NASSCOM Global Sourcing Conclave - The coming reversal of offshore delivery: Are the critics right?

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
Target buyers (e.g. CXO)
Global footprint
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

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NASSCOM Global Sourcing Conclave - The coming reversal of offshore delivery: Are the critics right?

by NASSCOM on Dec 03, 2007

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NASSCOM Global Sourcing Conclave - The coming reversal of offshore delivery: Are the critics right? — Presentation Transcript