[Insert Number] Days/Weeks/Months [Strike As Appropriate] To Save The Euro

George Soros is widely quoted today as saying there are only three months to save the Euro.

I have no idea whether he is right or wrong.  In fact, I have no better idea than the next man.  And it turns out the next man is full of ideas, all different.

6 weeks: In September 2011, George Osborne thought we had only six weeks to save it.

10 days: At the end of November last year, a leading EU monetary chief thought we had only ten days.

2 days: In December, some commentators thought we had as little as two days to make the save.

The one thing we know about predictions is that if you keep predicting something, it will eventually become true.  Except when the prediction is wrong.

How Do Freelancers Really Spend Their Time?

There have been endless stories over the last few weeks about freelancers “dodging tax” through using limited companies.  Seth Godin published a lovely graph (via SwissMiss via APhotoEditor) and I thought, why not publish the same for a freelancer?  So here it is … how the Daily Mail thinks their time is spent and how I imagine it is probably spent:

Seth’s text goes like this:

“Part of the magic (and the risk) of the internet is that if you want to, you can use your access to tools, markets and media to go even further in the direction of the chart on the right. You can become your own booker, accountant, publicist and more. Hey, it’s free! You get to keep all the money!  Of course, it also means you don’t get to spend very much time at all doing what you set out to do in the first place, which is shoot pictures, or write music or coach or whatever it was.The other thing you can do is find the guts and resources to move even more to the left. Hire other people (at huge expense) to do all those things you certainly could do on your own, so you can actually do the work you were born to do. One thing to consider: finding and retaining a great salesperson is more difficult than you might think, since a great salesperson might very well contribute even more value than you do.”

I think the same could be written for any freelancer in business.

TUPE or not TUPE

In outsourcing almost all of their IT over the last 20 years, government may have complicated their move to the cloud. Talk of the cloud is everywhere and has been for a couple of years. though little progress has yet been made on the journey. Last week, on walking into T5, I was greeted by a huge EMC ad announcing “the journey to the private cloud starts here” – and I thought I was on my way to Copenhagen. The complication arises because of something known as TUPE.

What is TUPE

From Wikipedia: The Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) known colloquially as TUPE, are the United Kingdom’s implementation of the European Union Acquired Rights Directive.

The regulations’ main aims are to ensure that:

– Just because of the transfer, employees are not dismissed before or after (unless there is an ‘economic, technical or organisational’ reason

– Employees’ most important terms and conditions of contracts are not worsened before or after the transfer (unless there is an ‘economic, technical or organisational’ reason

– Affected employees are informed and consulted through representatives

What might TUPE mean for UK government?

Consider two scenarios, both very likely to occur for any given government entity in the very near future.

1) The Insource

In a quest to become more agile, reduce costs, speed delivery and try out open source software, a department at the end of its current website development and hosting contract decides to bring the development in-house. After all, it can hire good quality coders straight from university or with a couple of years experience for hundreds of pounds a day less than paying contractors or service provider staff.

The business case is straight forward. There are 20 people working on the website now, there will be just 10 in-house. The old ones were charged at an average of £650/day, the new ones will be £200/day. Even better, there is no need to spend months running a costly re-procurement. Costs appear to fall by 80% or more. Losing suppliers are also spared the cost and risk of the procurement process.

TUPE, however, rears its head. Those 20 staff need to be considered for transfer. Ordinarily, this would have been a supplier to supplier conversation as the government entity would have retendered for its website and, had the original supplier failed to win, the new supplier would have dealt with the transfer. Some staff, of course, would not have been required (and some would not have been eligible for transfer) and all of the costs would have been wrapped up somewhere in the bids, with new suppliers likely doing some risk-based calculations to judge the likely costs. Outsourcing providers are good at this – some deal with thousands of such transfers a year across dozens of contracts.

Governments, however, rarely deal these days with TUPE and almost no one deals with the transfer of staff back into government. And here’s the problem: transferring all or some of those 20 staff into the business will break the business case. If they’re made redundant, as they’re no longer required, TUPE dictates that the liability is with the recipient of the undertaking, not the sender. The government entity needs, then, to factor the costs of this transfer (either taking the staff on or making staff redundant) into its business case. Taking the staff on will result in little or no saving (and taking on expensive staff whilst releasing others who earn far less is not good business practice), dealing with the redundancy will increase one-off costs and likely severely damage the business case, certainly in the first 1-2 years in which everyone had hoped to book a saving.

2) The Public Cloud

Running dedicated IT is expensive. The foundation of the cloud model is that shared servers achieved through clever virtualisation of everything from processors to storage makes IT far cheaper. We’ve all bought this model, fed by news stories that show startups such as Quora launching using Amazon EC2 at fractions of what it would have cost them in the past. New ideas can be tried out quickly and cheaply – and shutdown even faster with no stranded costs if they fail to work out. Pay as you go IT without the need for upfront capital is ridiculously attractive.

Governments naturally want, in varying degrees, to take advantage of this opportunity. The US government has stated that it believes some 25% of its IT needs can be met by the cloud. Now some governments are actually big enough (although not always clever enough) to create their own clouds (if every department or entity shared the same infrastructure and even software) but the real save is thought to come from using the public cloud. If every public sector worker in the UK switched to gmail or Office 365 tomorrow I doubt google or Microsoft would see even a blip in utilisation figures – they can accommodate new volumes easily without necessarily adding capacity or staff.

So let’s suppose that the department above, having considered insourcing its website, now wants to move to public cloud email. Its current service provider handles all of its IT needs, not just email but there are a few specialist (and dedicated, in both senses of the word) resources who keep email working, it being the lifeblood of the organisation. Perhaps email takes 3 people in this organisation.

In the cloud, of course, 3 people aren’t needed to run email for this organisation. It might be 0.3 or even 0.03 but it’s likely not those same 3. Again, TUPE suggests that they should be transferred to the new organisation – the public cloud operator. That operator may not even be based in the UK or, with some providers or services, not even in Europe (data protection rules to one side for a moment).

The new supplier has the obligation to accept the transfer of those 3 people, or to make them redundant (something that would be far more complicated in the event that the receiving supplier is not in the UK or the EU). My guess is that few cloud providers have any experience at all of TUPE and that, anyway, they will be unwilling to take on staff at a faster pace than their slick processes require. That means that the government department will end up dealing with this with their original supplier – and, on the basis that services will move to the cloud on a piece by piece basis over years, this will be a recurring issue.

I’m not a lawyer – and this post shouldn’t be taken as legal advice – and the likely scenarios are certainly far more complicated than the two I outline above. But the issue is real and needs careful thinking about, both by government and its suppliers.

There may, for instance, be a need for a managed rundown period where in the months leading up to the insource or the cloud move (or the end of contract), the existing team is slowly reduced (through not replacing leavers or transferring staff to other projects/customers) – this may delay the move, of course, or result in a period of reduced service levels (this would be somewhat akin to the, apocryphal (I assume) story that Ken Livingstone changed the phasing of all the traffic lights for a while to really screw up the traffic before resetting them, instantly making the traffic flow smoothly again). At the same time, the department will want to make sure that the supplier is not artificially moving people that it might want to see made redundant or transferred to a new supplier ahead of any move (as if anyone would).

Departments, seeing this risk, may decide to move new projects to the cloud initially – so creating a capability in the cloud through development and eventually production – and delay the transfer of existing services.

Alternatively, central provision could be made for redeploying such staff across departments or even suppliers to bolster weaker areas ensuring that tough projects were well-staffed. In the extreme, central provision for redundancy costs may be the only way to achieve a more rapid move to the cloud.

How Is Nokia Doing?

In the 6 or so months since Stephen Elop was announced as CEO of Nokia the stock is about flat.

That’s not to say that the stock hasn’t actually budged – from the day of his appointment until the announcement of the partnership with Microsoft around Windows Mobile, it was actually up about 40%, to about $11.75. It’s now at $8.66, although it’s been under $8 as recently as the end of March. Nokia is down 16% year to date, 21% in the last 3 months and 42% in the last year.

Mr. Elop is already taking, or considering taking additional steps:

The Economic Times said yesterday that Nokia is considering selling a controlling stake in its money-losing JV with Siemens (my Prescription on March 26th suggested that they sell the whole thing). The Wall Street Journal reported the same story suggesting that one of the blockers will be an outstanding pension obligation. Nokia’s FD is quoted in the WSL as saying the story is “untrue”.

The Gulf Times reports today that as many as 6,000 Nokia employees are at risk of being made redundant, with a significant reduction expected in R&D staff as I suggested in the same Prescription.

This week Nokia announced its latest Symbian phone (v3.0, known as Anna I gather, of the operating system), the X7. Apparently it will soon be replaced by an equivalent Windows Phone, cleverly named as the W7. I suggested that Nokia come up with a new naming convention – I’m already baffled by the E6 (a business related phone apparently – e for Enterprise?), the X7, the W7, the C7 and the C6-01 not to mention the N-series. Another site promoted the rumour that there would be at least 12 Nokia/Windows devices in 2012.

IDC announced at the end of March that Windows phone would have the number 2 share of the mobile operating system market by 2015 (Android would have 45%, Windows 20%, iPhone 15%). This would all be driven by the Nokia partnership. No mention is made of tablets, revenues or, importantly, profitability.

Meanwhile a customer satisfaction survey by JD Power showed Nokia coming 4th behind Apple, HTC and Motorola with its best score on battery life – always a strong point of Nokia and something that it may perhaps struggled to maintain with Windows as its operating system.

Digital Trends floated the rumour that LG and China mobile may adopt Meego – an apparently dead end platform as far as Nokia is concerned. Meego is open source so they would, in theory, be free to do that (Digia bought the library on which much of MeeGo and Symbian are built in March).

Nokia publishes its interim Q1 report on 21st April so we will find out whether the announcement of the Windows move deterred any customers from buying phones.

Goldman Sachs thinks Nokia is a buy with a target above $12, Moody’s downgraded its long and short-term debt, Nomura thinks the stock will fall 30% or more from where it is today, HTC’s new Sensation phone looks to outperform Nokia’s X7 and the median stock price target is about $9.25 – above where it is now plainly, but not likely to be a stellar performance.

I’d like to see Nokia unveil a clearer plan – perhaps like my prescription or an entirely different one. Waiting until 2012 before we see Windows phones doesn’t seem like a good idea – and in the interim the only headlines will relate to lay-offs, budget cuts, sales of units and other negatives, all of which will drive away customers and so put the stock in negative territory. Mr Elop has a big job ahead of him. Let’s hope he’s not like the CEO of Microfocus who departed after less than a year on the job this week, with the stock price having fallen 41%. Instead he’ll be hoping he’s more like Bart Brecht who say the shares of Reckitt Benckheiser lose $2bn in value upon the announcement of his departure.

Chequeing Out

APACS published the stats for how money was spent in 2008 in the UK. How as in by what method rather than how as in on what. I saw this linked to from Scott Loftesness’ blog. His point was about the use of Google’s Chart API (he’s evidently the author of the piece); I wanted to wonder aloud whether the vast bulk of the 3% of payments made via cheque are made to the government. It turns out – check (cheque?) the original APACS source – that this data doesn’t include payments to government. I’d like to speculate, though, that the percentage of payments made by cheque to government – whether local or central – is greater than 3% and that therein lies an opportunity to reduce costs (fees, handling and security) massively through incentivising payment by electronic means. Someone should build a central debit / credit card processing engine …


Economical Forecasting

The weather forecast for tomorrow has shifted again


If this holds, then the rain has shifted to Monday and the weather for tomorrow’s marathon looks “ok” – not great, but ok.

But, I did wonder today whether both of these paragraphs are true:

The weather is a complex system for which there are many variables. It takes a great deal of computing power to figure out even very localised immediate forecasts, let alone system wide forecasts. And forecasts – even at a trend level (i.e. the next few days will see more sun than rain) – are notoriously inaccurate. Such predictions frequently get duration and severity wrong and their results are often the exact opposite of what actually happens. Forecasters will hate the use of that word “prediction” which implies crystal ball gazing rather than the use of multi-faceted models built by the brightest people in the land backed by years of research. But the empirical data says they’re wrong more often that they’re right.

The economy is a complex system for which there are many variables. It takes a great deal of computing power to figure out even very localised immediate forecasts, let alone system wide forecasts. And forecasts – even at a trend level (e.g. house prices will next rise, rather than fall) – are notoriously inaccurate. Such predictions frequently get duration and severity wrong and their results are often the exact opposite of what actually happens. Forecasters will hate the use of that word “prediction” which implies crystal ball gazing rather than the use of multi-faceted models built by the brightest people in the land backed by years of research. But the empirical data says they’re wrong more often that they’re right.

No wonder we’re not sure if the economy is coming out of recession, going deeper, stabilising, growing or shrinking. House prices up? Down? Flip a coin? Build a model? Play Baccarat as a cipher for prediction?

What we want, what we really want …

The single best thing for the British economy this year would, in my view, be a long hot summer, starting in May and finishing in late September. Such a summer would encourage us to stay at home and spend our pounds at home. We need 150 days of temperatures in the high 20s. Temperatures that encourage people to stay home and spend pounds in the UK – pounds that are going to be in short supply, of course, but nonetheless, pounds that we want kept here.

Another summer like that of 2008 – rain, rain and more rain – would have the opposite effect. No matter how strong the euro, we’d all go abroad – desperately searching some respite from the gloom of the UK – and spend our weedy pounds (wait for the £100 and £200 pound note coming soon to a place near you), further negatively impacting the UK economy.

Better still would be a great UK summer and a poor European summer. The Europeans would come here and spend their Euros – more than they have even in the last month. The shift in spend would further bolster the pound and bring yet more money into the UK – and we have to be grateful already for those Europeans and Americans who have come to the UK in the last to months.

A decade ago I ran the operations of Citibank France. On New Year’s Eve back then, we were bringing in the Euro – the banking incarnation of it at least (it wouldn’t reach the hands of consumers for three years – and then I was in Austria ready to take fresh euros out of the ATM just after midnight on the first night).

I found this graph earlier showing the life of the euro versus the pound since its incarnation. It’s 2 months of data short, so I’ve added a line that approximates how the pound has fallen apart since the end of October:


What a stunning change in fortunes for the venerable pound sterling. Something needs to change very soon. As I sit in Switzerland, watching a foot of fresh snow fall, pondering a Swiss Franc exchange rate that has moved from 2.4 to 1.5 in the last 4 years – or even from just under 2 to 1.5 in the last 9 months, I can only wonder what 2009 will bring.

Here’s to a Happy New Year to everyone that I know, that knows me, that reads this blog and to those who have yet to read it who might yet still, one day.