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Offshoring Trends

Arash Shahideh. Offshoring Trends. Offshore Trends in 2004-2005. Offshore becoming mainstream -- 25%+ growth India continues to dominate, but country diversification imminent New entrants, new competition New decision makers -- business buyers and consultants Big names, preferred vendors

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Offshoring Trends

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  1. Arash Shahideh Offshoring Trends

  2. Offshore Trends in 2004-2005 • Offshore becoming mainstream -- 25%+ growth • India continues to dominate, but country diversification imminent • New entrants, new competition • New decision makers -- business buyers and consultants • Big names, preferred vendors • Most of the work is still project work NOT outsourcing • Concerns about risk, distance and no “cookbook” • Longer decision-making cycles; • Increasing interest in other segments -- ITO, BPO, Network • Tendency to build relationship and then leverage across services • Way too much focus on rates • Some backlash globally as a result of IT jobs flowing offshore

  3. “Offshore” is becoming Mainstream Global delivery moves to the main Number of stream Enterprises Using Offshore All types of Sourcing For enterprise such The First Time as healthcare, retail and energy companies are Early adopters of Type B: piloting or sourcing Pragmatists outsourcing programming in India include: Largest segment of Financial service • enterprise buyers High-Tech • comprise this manufacturing category; thus, there will be a large volume of activity Type A: Type C: Early Adopters Laggards 1995 to 2001 2002 to 2003 2004 +

  4. Regions of Supply for Offshore IT Services Russia Eastern Europe/ Baltic States Canada 90% of enterprises source from here Ireland China Philippines Mexico India • Nearshore • Easier travel • Cultural similarities • Time zone • Team integration South America Offshore: • Lower costs • Round the clock • Resources • Quality Longer-Term Prospects Current Priorities

  5. A Simple Value Proposition…. • Lower costs • For example, UK based SAP consultants cost £600 and up, where SAP consultants in India cost $22 - $35 an hour • The savings in labor is enough to pay for the incremental overhead remote management incurs and still save 30% – 50% • Flexibility of Resources • India, China and the Phillipines supply 90% of the market • Other low cost geographies quickly gaining in popularity (Canada, South America, Ireland) • Quality/Stability of Service • High quality infrastructure • Highly educated staff • Time zone difference • Faster turnaround of tasks

  6. … But a very complex execution Loss of communication richness Constructive Responses Service architecture Loss of Collaboration Cultural differences Managerial techniques Development methodology Loss of teamness Coordination breakdown Telecom infrastructure Collaborative technologies DisruptiveIssues Team building

  7. Evolutionary Stagesin Offshore Sourcing Relationships Stage 5 Transformational Outsourcing Stage 4 Offshore Development Centers High Stage 3 On-site/ Offshore Projects • Quasi-captive offshore facilities • Value commitment • Processes& technology infrastructure common between client and center Stage 2 On-site Project Team • Dedicated offshore facilities • Committed long-term revenue • Typically connected to client site by direct leased telecom link Stage 1 On-site Contract Work • Project manage-ment and client services in the UK; deliveryteam offshore • Charged hourly, maybe milestone fees • Risk shared between client and vendor Persistence of Services • Delivery teamon-site Low Complexity of Service Delivery Simple Complex

  8. High level approach to off-shoring IBM can either consult on the approach and/or provide off-shore services 6 weeks 6 months 2-3 months 1-2 months 1-2 months 1 month On-going Support Scoping Supplier Selection Portfolio Assessment & Migration Strategy Application Specific Migration Plans Knowledge Transfer Parallel Perform Application Cutover Transition IBM’s Story Fit with wider initiatives Transform retained organisation (IS and business) Change Leadership, Communications and Stakeholder Management

  9. Remote Delivery Models Adopted by Our Clients

  10. Delivery Models

  11. Application Migration Criteria

  12. Migration /Transition Process Overview Contract Engagement Transition Operation Phase 5: Application Cutover Application supported by in steady state Phase 4: Parallel Perform Phase 3: Assisted Perform Phase 2: Guided Perform Formal milestone for completion of knowledge transfer. Suppl. team is ready to take on project management of new services Phase 1: Transition Planning Application skill level Assurance checkpoint for knowledge transfer - new team now ready support independently First phase of knowledge transfer – Customer Team to mentor suppl. staff Second phase of knowledge transfer – suppl. staff to deliver 75% of support calls Detailed transition planning = Quality Gate/Review

  13. Typical Application Support Structure at Steady State Client Site Global Delivery Center Business Help Desk (L1) • Incident/Problem Manager - assigns PT to appropriate support queue • Owns the issue till it is closed Application Support Desk (L2) • Functional consultants • Owns the PT till the fix is tested and approves the code. • Reassigns the PT to the L1 queue for closure with the comments Technical Support Desk(L3) • Tech Consultants, DBAs, Queue,Interface monitoring • 24x7 for sev 1 calls • emergency fix, unit testing • Tools (SDMS, PELICAN) • Quality Processes • WW SAP ICM Database

  14. Production Maintenance Call Management • Flexible 24 x 7 support services based on severity levels • The teams are equipped with • Pagers and cellphones • Laptops to connect from home • Central repository of all key contacts in the production support team • Roster charts • Backup contact details • Daily status update conference callsacross all the support teams • Monthly reporting on performance based on the agreed SLA’s • Based on criticality (sev 1), hourlymanagement calls on status Customer PT Business Help Desk Status Reports Level1 Support Updates PT Resolves data related problems & working with Customer personnel assign severity Problem levels Reporting Controlled database Access Updates Updates PT PT PR Global Delivery Team Level 3, Emergency Fix Global Delivery Team Level 2 Support Onsite Team E-mail Level 2 Support Telephone Cell phone On-Site Global Delivery Center Pagers Travel On-line chat e-Meeting

  15. Key Performance Indicators : At Steady State

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