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

  • 1. Global Sourcing - The Coming Reversal of Offshore Delivery: Are The Critics Right? – A Panel Discussion Bob Welch, IDC
  • 2. 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.
  • 3. 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
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. 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
  • 10. 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
  • 11. 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