Dr. Joseph W. Rottman November 06, 2006
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Dr. Joseph W. Rottman November 06, 2006 Presentation Transcript

  • 1. Dr. Joseph W. Rottman The Global IT Market: Helping students understand offshore outsourcing and its impacts 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. 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 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.
  • 6. Demand Trend: Total US vs. Global ICT Spending 2000- 2007 Source: Digital Planet/Global Insight as downloaded from www.itaa.org
  • 7. Total U.S. ICT Spending as % of Global ICT Spending DEMAND TREND: Forecast Source: Digital Planet/Global Insight as downloaded from www.itaa.org
  • 8. DEMAND TREND: Forecast U.S. ICT Spending as % of Gross Domestic Product 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 27 36% 387,000 284,000 Computer & information systems managers 24 37% 345,000 251,000 Network and computer system administrators 20 39% 653,000 468,000 Computer systems analysts 12 44% 159,000 110,000 Database Administrators 9 45% 409,000 281,000 Computer software engineers/systems software 7 46% 573,000 394,000 Computer software engineers/applications 2 57% 292,000 186,000 Network systems & data communication analysts Rank Percent Growth 2012 2002 Occupation
  • 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 Sources: U.S. Department of Labor & Forrester Research $136 billion in wages 3,320,213 1,591,101 587,592 102,674 Total Other Services 288,281 117,835 37,477 0 Management 348,028 161,722 61,252 10,787 Business 472,632 276,954 108,991 27,171 Computer 2015 2010 2005 2000 Category
  • 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, M IS 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 OTJ Job rotation Job rotation Generic Training classes offered by third parties Generic Training classes offered by third parties Self-tutorials Assign a mentor Assign a mentor Self-tutorials Training classes customized for our organization Training classes customized for our organization Mid Level Hires Entry Level Hires
  • 16. Plans for Obtaining Needed Skills
    • Learn from contractors/3PP
    • Convert contractors to employees
    • Mentor programs
    • College hire-entry-level
    • Support tuition reimbursement
    • On-the-Job-Training
    • Formal training through outside programs
    • Formal training in house
    • Hire experienced people
  • 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) Change Management/Organizational Readiness IT Architecture/Standards Project Risk Management Project Leadership Systems Design Business Process Design/Re-engineering Industry Knowledge Systems Analysis Company Specific Knowledge Functional Area Process Knowledge Project Planning/Budgeting/Scheduling
  • 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. Canada Mexico India Brazil EU Russia Israel China Japan Philippines Singapore Australia Supply Trend: 95% of US Offshore IT sourcing activity is taking place in these nations: 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. 2.74 Ukraine 2.40 Russia 2.58 Armenia 2.40 Canada 2.58 Brazil 2.40 Latvia 2.56 Philippines 2.26 Czech Republic 2.56 Poland 2.28 Hungary 2.76 Israel 2.42 Chile 2.50 Singapore 2.24 Costa Rica 2.50 Ireland 2.16 China 2.46 Romania 2.02 India GOI County GOI Country
  • 24.  
  • 25. Offshore Learning Curve Phase 1: Hype & Fear Phase 2: Early Adopters Best & Worst Practices Emerge Focus on Costs Phase 3: Market Matures Richer Practices Emerge Focus on Quality Phase 4: Institutionalized Focus on Value-added Size of Market Customer Learning Time
  • 26. What does it look like? Engagement Model 1: Onsite Supplier Engagement Manager Offshore Supplier Delivery Team Local Business Units Architects/ DBAs/etc. Project Managers Offshore Supplier Delivery Team Offshore Supplier Delivery Team PMO
  • 27. What does it look like? Engagement Model 2: Onsite Supplier Project Managers Offshore Supplier Delivery Team Offshore Supplier Delivery Team Offshore Supplier Delivery Team Onsite Supplier Project Managers Offshore Supplier Delivery Team Offshore Supplier Delivery Team Offshore Supplier Delivery Team Architects/ DBAs/etc. Project Managers PMO Local Business Units
  • 28. Offshore training models Product, technology, project specific Content For large offshore supplier: Customer pays supplier onshore rates if training is onshore Customer pays supplier offshore rates if training via Intranet For small specialized offshore supplier: Customer pays supplier offshore rates for onshore training Charges Industrial Equipment Manufacturing New hires for customer (developer/architect/team lead) New assignments from supplier organizations Project Leads Audience Onsite Training sessions of new customer employees and supplier employees. Sessions are taped and placed on customer’s intranet Approved vendors are given access through secure data circuits One-to-to for Project Leads Delivery
  • 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 Customer Project Leads and Architects Supplier Project Lead 1 Train On Shore - On Site Off Shore Industrial Equipment Manufacturing Project Duration On Site Overlap 3 – 6 Months Supplier Project Lead 2 Trains Supplier Project Lead 3 On Site Overlap Trains Offshore Delivery Team Trains
  • 31. Talent Pipeline Issues Entry Level Programmers Analysts Project Manager
  • 32. Conclusion
    • Research Base
    • Career Implications and Trends
    • Case Study