The Complete IDC Intelligence Solution
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The Complete IDC Intelligence Solution

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    The Complete IDC Intelligence Solution The Complete IDC Intelligence Solution Presentation Transcript

    • Global Sourcing - The Coming Reversal of Offshore Delivery: Are The Critics Right? – A Panel Discussion Bob Welch, IDC
    • Panel Members
          • Samantha Covell, VP Services Procurement, BT
          • Aidan Connolly, Finance Director, UK & Ireland, Sodexho
          • Neeraj Gupta, Executive Vice-President, Patni Computer Systems
          • Padma Ravichander, President & Managing Director, Global Consulting and Applications Solutions and Chief Executive APAC region, Perot Systems.
    • Offshore Services - Key Messages
      • Offshore is transforming to a strategic and disruptive form of service delivery
      • Offshore labor-only model has a limited lifespan of effective service delivery
      • Customers are looking to ensure that they mitigate their sourcing strategies across geographies and service delivery models
      • Expansion by non-India countries as primary sources of services is expected to be incremental over the next 2 to 3 years, but potentially significant in the longer term
    • From Defense to Offense: Offshore Player Strategic Directions and Challenges Integrate Transform Optimize Phase
      • Automation/capital
      • Brand image
      • Delivery Investments
      • Partnerships
      • Geographic reach
      • Expansion of skills (e.g. consulting, BPO, IT)
      • Brand image
      • Delivery Investments
      • Target buyers (e.g. CXO)
      • Global footprint
      • Delivery Investments
      • Partnerships
      • Skills
      • Brand image
      Provider Challenges 2004 2008 2007 2006 2005
      • Integrating global sourcing with hosting, utility computing/Software-as-Service
      • Market enabler: SMB, emerging
      Integrated Global Delivery
      • Cost
      • Project-based (develop, maintain)
      • Tactical
      • Legacy environments
      Offshore: Discrete Sourcing
      • Transformation via self-financing
      • New technologies (innovation)
      • Operational services (e.g.outsourcing)
      • Strategic
      • Industry-centric
      Global Sourcing Defense Offense
    • Emergence of Digital Services Supply Chains: Integrated Global Delivery “Platform” Procuring integrated IT, business process and industry-specific services Customer
      • Business consulting
      • Operations
      • Hosting
      Local Delivery Access to community of developers, technologies, processes and industry-specific expertise and skills Global Resource Community
      • Transformational services
      • Operations
      • Hosting
      Global Delivery
    • Emergence of “Disruptive” and “Transformative” Global Sourcing Delivery Options
      • Delivering “large-scale” IT outsourcing on a cost-effective, global delivery model (e.g. HCL – Autodesk/$50M, DSG International/$338M)
        • Integration of global sourcing (offshore) with a hosted “onshore” infrastructure (e.g. data centers)
        • Leverage partnerships for hosting
      • Enabling new service options: SaaS (Software-as-a-Service)
        • Tata, Wipro partnering with salesforce.com
          • Providing systems integration via global sourcing to SaaS provider customers
        • OpSource and IndusLogic
          • IndusLogic acts as offshore “SOA” factory for OpSource’s on-demand delivery platform
      Offshore providers expanding market potential with disruptive delivery models and placing greater pressure on global players to maintain pace
    • Global Sourcing Risk Mitigation and Management
      • Customers are increasingly looking to mitigate sourcing risks via:
      • Diversification of geographic locations
        • Require core requirements: strong infrastructure, educated workforce, language, IP protection, security (physical and logical)
      • Vendor requirement of investing in local assets for strategic relationships (business consulting, outsourced/managed services)
      Market data from 2007 US Utility Computing Market Adoption Respondents: CEO, CIO, CTO, IT/telecom Directors/VP, N=320
      • Utilization of newer service delivery models as substitutes (e.g. utility computing/SaaS)
      Top 3 benefits from leveraging utility computing as an outsourced service
    • Competing Business Models: Investment Considerations and Staffing Impacts
      • 2005 Data: Company Reports
      Growth $612K $185K $41K Revenue per Employee Headcount Requirements Delivery investment strategy will impact (1) Future opportunities (e.g. SMB, emerging markets) and (2) Competitive positioning (new players: online, SaaS) Offshore Economics Onshore Economics On-Demand Economics
    • Emerging Offshore Providers
      • Focused on project-based IT services such as CAD (custom application development)
      • Negligible focus on BPO
      • Increase focus on R&D/engineering and testing services
      • Relatively small with only a few players having approximately $300-400M in revenue and the remaining less than $100 million
      • Lack scale, brand recognition, strong global footprints needed to gain quick traction
      • Need to develop more focused approach (e.g. industry, market – R&D/engineering services) while making strategic investments (e.g. delivery footprint and capabilities)
      • Potential Competitors
      • Latin America
        • Mexico: Softtek, Neoris, Epsilon
        • Brazil: CPM, Politec
        • Argentina: Cubecorp, Globant
      • CEMA
        • Russia: SBS Luxoft
        • US-headquartered: Exigen, ePAM
      • APEJ
        • China: HiSoft, Augmentum
    • Potential Next “India’s”
      • Emerging geographic centers for offshore services
        • Increase focus on building NASSCOM-like lobbying groups (MexicoIT, Russoft, BRASSCOM)
        • Increase focus by governments to drive offshore/sourcing industry (China, Chile, Mexico)
        • Continued weaknesses in IP protection, infrastructure, language, project mgmt, security and politic dynamics inhibit growth
        • Competing on cost for smaller countries is not sufficient to drive scale
        • Becoming effective competitors to India increasingly requires focusing on industry-specific area (e.g. Brazil/finance)
      • Offshore Countries
      • Latin America
        • Brazil
        • Chile
        • Mexico
      • CEMA
        • Southeast European: Romania, Bulgaria
          • Entering EU in 2007
        • Central European: Czech, Poland, Hungary
        • Baltic States and Russia: Russia
      • APAC
        • China
    • Panel Discussion
      • What has changed in the sourcing model for offshore delivery?
      • What are some of the key lessons learned by buyers of offshore services?
      • What are some of the key lessons learned by providers of offshore services?
      • Conversion of offshore owned to offshore/ contacted?
      • Do clients favor vendor sourcing models that include offshore delivery?
      • Examples of where it works well and why
      • Examples where it hasn’t worked well and why
      • Major investment areas for companies with offshore delivery capabilities