Tuesday, 25 November 2008

Ordina signals Netherlands IT services slowdown

(By Anthony Miller) Netherlands-based IT services mid-cap Ordina warned the market today (Tuesday) that demand for consulting, IT and application outsourcing decreased strongly since the beginning of October, notably in staff augmentation (i.e. body-shopping). Ordina had recently been hit by the cancellation of a major BPO deal with Dutch financial services firm Robeco Direct a little over a year into a ten-year deal. Not only did Ordina’s stock plunge 14%, but Logica came out in sympathy, with its shares down 5%. Logica gets 16% of its revenues from the Netherlands, now its slowest growing major market (see Logica battens down the hatches and raises outlook).

Ordina was also one of the last bastions of the ‘let’s do it all onshore’ brigade, refusing to acknowledge until a couple of years ago that offshore delivery had any significant role to play in its business (I remember well my ‘spirited’ discussions as an equity analyst with CEO Ronald Kasteel on the pros and cons of offshoring). Things changed somewhat at the end of 2006 when key client Rabobank insisted on an element of offshore delivery before it would outsource some of its application development work to Ordina. With little or no low-cost resource itself, Ordina partnered with Cognizant, the fastest growing of the Indian SIs (then with an undernourished European business). Trojan Horse or what? By the way, Cognizant managed a similar coup with Deutsche Telekom’s IT services business, T-Systems, in March this year (that Trojan Horse is looking like becoming a stable!). I think you get the message.

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