small- and medium-sized businesses. The site, called Work24 (www.work24.co.uk), was to be a complete online resource for other companies, giving the small business access to information and advice, co-working facilities, bulk purchasing power, and so on. Both of R38's parents had strong relationships with the UK's small/medium enterprise (SME) business community, providing a base on which to build their own online presence. 1

Computer Sciences Corporation, one of the worlds’s leading consulting and information technology services firms, helps clients in industry and government achieve strategic and operational objectives through the use of technology. Having guided clients through every major wave of change in IT for more than 40 years, CSC today is well positioned to develop and apply IT strategies and technologies, particularly in the e-business area, based on its full range of capabilities in management and IT consulting; systems design and integration; applications software; Web and application hosting; and IT and business process outsourcing.2

Since its formation in 1959, CSC has been known for its flexibility and customer-centric culture. Through numerous agreements with hardware and software firms, the company develops and manages solutions specifically tailored to each client’s needs. With more than 60,000 employees in locations worldwide, CSC had revenues of $9.6 billion for the twelve months ended June 30, 2000. It is headquartered in El Segundo, California.

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Computer Sciences Corporation (NYSE: CSC) and BAE SYSTEMS have signed a six-year global information technology (IT) outsourcing agreement valued at $2.2 billion (£1.5 billion). This new contract, which extends to November 2006, supersedes the current arrangement between the two companies that was scheduled to expire in March 2004 under which CSC managed the former British Aerospace's IT operations.

The increased scope and duration of the new contract will provide CSC with incremental revenues of $1.2 billion (£826 million). CSC will now manage the IT infrastructure in the United States and the UK of BAE SYSTEMS, which was formed last year when Marconi Electronic Systems and British Aerospace merged. The new agreement follows the memorandum of understanding that CSC and BAE SYSTEMS signed in April of this year.

The relationship, which is one of CSC's largest global outsourcing engagements, calls for the transition of an additional 600 IT staff (430 in the UK and 170 in North America) from BAE SYSTEMS to CSC. CSC will manage the full range of IT operations on a transatlantic basis, from mainframe and midrange computers, servers and desktops, to wide and local area networking, Internet services, help-desk, applications support and procurement.

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With this expanded BAE SYSTEMS contract, CSC has announced major new business awards of more than $8.9 billion since the beginning of its fiscal year on April 1. “We are extremely gratified by the confidence BAE SYSTEMS has placed in CSC with the expansion of this global relationship,” Van B. Honeycutt, CSC’s chairman, president and CEO, said. “This commitment by BAE SYSTEMS reaffirms CSC’s position as the premier IT services provider to the international aerospace and defense industry.”

“As a global systems, defense and aerospace company, BAE SYSTEMS is looking to CSC’s breadth of IT services and resources around the globe to meet our business needs,” Stephen Henwood, BAE SYSTEMS’ director responsible for IT, said. “Working with an industry leader such as CSC, we will achieve very real benefits from having a single point of responsibility for all of our IT requirements. Our relationship with CSC will make it easier for us to develop common systems and draw upon best practices to respond quickly to changes within our global business.”

“This new agreement provides BAE SYSTEMS an opportunity to focus on the quickly evolving global aerospace and defense business while CSC will support the company’s business objectives with the effective use of IT solutions,” Guy Hains, president of CSC’s UK division, added.Lem Lasher, a vice president in CSC’s European Consulting Group, will oversee the expanded global BAE SYSTEMS relationship. Lasher, who has spent the last eight years in Europe for CSC, most recently as head of its European e-business/Internet initiatives, will be responsible for global service delivery and performance for BAE SYSTEMS.3

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British Bakeries has prepared itself for ongoing change in IT by signing a long-term outsourcing contract with Cap Gemini Ernst & Young UK plc. The five-year deal, valued at more than £8 million, covers all British Bakeries core business systems at its Windsor, Berks HQ and at all 25 of its bakeries and other centres throughout the UK.

The agreement is expected to yield significant benefits within the first 12 months, including efficiency gains and cost savings. But its main longer-term significance for British Bakeries is the adaptability to changing business conditions and protection against technological change that Cap Gemini Ernst & Young can help to provide as a result of its flexible and business-driven approach. Phil McCallum, British Bakeries Head of IT, said: 'By moving to a one-stop service provider with a totality of skills and technologies under one roof we are in effect future-proofing our IT, because however far and fast our IT needs might change over the next five years, Cap Gemini Ernst & Young should have the resources and skills to satisfy them. We expect them to be a safe pair of hands for our mission-critical core systems.'

A number of development projects by Cap Gemini Ernst & Young at British Bakeries are already well on the way to early completion. They include a migration to thin-client technology for up to 1000 desktop users at the different British Bakeries sites in a move that will improve internal communication, and establish a platform which facilitates software upgrades and simplified desktop support.

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Applications are managed under the contract from Cap Gemini Ernst & Young's Applications Management Service Centre (AMSC) in Sale, Cheshire. They include order processing, business intelligence, customer service, sales and marketing, distribution, finance and the manufacturing interface. Hardware, comprising AS/400 network servers and Windows 2000 servers, and the British Bakeries Wide Area Network (WAN) are supported from a Cap Gemini Ernst & Young data centre in Rotherham, Yorks.

Brian McCarty, the Cap Gemini Ernst & Young Account Director for British Bakeries, said: 'We plan not only to improve the efficiency of IT support at British Bakeries but equally important, to bring it into firmer alignment with the evolving needs of their business. I am confident of achieving both aims throughout the initial five-year lifespan of the contract.4

The 101 US and UK respondents are generally pleased with information technology (IT) outsourcing. In particular, respondents rated overall supplier performance as "good", respondents mostly realized the benefits they expected from IT outsourcing, and respondents characterized the majority of problems/issues as only "minor" in nature. The healthy IT outsourcing report card is likely explained by the scope and type of IT outsourcing practiced by responding organizations. The vast majority of respondents pursue selective outsourcing which is less risky than total outsourcing. Most respondents also use multiple suppliers rather than a single supplier, which allows for best-of-breed supplier selection. The healthy report card may also be explained by the types of IT activities selected for outsourcing. Respondents generally targeted IT infrastructure activities-such as disaster recovery, mainframe operations, network management, midrange operations, PC support, and help desk operations-rather than IT development or IT strategy. UK and US practices and outcomes were very similar, although a few exceptions are noteworthy. On average, UK organizations (30%) totally insourced IT more frequently than US organizations (8%). US organizations (29%) more frequently used a single supplier than UK organizations (9%). UK organizations (50%) use only one stakeholder to negotiate/define contracts compared to US organizations (9%). Differences may be explained by a more matured approach to outsourcing in the USA together with the higher preponderance of larger deals and organizations studied. Findings are compared to prior survey and case study research. 5

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  1. Knowledge Management caters to the critical issues of organizational adaptation, endurance and competence in face of increasingly discontinuous environmental change. Originally, it embodies organizational processes that look for synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings. The focus of knowledge management is on doing the right thing instead of doing things right. It provides a framework within which the organization views all its methods as knowledge processes and all business processes involve creation, dissemination, renovation, and application of knowledge toward organizational nourishment and survival. The typical view of knowledge management essentially focuses on information, whereas the knowledge ecology adds the context, synergy and trust essential for translating such information into actionable knowledge. Besides that no capital investment is required, no increase in operating costs, no Additional Personnel cost is required. On the profitability side, there is a significant increase in ROE as well as ROA. Risk is managed and customer goodwill and public relations is established. And last but not the least, companies gain a differential advantage in the market. Its impact on the outsourced employee is also substantial. The newly empowered knowledge worker will live in a world of vast choice that may often imply living with immense risks and immense returns. The feeling will be simultaneously exciting and unnerving. The new era of dynamic and discontinuous change requires constant reassessment of organizational routines to ensure that organizational decision-making processes, as well as underlying assumptions, keep pace with the dynamically changing business environment. In contrast to the traditional factors of production that were governed by diminishing returns, every additional unit of knowledge used effectively results in a marginal increase in performance. Computers have done a great deal of harm by making managers even more inwardly focused. Executives are so fascinated by the internal data the computer generates and that's all it generates so far, by and large they have neither the mind nor the time for the outside. Yet results are only on the outside. We find more and more executives less well informed because they believe that the data on the computer printouts are the only available information. Excellence arises from the way management efficiently and effectively work out with its resources. One could say that outsourcing has many of the attributes of a widely prevailing disorder. Executives in companies with poor financial performance seem to concentrate on downsizing as the favored method for restoring competitiveness.
    The dearth of correlation of information technology spending with financial results has led me to conclude that it is not computers that make the difference, but what people do with them. Refining computerization to the level of a magic bullet of this civilization is a mistake that we need to correct in due course. It leads to the diminishing of what matters the most in any enterprise: educated, committed, and creative individuals working for organizations that place greater emphasis on people than on technologies.

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Following the UK government’s decision to grant £100 million (150m Euro) of lottery money to equipping UK libraries with state-of-the art computer equipment, a further £4 million has been granted to 11 more library authorities to increase library computer power as The People’s Network spreads out to local branches and local communities. In York, all city libraries will have a high-speed connection to the Internet and to YOREC, the local community website. In Derbyshire, the 45 libraries will provide over 300 computers for use by an expected 400,000 people every year.

In Germany ‘everyone’ has heard of Norman Foster. Back in the UK, his company has designed the redevelopment of the British Library of Political & Economic Science at the LSE. Jean Sykes, Librarian at LSE, commented: ‘It is such a wonderful 21st environment in which to study and learn. It is another distinctive and imaginative Foster building, and one which LSE is proud to have as a landmark for London.’

The British Library has appointed its first e-Director as part of its top tier of management. He is Dr Herbert Van de Sompel, who was for 17 years the head of the library automation department at the University of Ghent, Belgium (see the September 2001 issues of Online and CD Notes and Managing Information).

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Information Professional Elspeth Scott, former Aslib Chairman and Vice President, has been made Director of Global Information and Records Management of GlaxoSmithKlein, the biggest pharmaceutical company in the world.

In order to enhance the prospect of the UK achieving the most extensive and competitive broadband market in the G7 by 2005 (as committed to in the UK government’s broadband strategy ‘UK online: the broadband future’), the government’s e-minister Patricia Hewitt has announced a major new project to determine how to speed up the roll-out of broadband services to individuals and businesses in rural and other areas that individual suppliers currently see as uncommercial.

The survey will help to address these concerns by:

• developing detailed plans for aggregating the public sector’s own procurement of broadband services, in ways which will have maximum impact on the availability of broadband to households and businesses in rural areas; and
• evaluating the costs, benefits and value for money of further measures the government could take, over and above its own procurement, to share with industry partners the commercial risk of rolling out broadband networks in rural areas.  6

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Conclusion:

More and more leading organizations are relying on outsourcing their technology as well as personnel. The major drivers pushing to outsource include constant market pressures to shorten time-to-market, enhance asset utilization and master the complexity of process technologies. In essence, outsourcing enables firms to focus on their core competencies, which include research and development, sales, and marketing. In the intensely competitive information technology industry, companies have only a small window of opportunity in which to render products to market. The earliest entrants to the market often reap notable financial rewards as well as the dominant market share. Faced with brief product life cycles, companies are forced to curtail their time-to-market to remain competitive. By working with partner, the organization can achieve faster time-to-market by leveraging the power and facilitating their products and services in time. As products become more technologically developed, manufacturing processes become more sophisticated. By partnering with the partner, we can gain access to the latest equipment, process knowledge and manufacturing expertise without making substantial capital investments. It is essential that all of processes and information systems operate within a common framework and are fully integrated within all business unit, so that implementation of new IT capabilities are carried out successfully.

Works cited

  1. http://news.com.com/2100-1033-272892.html? Legacy=cnet
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  6. http://www.acm.org/technews/articles/2001-3/1102f.html
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  11. http://www.guardian.co.uk/september11/story/0,11209,60181200.html
  12. http://www.guardian.co.uk/september11/story/0,11209,601812,00.html
  13. http://www.informationweek.com/story/IWK20011015S0002
  14. http://www.internetwk.com/story/INW20011008S0003
  15. http://www.findarticles.com
  16. http://www.siainvestor.com/html/investor_survey.html

Outsourcing of Technological Information Links

1. http://dcb.sun.com/practices/casestudies/work24_part1.jsp
2.http://www.csc.com/solutions/managementconsulting/news/15.
3http://www.uk.cgey.com/news/pr2002/pr1399.shtml
4.http://preview.biblioalerts.com/info/com.biblioalerts_biblioalerts_IGGv08i201.html
5.http://www.aslib.co.uk/ecia/views/current/country-news.html

 
 


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