The Global IT Market: Helping students understand offshore outsourcing and its impacts

1. The Global IT Market:Helping students understand offshore outsourcing and its impacts Dr. Joseph W. Rottman November 06, 2006 Presented to BA5800

2. Agenda • Explain research base • Explore global trends • Explore impacts to US students workers • Create dialogue

3. 1989-2001: Outsourcing: n = 72 organizations: British Aerospace DuPont Inland Revenue Enron IRS South Australia 1989-1996: Insourcing/Backsourcing: n = 18 organizations: Westchester County Occidental Petroleum Ralston Purina Vista Chemicals 1999-2001: Application Service Provision: n =10 organizations: Corio EDS Host Analytics mySAP Zland 2001-2004: Business Process Outsourcing: n = 4 organizations: BAE Systems Lloyd’s of London 2004-2006: Offshore Outsourcing: n = 41 organizations: Anonymous Case Studies: Primarily Fortune 500 companies & their offshore suppliers 2006: Global IT Workforce Development: Team of 20 researchers In - Progress: Corporate members of the Society for Information Management Sourcing Research

4. Salient Research Articles • Rottman, J., and Lacity, M., "Proven Practices for Effectively Offshoring IT Work," Sloan Management Review, Vol. 47, 3, Spring, 2006, pp. 56-63. • Rottman, Joseph W., “Successfully Outsourcing Embedded Software Development” IEEE Computer, Vol 39, 1 pp. 55 – 61, 2006. • Zwieg, P., Kaiser, K. M., Beath, C., Bullen, C., Gallagher, K., Goles, T., Howland, J., Simon, J. Abbott, P., Abraham, T., Carmel, E., Evaristo, R., Hawk, S., Lacity, M., Gallivan, M., Kelly, S., Mooney, J., Ranganathan, C., Rottman, J., Ryan, T., Wion, R., “ The Information Technology Workforce Trends and Implications 2005-2008,” MIS Quarterly Executive Vol. 5, 2, 2006, pp. 47-54. • Rottman, J., and Lacity, M., "Twenty Practices for Offshore Sourcing," MIS Quarterly Executive, Vol. 3, 3, 2004, pp. 117-130.

5. U.S. Executives must manage a global network of IT employees and suppliers U.S. universities must educate the current and future IT workforce to compete in the global IT market. Global IT Sourcing Market Trends DEMAND TRENDS: Global IT spend is increasing U.S. IT spend is increasing U.S. IT spend as a percentage of global IT spend is decreasing U.S. organizations will significantly seek to hire IT workers over next 7 years SUPPLY TRENDS: U.S. IT unemployment rate is decreasing U.S. Computer Science & MIS enrollments down 25% since 2002 U.S. use of foreign IT workers is a small percentage of overall IT workforce, but growing Many foreign countries are creating viable IT service industries

6. Demand Trend: Total US vs. Global ICT Spending 2000- 2007 Source: Digital Planet/Global Insight as downloaded from www.itaa.org

7. DEMAND TREND: Total U.S. ICT Spending as % of Global ICT Spending Forecast Source: Digital Planet/Global Insight as downloaded from www.itaa.org

8. DEMAND TREND: U.S. ICT Spending as % of Gross Domestic Product Forecast Source: Digital Planet/Global Insight as downloaded from www.itaa.org

9. DEMAND TREND:Of 30 fastest growing jobs between 2002 and 2012, 7 are in IT Source: U.S. Department of Labor, Bureau of Labor Statistics

10. Supply Trend:National Unemployment (non-adjusted Rate) Source: Pfannenstein, L. and Tsai, R., “Offshore Outsourcing: Current & Future Effects on American IT Industry,” Information Systems Management, 2004,Vol. 21, p. 72-81

11. Supply Trend:U.S. use of offshoring is small • In 2004, total number of reported US IT workers varies by source from 10.3 million IT workers reported by ITAA to 3.38 million by BLS in 2004. • In 2004, about 90,000 U.S. IT jobs lost offshore • Percentage of U.S. lost IT jobs fall between and .9% and 2.7% Sources: Pfannenstein, L. and Tsai, R., “Offshore Outsourcing: Current & Future Effects on American IT Industry,” Information Systems Management, 2004,Vol. 21, p. 72-81; NASSCOM, U.S. of Labor, Bureau of Labor Statistics; Chabrow, “IT Employment On Upswing,” Information Week, April 4, 2005.

12. Supply Trend:Number of U.S. Jobs Moving Offshore $136 billion in wages Sources: U.S. Department of Labor & Forrester Research

13. The Information Technology Workforce Trends and Implications 2005-2008 Zwieg, P., Kaiser, K. M., Beath, C., Bullen, C., Gallagher, K., Goles, T., Howland, J., Simon, J. Abbott, P., Abraham, T., Carmel, E., Evaristo, R., Hawk, S., Lacity, M., Gallivan, M., Kelly, S., Mooney, J., Ranganathan, C., Rottman, J., Ryan, T., Wion, R., The Information Technology Workforce Trends and Implications 2005-2008, MIS Quarterly Executive Vol. 5, 2, 2006, pp. 47-54.

14. Research Method • 20 Academic researchers working in U.S. and Europe • 96 interviews of 81 IT leaders in 77 departments • 82% of respondents are IT top management

15. Training Methods Used Within the First Year

16. Plans for Obtaining Needed Skills

17. Skills to keep in house 2005

18. Top Skills Sourced 2005

19. Top Desired Entry Level Skills

20. Skills and Capabilities Critical to Keep In House Now (05 - 06)

21. Skills and Capabilities Newly Important and Critical to Keep In House by 2008 • Functional Area Process Knowledge • Industry Knowledge • Business Process Design/Re-engineering • Company Specific Knowledge • IT Architecture/Standards • Communication • Project Leadership • User Relationship Management • Change Management/Organizational Readiness • Managing Stakeholder Expectations • Managing 3rd party providers

22. Supply Trend: 95% of US Offshore IT sourcing activity is taking place in these nations: Canada Russia EU Israel China Japan Mexico India Philippines Singapore Brazil Australia Carmel, E., and Agarwal, R., “The Maturation of Offshore Sourcing of Information Technology,” MIS Quarterly Executive, Vol. 1, 2, pp. 65-77.

23. Supply Trend: The Global Outsourcing Report • Overall rankings based on cost and risk (geopolitical, human capital, IT competency, economic, legal, cultural, IT infrastructure: Source: “The Global Outsourcing Report,” CIO Insight, March 2005.

24. http://commonziffdavisinternet.com/download/0/2216

25. Offshore Learning Curve Phase 4: Institutionalized Focus on Value-added Size of Market Customer Learning Phase 3: Market Matures Richer Practices Emerge Focus on Quality Phase 2: Early Adopters Best & Worst Practices Emerge Focus on Costs Phase 1: Hype & Fear Time

26. What does it look like?Engagement Model 1: Architects/ DBAs/etc. Offshore Supplier Delivery Team PMO Project Managers Onsite Supplier Engagement Manager Offshore Supplier Delivery Team Local Business Units Offshore Supplier Delivery Team

27. Architects/ DBAs/etc. Offshore Supplier Delivery Team Offshore Supplier Delivery Team PMO Project Managers Onsite Supplier Project Managers Onsite Supplier Project Managers Offshore Supplier Delivery Team Offshore Supplier Delivery Team Offshore Supplier Delivery Team Offshore Supplier Delivery Team Local Business Units What does it look like?Engagement Model 2:

28. Offshore training models

29. Case Study:Industrial Equipment Manufacturer • Fortune 100 / Six Sigma • 75,000 employees in 20 countries • Software Center of Excellence • 150 IT employees / $32 Million

30. Training Model On Site Overlap 3 – 6 Months Trains Supplier ProjectLead 2 Trains Offshore Delivery Team On Site Overlap Supplier ProjectLead 3 Trains Industrial Equipment Manufacturing Customer Project Leads and Architects Train Supplier Project Lead 1 Project Duration On Shore - On Site Off Shore

31. Talent Pipeline Issues Entry Level Programmers Analysts Project Manager

32. Conclusion • Research Base • Career Implications and Trends • Case Study