Payment Business Services Offshore Outsourcing the “Danish way” N ASSCOM India Leadership Forum 2008 Claus Lund Pedersen Senior Manager & Head of Resource Management within IT Development ...the right resources with the right skills at the right time for the right projects…

Offshore Outsourcing in PBS Agenda Payment Business Services - PBS PBS’ rationale for outsourcing PBS’ sourcing strategy and set-up PBS’ experiences Future plans for PBS’ outsourcing Agenda

Payment Business Services - PBS

PBS’ rationale for outsourcing

PBS’ sourcing strategy and set-up

PBS’ experiences

Future plans for PBS’ outsourcing

Offshore Outsourcing in PBS Scope for this presentation Something on outsourcing of… IT System Development IT System Maintenance Nothing on outsourcing of… BPO IT Operations IT Support IT Data scanning … or … So…

Something on outsourcing of…

IT System Development

IT System Maintenance

Nothing on outsourcing of…

BPO

IT Operations

IT Support

IT Data scanning

Offshore Outsourcing in PBS Payment Business Services PBS develops, sells and operates systems and services in the market for payment cards and payment services. PBS are also sub-suppliers to the common IT infrastructure of the Danish banks. In popular terms, PBS moves money and information between citizens, companies and public institutions. Every minute of the day several million DKK passes through our systems. PBS was founded in 1968 and we are owned by most of the Danish banks and the central bank in DK, Danmarks Nationalbank PBS employ approx. 850 people of which 99% work at our headquarters in Ballerup, northeast of Copenhagen, Denmark. PBS is the company behind systems such as Dankort (Danish debetcard) and Direct Debit Service (used by 94% of the Danish household). 1¾ billion transactions were processed via PBS in 2006

PBS develops, sells and operates systems and services in the market for payment cards and payment services. PBS are also sub-suppliers to the common IT infrastructure of the Danish banks.

In popular terms, PBS moves money and information between citizens, companies and public institutions. Every minute of the day several million DKK passes through our systems.

PBS was founded in 1968 and we are owned by most of the Danish banks and the central bank in DK, Danmarks Nationalbank

PBS employ approx. 850 people of which 99% work at our headquarters in Ballerup, northeast of Copenhagen, Denmark.

PBS is the company behind systems such as Dankort (Danish debetcard) and Direct Debit Service (used by 94% of the Danish household).

1¾ billion transactions were processed via PBS in 2006

Offshore Outsourcing in PBS Payment Business Services Mission To make payments and exchange of information easy and secure Vision To be the leading supplier of payment and information solutions Values Responsibility : Because we handle other people’s money Creating value : F or our customers as well as our shareholders Assets People Knowledge, experience and expertise Systems and services Profile in the market

Mission

To make payments and exchange of information easy and secure

Vision

To be the leading supplier of payment and information solutions

Values

Responsibility : Because we handle other people’s money

Creating value : F or our customers as well as our shareholders

Assets

People

Knowledge, experience and expertise

Systems and services

Profile in the market

Offshore Outsourcing in PBS European market future New players New global players on the European market Current 15-20 players will be 3-5 players in the future Cross border activities New potential customers and competitors Multicurrency services Multilanguage services SEPA Single European Payment Area Costs Lover transaction costs

New players

New global players on the European market

Current 15-20 players will be 3-5 players in the future

Cross border activities

New potential customers and competitors

Multicurrency services

Multilanguage services

SEPA

Single European Payment Area

Costs

Lover transaction costs

Offshore Outsourcing in PBS PBS future Keep our position as the leader Digitised services Lower transaction costs Denmark New home market Follow our customers Strategic partnerships Nordic countries Be ready for the new competition on the European market incl. SEPA Europe Expansion – More work

Keep our position as the leader

Digitised services

Lower transaction costs

New home market

Follow our customers

Strategic partnerships

Be ready for the new competition on the European market incl. SEPA

Offshore Outsourcing in PBS Rationale for outsourcing 2002 … Big project – Reengineering of a payroll system (1/3 of PBS’ development capacity for 2 years) Few internal experts – both old and new system Time and resources – scares resources 2007/2008 … More work than resources Reduction of costs Release internal resources for process-improvement projects Expand resource-pool as variable costs Not only to cut costs !! Lack of resources !!

2002 …

Big project – Reengineering of a payroll system (1/3 of PBS’ development capacity for 2 years)

Few internal experts – both old and new system

Time and resources – scares resources

2007/2008 …

More work than resources

Reduction of costs

Release internal resources for process-improvement projects

Expand resource-pool as variable costs

Offshore Outsourcing in PBS Rationale for outsourcing Variable costs ODC Contractors Projects PBS staff

Variable costs

Offshore Outsourcing in PBS Sourcing strategy PBS identifies the sourcing option for each project based upon the project type, duration, costs, req. stability and knowledge required Standard tools/systems wherever possible IT development/maintenance carried out by… Resources from PBS’ internal IT Development Resources from our ODC (either in India or in PBS) External contractors (primarily Danish or English) Knowledge about our systems and business needs to be in PBS !!!

PBS identifies the sourcing option for each project based upon the project type, duration, costs, req. stability and knowledge required

Standard tools/systems wherever possible

IT development/maintenance carried out by…

Resources from PBS’ internal IT Development

Resources from our ODC (either in India or in PBS)

External contractors (primarily Danish or English)

Knowledge about our systems and business needs to be in PBS !!!

Offshore Outsourcing in PBS Sourcing strategy Resource pools Always a PBS Project leader/manager and a QA person on a project Project responsibility is always with PBS PBS has the ultimate responsibility PBS IT Development ODC External contrac-tors & vendors Resource Allocation

Resource pools

Always a PBS Project leader/manager and a QA person on a project

Project responsibility is always with PBS

Offshore Outsourcing in PBS Sourcing set-up PBS has set-up an Offshore Development Centre (ODC) The ODC is an extension to the ressource pool in PBS The ODC has been set-up with L&T Infotech in India: Office-space, IT infrastructure etc. is owned by the vendor Resources are employed by the vendor but allocated to the ODC 100% PBS has: 3 PBS employees for the vendor management and coordination/administration of the relationship - Based in PBS (onsite) 2 PBS employees for the project coordination - Based at vendors site in India (offshore)

PBS has set-up an Offshore Development Centre (ODC)

The ODC is an extension to the ressource pool in PBS

The ODC has been set-up with L&T Infotech in India:

Office-space, IT infrastructure etc. is owned by the vendor

Resources are employed by the vendor but allocated to the ODC 100%

PBS has:

3 PBS employees for the vendor management and coordination/administration of the relationship - Based in PBS (onsite)

2 PBS employees for the project coordination - Based at vendors site in India (offshore)

Offshore Outsourcing in PBS Sourcing set-up Payment SAP Card

Offshore Outsourcing in PBS Sourcing set-up Strategic investment !! PBS invest time and money in knowledge build-up at the vendor which results in: Domain knowledge of PBS’ business and systems Knowledge-database/repository Certification-program PBS has a three year contract which acts as a framework with supporting service orders for each project carried out by the vendor Fixed price … and … Time & Material Common processes both at onsite and offshore to ensure a smooth, efficient and predictable coorporation Workshops, handbooks and project introductions to minimise the impact of the cultural differences between Danes and Indians KEY !!

Strategic investment !!

PBS invest time and money in knowledge build-up at the vendor which results in:

Domain knowledge of PBS’ business and systems

Knowledge-database/repository

Certification-program

PBS has a three year contract which acts as a framework with supporting service orders for each project carried out by the vendor

Fixed price … and … Time & Material

Common processes both at onsite and offshore to ensure a smooth, efficient and predictable coorporation

Workshops, handbooks and project introductions to minimise the impact of the cultural differences between Danes and Indians

Offshore Outsourcing in PBS Experiences - Maturity CMMI makes a difference (SEI Capability Maturity Model Index) Goal PBS Current level CMMI level Customer Vendor 5 4 3 2 1 1 2 3 4 5 Good Average Poor Current level

CMMI makes a difference (SEI Capability Maturity Model Index)

Offshore Outsourcing in PBS Experiences - Culture Indians work long hours Easy to blend in when working at customer’s site There are cultural differences between India and Denmark… Indians does not always tell you if they don’t understand you Shaken the head does not mean no – could mean yes or “I hear you” Indians are very polite – sometime too polite Indians accept the “unequal dimention” - Danes think everybody are equal A lot of Indians work far from hometown… Illness in the family, marriage etc. can mean leaving their job

Indians work long hours

Easy to blend in when working at customer’s site

There are cultural differences between India and Denmark…

Indians does not always tell you if they don’t understand you

Shaken the head does not mean no – could mean yes or “I hear you”

Indians are very polite – sometime too polite

Indians accept the “unequal dimention” - Danes think everybody are equal

A lot of Indians work far from hometown…

Illness in the family, marriage etc. can mean leaving their job

Offshore Outsourcing in PBS Experiences - Culture Religion is important to Indians - Acknowledge many religions If you want creativity you need to ask for it Promotions are expected after 3-4 years in same position/rolle which does not easily comply with long term retention of knowledge in a team The impact of cultural differences is very much depended on the vendor’s and customer’s ability to manage these differences You need to understand ”hinglish” But … not all Indians are the same (just like the Danes and…)

Religion is important to Indians - Acknowledge many religions

If you want creativity you need to ask for it

Promotions are expected after 3-4 years in same position/rolle which does not easily comply with long term retention of knowledge in a team

The impact of cultural differences is very much depended on the vendor’s and customer’s ability to manage these differences

You need to understand ”hinglish”

But … not all Indians are the same (just like the Danes and…)

Offshore Outsourcing in PBS Experiences - Recommendations Make your company ready as an “outsourcing customer” Choose the right vendor State clear requirements and expectations Create common processes, templates, checklists and plans Ask the “receiver” whether he/she has understood the message Priority on all projects – What is most important to you as customer… Price, Time or Quality Use own staff as offshore coordinators Make use of new technology – Videoconf., Skype, Chat etc. Internal communication is IMPORTANT Inform about plans and status – take the discussions Try it = Prove it

Make your company ready as an “outsourcing customer”

Choose the right vendor

State clear requirements and expectations

Create common processes, templates, checklists and plans

Ask the “receiver” whether he/she has understood the message

Priority on all projects – What is most important to you as customer…

Price, Time or Quality

Use own staff as offshore coordinators

Make use of new technology – Videoconf., Skype, Chat etc.

Internal communication is IMPORTANT

Inform about plans and status – take the discussions

Try it = Prove it

Offshore Outsourcing in PBS Future for PBS PBS believes that controlled and managed outsourcing is one of the tools to ensure expansion of PBS’ development capacity Key numbers… Global development capacity needs to be expanded ODC needs to deliver up to 40% of the total kapacity Split of outsourced work: 20% onsite and 80% offshore Decreasing hourly rates by expanding with “cheaper” development hours

PBS believes that controlled and managed outsourcing is one of the tools to ensure expansion of PBS’ development capacity

Key numbers…

Global development capacity needs to be expanded

ODC needs to deliver up to 40% of the total kapacity

Split of outsourced work: 20% onsite and 80% offshore

Decreasing hourly rates by expanding with “cheaper” development hours

Offshore Outsourcing in PBS Not everything is suited for outsourcing

Offshore Outsourcing in PBS Thank you – Contact information Claus Lund Pedersen , Senior Manager IT Development, Resource Management Tel.: +45 2948 2252 Email: clp@pbs.dk

Claus Lund Pedersen , Senior Manager

IT Development, Resource Management

Tel.: +45 2948 2252

Email: clp@pbs.dk