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OVERVIEW

REVIEW OF IT OFFSHORE OUTSOURCING ISSUES Helen M. Carothers Gerhard Steinke Seattle Pacific University gsteinke@spu.edu 8 October 2004. OVERVIEW. Background Outsourcing Models Drivers Benefits Risks Future Conclusion. BACKGROUND.

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OVERVIEW

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  1. REVIEW OF IT OFFSHORE OUTSOURCING ISSUESHelen M. CarothersGerhard SteinkeSeattle Pacific Universitygsteinke@spu.edu8 October 2004 Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  2. OVERVIEW Background Outsourcing Models Drivers Benefits Risks Future Conclusion Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  3. BACKGROUND “Offshore outsourcing” and/or “offshoring” refers to moving work and the related costs from a developed country to a lower-cost, developing country. Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  4. OUTSOURCING MODELS Ownership Subsidiary Partnership Contract Provider owned facilities Provider employs staff Provider responsible for deliverables Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  5. OUTSOURCING LEVELS Simple - Provide Resources Repetitive tasks Moderate - Cost Reductions Rule-based decision-making Problem resolution Complex - Process Improvements Fully analytical tasks Research Non-rule based decision-making Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  6. Figure 1: Outsourcing TrendsSource: Australia Outsourcing and Utility Services: Research Fact Sheet. IDC’s IT Outsourcing and Utilities Services (2004) Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  7. MATURING MARKET • More sophisticated providers • Focus on higher value work • Distinguish and differentiate offerings • Driver shifting from cost to quality • Some fragmentation • Variety of business models • Disparity in provider maturity • New service offerings Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  8. GROWTH POTENTIAL Fewer Opportunities Application development Maintenance work More Opportunities Enterprise application integration Implementation of application packages Business integration Greatest Opportunities Call centers Business processes Infrastructure Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  9. Figure 2: Applications Being Sent OffshoreSource: Behind the Numbers: Offshore Outsourcing Projected to Grow.Information Week. (2004) Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  10. Figure 3: Type of Work Being Sent OffshoreSource: Behind the Numbers: Offshore Outsourcing Projected to Grow.Information Week. (2004) Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  11. BENEFITS • Cost reduction • Enhanced processes • Reengineered processes • Cost reduction • Enhanced processes • Reengineered processes • Process improvements Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  12. RISKS • Rapid growth • Renegotiated contracts • Leaving shareholder value on the table • More complex operations • Not always satisfactory • No competitive advantage • Poor quality Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  13. Figure 4: Success of Offshore OutsourcingSource: Behind the Numbers: Offshore Outsourcing Projected to Grow.Information Week. (2004) Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  14. CHALLENGES • Communication • Cultural differences • Time-consuming travel • Intellectual property considerations • Privacy and security regulations • Political risks • Infrastructure capabilities Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  15. FUTURE IT industry is changing Globalization of software Globalization of it services Stronger job demand Support specialists Software applications engineers Software systems engineers Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  16. JOB DEMAND Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  17. WHAT DOES THIS MEAN? • Large businesses • Globally blended outsourcing options • Enterprise software development • Paper-based transaction processing • Project manager • Business requirements analyst Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  18. CONCLUSIONS Man was not meant to fly. The horseless carriage was a fad. There was no place in business for the personal computer. • Offshore outsourcing is a fad. • Most of the offshore projects will fail. Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  19. PREDICTIONS Globalization will happen and it is about more than the offshore outsourcing of IT related jobs. If you work in the IT industry, your work environment will be changed by offshoring. Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  20. OFFSHORE OUTSOURCING • Reduces costs • Facilitates innovative solutions • Facilitates growth • Increases productivity • Increases demand for IT-related jobs • Leaner, more competitive U.S. economy Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  21. EPILOGUE Since 2000, U.S. has lost 372,000 IT jobs Reasons: Dot-com bust Recession Growth in productivity Global Insight study Sponsored by the Information Technology Association of America (ITAA) The Benefits of Offshore Outsourcing Michael J. Miller PC Magazine, 28 April 2004 Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  22. WHAT CAN WE DO? Increase worker training, retraining, and education Fix failing K-12 education system (future competitiveness depends on it) Increase basic research in physical sciences Encourage foreign nationals earning masters and Ph.D. degrees to stay and work Adopt a broadband policy to facilitate communications Support open markets and oppose protectionist legislation Reduce the costs of doing business Adapted from the American Electronics Association report: Offshore Outsourcing In An Increasingly Competitive And Rapidly Changing World: A High-Tech Perspective March 2004 Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  23. NOT FOR EVERYONE "We'd be nuts to outsource." Linda Dillman Executive VP and CIO of Wal-Mart Stores Inc. InformationWeek Sept. 27, 2004 Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

  24. REVIEW OF IT OFFSHORE OUTSOURCING ISSUESHelen M. CarothersGerhard SteinkeSeattle Pacific Universitygsteinke@spu.edu8 October 2004 Review of IT Offshore Outsourcing Issues Helen M. Carothers Gerhard Steinke

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