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Choosing the right offshore destinations Dutch experiences

Choosing the right offshore destinations Dutch experiences. ITC Roundtable, Vilnius Paul Tjia - GPI Consultancy. Offshore status in The Netherlands Why offshore development Challenges in offshore outsourcing Choosing a foreign partner Marketing and promotion. Agenda.

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Choosing the right offshore destinations Dutch experiences

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  1. Choosing the right offshore destinationsDutch experiences ITC Roundtable, Vilnius Paul Tjia - GPI Consultancy

  2. Offshore status in The Netherlands Why offshore development Challenges in offshore outsourcing Choosing a foreign partner Marketing and promotion Agenda

  3. Which country to choose?

  4. Turkey Iran Pakistan India Sri Lanka Bangladesh Nepal Thailand Vietnam Malaysia Indonesia The Philippines China North-Korea Egypt Libanon Jordan South-Africa Colombia Dutch offshore destinations (1)

  5. Lithuania Latvia Czech Republic Hungary Bulgaria Romania Serbia Slovakia Russia Ukraine Belarus Ireland Dutch offshore destinations (2)

  6. Dutch reasons for offshore outsourcing Main reasons: • Shortage of IT-staff • Need for flexibility • Cost reduction Other reasons: • New export markets • Personal reasons

  7. Four ways of collaboration • Project-based outsourcing • ABN AMRO Bank, ING Group, KLM • Own subsidiary • Baan, Philips • Joint-venture with (or financial investment in) foreign partner • KPN Telecom and TCIL • Direct employment of foreign IT-professionals • On-site work (e.g. Indian IT-staff)

  8. The Dutch market: a comparison European IT markets: • Germany 61 billion Euro • U.K. 56 billion Euro • NL 13 billion Euro Indian software exports to: • U.K 422 million US$ • Germany 133 million US$ • NL 44 million US$

  9. Offshore status Netherlands • Positive: already more than 20 years • More than 250 large and small users • But: offshore outsourcing is still a small market • Not yet popular • And: a growing number of offshore suppliers and destinations

  10. Challenges in offshore outsourcing • Small and medium sized Dutch companies unaware of advantages • Bad image (or no image) of supplier countries • Most offshore suppliers not visible in Holland • User perception: “offshore outsourcing is difficult”

  11. English language You want an English translation of the speech? But the speech he made was in English!

  12. “Offshore outsourcing is difficult” • Different languages • Geographical distance: coordination and communication difficult • No “communication richness” • Less teamspirit • Cultural differences

  13. Culture: the 5 Cultural Dimensions (Prof. Hofstede) 1. Power distance (high – low) 2. Individualism – collectivism 3. Masculinity – femininity 4. Uncertainty avoidance 5. Long term – short term orientation

  14. 1. Power Distance Philippines Indonesia Arab countries India Pakistan UK Sweden The Netherlands USA

  15. 1. Power Distance Index China 80 India 77  The Netherlands 38  UK 35 Israel 13 HIGH SCORE LOW SCORE Power holders have priviliges All have equal rights Inequality accepted Inequality minimized Hierarchy needed Hierachy for convenience Staff: expect to be told what to do Staff: expect to be consulted Superiors often inaccessible Superiors accessible

  16. How to choose a partner • Start a (low risk) pilot project • Business criteria • required skills • available international experience • quality • location, size, culture, etc. • Personal reasons • Country and partner selection

  17. Most successful country: India • IT-exports: 7.5 billion US$ (Russia around 300 million US$) • 80 % of all Dutch offshore-projects • More than 200 Dutch clients • Only India has an “IT-image”

  18. Indian marketing (1) • Professional IT industry (e.g. CMM-5) • Very strong business mentality • Marketing offices in Europe • Personal networks (US, UK) + networking • Partnerships and alliances

  19. Indian marketing (2) • Large client base • references • articles press (free publicity) • (Direct) marketing • letters, E-mail • visits, events • Trade fairs (e.g. CeBIT, Systems) • as visitors • in an India pavillion • as individual companies

  20. Indian marketing (3) • Active associations (Nasscom) • Governement support • International support • Indian embassies, TPO’s • Other contacts (e.g. through tourism)

  21. Opportunities for other offshore destinations • Market share of India: less than 1% • India has disadvantages • long distance • time difference • rising tariffs • cultural differences • Other countries have advantages too • But: these must be actively promoted

  22. Access to the Dutch market • Improve expertise • project management • quality (CMM, P-CCM, ISO 9000) • Marketing and promotion • use many marketing tools • from prospects to clients, it is a numbers game. It will take a long time and requires investments • a local office (or a local partner) is neccessary

  23. What holds tomorrow? • Need for cost reductions: increase in offshore outsourcing • Netherlands - India: from US$ 44 million to US$ 1000 million in 2008 ... • Opportunities for companies from many other countries

  24. Conclusions • Opportunities in The Netherlands – but marketing is crucial • GOOD LUCK !

  25. GPI Consultancy Paul Tjia P.O. Box 26151 - 3002 ED Rotterdam The Netherlands Tel: + 31 - 10 - 4254172 info@gpic.nl

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