Global leadership: IT as a competitive advantage, Claus Lund Pedersen, Head,Denmark

Slide 1: Payment Business Services Offshore Outsourcing the “Danish way” NASSCOM 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…

Slide 2: 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 2

Slide 3: 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 So… …or… NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 3

Slide 4: 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 4

Slide 5: 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: For our customers as well as our shareholders ► Assets ► People ► Knowledge, experience and expertise ► Systems and services ► Profile in the market NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 5

Slide 6: 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 6

Slide 7: Offshore Outsourcing in PBS PBS future  Keep our position as the leader Denmark  Digitised services  Lower transaction costs ork w  New home market ore Nordic M  – Follow our customers countries on  si Strategic partnerships an E xp  Be ready for the new Europe competition on the European market incl. SEPA NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 7

Slide 8: 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 Lack Not only of to cut resources !! costs !! NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 8

Slide 9: Offshore Outsourcing in PBS Rationale for outsourcing ► Variable costs Projects ODC Contractors PBS staff NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 9

Slide 10: 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 !!! NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 10

Slide 11: Offshore Outsourcing in PBS Sourcing strategy ► Resource pools Resource Allocation External contrac- PBS ODC tors & IT Development vendors ► Always a PBS Project leader/manager and a QA person on a project ► Project responsibility is always with PBS s th e ity PB S ha onsibil resp ate ultim NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 11

Slide 12: 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) NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 12

Slide 13: Offshore Outsourcing in PBS Sourcing set-up Payment SAP Card NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 13

Slide 14: 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 KEY !! ► 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 14

Slide 15: Offshore Outsourcing in PBS Experiences - Maturity ► CMMI makes a difference (SEI Capability Maturity Model Index) Vendor Good Current level 5 PBS Average 4 Goal Poor 3 2 1 CMMI level 1 2 3 4 5 Customer Current level NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 15

Slide 16: 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 16

Slide 17: 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…) NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 17

Slide 18: 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 18

Slide 19: 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 19

Slide 20: Offshore Outsourcing in PBS Not everything is suited for outsourcing NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 20

Slide 21: 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 NASSCOM India Leadership Forum 2008 PBS – Payment Business Services – 2008 © February 14, 2008 - page 21