EXTENDING YOUR REACH
EXTENDING YOUR REACH
Outsourcing (i.e., Global Sourcing)
– A ‘Mantra’ for Survival
Proven strategy being adopted by leading organizations across various industries to address business and financial objectives.
Outsourcing transforms important non-core business and IT
functions using external resources while maximizing value from internal resources focused on core business functions. Provides leverage and economies of scale.
Outsourcing provides effective strategies for:
– Realizing business value
– Decreasing operational costs and improving efficiency
– Improving time-to-market and customer responsiveness
– Improving flexibility and adaptability to changing market dynamics
– Access to critical skills and ability to reallocate resources dynamically
– Improved processes and standardization
Current
Outsourcing
Trends
Growth of outsourcing in traditional areas:
customer care, financial services, manufacturing,
IT and ITES (IT Enabled Services)
Large MNC's investing in captive BPO units
Outsourcing is becoming sophisticated - business
process excellence, speed to market, improvement
in quality, benchmarking to world-class standards.
Increasing global competition & pressure on
margins
In past two decades, China (growing at an 9.5% P.A)
Today’s
Outsourcing
Destinations
Country Population IT wage English Skills
China 1.3 billion $3 - 8k Poor Transaction processing, low-end software development and
maintenance
India Over 1 billion $5 - 12K Good Application development,
maintenance, call centers, financial processing
Philippines 77 mil $5 - 10K Medium Accounting, finance, call centers, animation, human resources. Russia 155 m $6 - 10K Poor Web design, complex software
development, aerospace engineering Canada 107 million $25 - 50K Good Software development and
maintenance, call center, tech support.
Mexico 107 million $22- 35 K Spanish a plus Spanish-language call centers, software development, data center outsourcing
Strategic Prediction for Outsourcing –
BPO & IT
• By 2008, the need to improve business processes will be identified as one of the top-three requirements for organizational success (0.9 probability).
• By 2008, more than 50 percent of new outsourcing deals will include IT utility service components (0.7 probability).
• By 2010, 60 percent of custom BPO contracts will include related application and IT infrastructure outsourcing (0.7 probability).
• By 2012, BPO (custom solutions and utilities) will be the dominant outsourcing relationship vehicle (0.6 probability).
• By 2012, more than 50 percent of Global 1000 companies will use an external IT infrastructure (0.7 probability).
• By 2012, organizations that employ application utilities and BPUs will reduce their total cost of IT ownership (for comparable custom solutions) by 30 percent or more during the life of the solution (0.6 probability).
In News : Outsourcing Deals
Client Vendor Work Value
DuPont Convergys HR Outsourcing Deal to provide Transactional services to DuPont’s 60,000 employees & 102,000 retires
$1.1 Billion, 13yrs
Bank of America EDS To integrate FleetBoston Financial Corp.'s
communication infrastructure into Bank of America's voice and data network
$1.3 Billions
3UK Ericsson Ericsson will manage 3UK’s network and IT management
$2.6 Billion Proctor & gamble Five Back office integration and maintenance $5.8 Billion New Hampshire’s
Dept. Of health & Human service
Affiliated Computer Services
Five-year deal to develop & implement Web-based Medicaid Management Information system
$61 Million
U.S.Navy CACI Intl, Inc
CACI would provide support for Navy maintenance information system through the pacific fleet
$21.1 Million ** Source : International Data Group
Global Sourcing
Reasons for Moving Offshore
Global Sourcing
Root Failures of Offshore
Global Sourcing Rewards and Drawbacks
Reward
9 Direct costs savings
9 Financial engineering and
Renewed focus on core business 9 Access to a vast pool of
knowledgeable domain & technology resources
9 Reduced project cycle times
9 Improved productivity and quality 9 Enhanced ability to adapt to
change – Operational Flexibility
Drawbacks
Cultural reasons
Lack of industry expertise with outsourcing vendor
Loss of control and inability to manage outcomes
Change management
Lack of mature models to quantify long term strategic benefits of
offshore outsourcing
Dependency on offshore outsourcing vendor for critical applications
Global Sourcing - Future Trends
• Political backlash diminishing
• Increased global stability through interlinked supply chains.
• Regional outsourcing hubs arising in response to strategic near shoring company initiatives
• Vendors moving up the value chain
• Increased client control in driving and designing deals
Consulting/SI Tactical Outsourcing Strategic Outsourcing Opportunity size Brand leverage Low Low High High Competition – Medium Pricing pressure – igh Decision cycle - Hig
H h
Competition – High Pricing pressure – High Decision cycle - Medium
Global Sourcing Selection Tips
LOOK FOR CRITERIA'S
Understanding of business
• Test- response to real life situations • Expertise and cases studies
• SLA’s & cost proposal – detailed/realistic plans
Capability • Governance: Program/ Project
• Operational
• Technology competencies
• Human Resources
• Infrastructure
Commitment • Contracts/ SLA compliances
• Time lines and schedules
• Efficiency levels and outputs
• Cost Management
Attitude • Can-do : Creative/ flexible and responsive
• Approachable
• Team effort
Global Sourcing -Risks and
Challenges
Key Components of Total Cost to Offshore:
¾ Wage Rate
¾ Communication Systems
¾ Physical Infrastructure and Support ¾ Transition
¾ Governance
¾ Resource Redeployment ¾ HR Change Management ¾ Training and Productivity
¾ Disaster Recovery and Business Continuity Capabilities ¾ Offshore Knowledge Development/Advisory Services ¾ Travel costs
EXTENDING YOUR REACH
EXTENDING YOUR REACH
GLOBALLY THROUGH
GLOBALLY THROUGH
OUTSOURCING
OUTSOURCING
Global Software Development
An Insight by:
Susan Fojtasek, PMP
Agenda
• IT Offshore Trends
• IT Offshore Execution Models
IT Offshore Trends
Hype Cycle for IT Offshore Outsourcing
General Electric, early adopters prove model
Vendors make investments, including
acquisitions
Stabilized pricing schemes Market reaches reliable
global sourcing model relentless cost
pressure Economic malaise, weak tech sector, geopolitical risk begin
• No silver bullet
• Hidden costs
• Missed expectations
IT Offshore Strategy
• Key factors
– Yield
Agenda
• IT Offshore Trends
• IT Offshore Execution Models
IT Offshore Execution Models
• Onsite staff augmentation with offshore staff
• Offshore staff augmentation
• Blended onsite/offshore staff augmentation
• Collocation
• Project outsource
• Dedicated Offshore Lab
• Buy
• Build
• Onsite staff augmentation with offshore staff
– Bring staff from offshore location to work on projects in your home country
• Offshore staff augmentation
– Hire offshore staff to supplement the capacity of your onsite team
• Blended onsite/offshore staff augmentation
– Hire a mix of onsite and offshore staff from a single vendor to supplement your onsite team
– Target ratio: 30% onsite, 70% offshore
Execution Model Descriptions
• Collocation
– Send your onshore resources to the vendor’s offshore development center.
– Team members work together on project assignments.
• Project outsource
– The entire project is sent to the offshore location.
– All development and test work is done remotely, and the finished product is returned.
• Dedicated offshore lab
– You retain a set of vendor employees that are dedicated to work solely on your projects.
Execution Model Descriptions
• Buy
– You purchase an offshore company and its employees to become your offshore office.
• Build
– You setup a company in the offshore location and hire your own management and employees.
• Build Operate Transfer (BOT)
– Partner with a vendor build your offshore practice.
– The vendor assigns team members to your projects and they learn the business domain.
– A new business entity is created for you in that country. After a specified period of time, the employees transfer to your
Agenda
• IT Offshore Trends
• IT Offshore Execution Models
Onsite Staff Aug
Offshore Staff Aug
Blended
Staff Aug ODC/DDC Collocation Buy Build BOT Project
Outsource
Quantified Yield
Agenda
• IT Offshore Trends
• IT Offshore Execution Models
Traditional Development Practice
• Inflexible to changes during lifecycle of the project
– Sequential progression through requirements, design, code, test – Focus on documentation and review meetings
• Large amount of uncertainty around meeting end
deliverable dates
– Limited management visibility until late in the schedule – “Big bang” integration late in the lifecycle
• Typical issues
– Lack of clarity in the requirements definition – Due date promised
AgileOffshore
TM
• Best practices
– Iterative development
– SCRUM
Iterative Development
• Project is segmented into a series of time-boxed
iterations, usually 2- 4 weeks in length
• During each iteration:
– Design, development, unit testing, functional testing
occurs
– Working system code produced
– Demonstration made for stakeholders at completion
• Schedule is fixed; scope is variable
Scrum
• Each iteration is called a Sprint
– Sprint planning
– Spring backlog
– Sprint review
• Daily Scrum meeting
– ScrumMaster removes roadblocks
– Three main questions to be answered:
• What have you done since last Scrum?
• What are you planning to do before next Scrum? • What blocks are you facing?
Test Driven Development
• Tests are developed before code is written
• Expected functional test results are delivered
when requirements are delivered
• Primarily aimed at development process
– Unit tests are designed and implemented before
actual source code is written
– Tests are run after every build to ensure that tests
passed (continuous integration)
Backlog/Burndown Charts
• Backlog
– List of all features that are to be included in the development cycle – Features can be added or removed
at any time
– Effort estimates established for each item in backlog
– Prioritized based on business priority and complexity
• Burndown Chart
– Tracks progress for an iteration and/or release
– Plots work remaining each day
• Benefit: Visibility Burn-down chart 221 221 169 129 119 105 95 78 54 10 0 213 188 163 138 113 88 63 38 13 0 0 0 50 100 150 200 250 Dates Ho u rs r e m a in in
Actual IEH Burndown 221 221 169 129 119 105 95 78 54 10 0
Expected IEH Burndown 213 188 163 138 113 88 63 38 13 0 0
Risk
Effects of Agile on Offshore Strategy
Onsite Staff Aug.
Blended Staff Aug.
Project Outsource Offshore Dev. Center
Collocation
Offshore Staff Aug.
BOT Build
Buy
