Sourcing Global and Israeli trends 2008


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  • Galit Fein Office of the CIO 2008
  • Sourcing Global and Israeli trends 2008

    1. 1. Galit Fein Senior Analyst & VP [email_address] Sourcing Israeli Trends 2008
    2. 2. Agenda <ul><li>WW outsourcing trends </li></ul><ul><li>Israeli outsourcing trends </li></ul><ul><ul><li>Selective outsourcing </li></ul></ul><ul><ul><li>Infrastructure, HD, QA/Testing, BPO </li></ul></ul><ul><li>Professional Services </li></ul>
    3. 3. Outsourcing Objectives – Unchanged <ul><li>Cost reduction is most companies' primary objective for pursuing IT outsourcing – 65% </li></ul><ul><li>Focus on core business – 58% </li></ul><ul><li>Lack of inhouse resources – 52% </li></ul><ul><li>Better expertise – 26% </li></ul><ul><li>Moved fixed cost to variable cost – 15% </li></ul><ul><li>Avoid capital investment- 10% </li></ul>
    4. 4. Top Factors for Failed Outsourcing <ul><li>Management lacks prior experience with outsourcing </li></ul><ul><li>Management lacks skill at writing & negotiating outsourcing contracts </li></ul><ul><li>The work outsourced is difficult to standardize </li></ul><ul><li>Quality didn’t not meet expectations </li></ul>
    5. 5. What kinds of work are you currently outsourcing or planning to outsource? Source: Cutter
    6. 6. For what reasons have you considered insourcing? Source: Cutter
    7. 7. Outsourcing Model Israeli Trends <ul><li>Outsourcing model evolution or equilibrium? </li></ul><ul><li>Outsourcing market has matured & customer are deeply aware of the advantaged & risks involved </li></ul><ul><li>1/3 of deals were total IT function, especially with SMBs </li></ul><ul><li>Rest of deals were of transferring processes & specific fields to outsourcer: </li></ul><ul><ul><li>Help Desk </li></ul></ul><ul><ul><li>Infrastructure </li></ul></ul>
    8. 8. Outsourcing Israeli Trends <ul><li>Outsourcing market growth has narrowed: </li></ul><ul><ul><li>Overcoming recessional economy </li></ul></ul><ul><ul><li>End of vendors’ “suicidal prices” </li></ul></ul><ul><ul><li>Extreme changes in the IT executive lead </li></ul></ul><ul><ul><li>Advertised disagreements & problems with the contract between Mataf & EDS </li></ul></ul>
    9. 9. Outsourcing Israeli Trends <ul><li>Most orgs. are successful in achieving their objectives, but in general they feel neutral about the results </li></ul><ul><li>Companies generally have difficulty evaluating vendor capabilities & outsourcing outcomes </li></ul>
    10. 10. Outsourcing Israeli Trends <ul><li>Companies are choosing vendors with proven abilities to deliver services according to SLA </li></ul><ul><li>Clients changing preference – smaller contracts~ 3-5 years </li></ul><ul><li>Highly competitive market with increasing no. of vendors </li></ul><ul><li>New players are entering the IT arena: Bynet , Taldor </li></ul>
    11. 11. Outsourcing Israeli Trends <ul><li>Engagement with multiple vendors </li></ul><ul><li>Vendor portfolio restructuring </li></ul><ul><li>Consulting company or dedicated IT Executive are in charge of Client-Vendor negotiation & mngt </li></ul><ul><li>Main players: </li></ul><ul><li>Ness, EDS, IBM, Malam-Team, HP </li></ul>
    12. 12. Selective Outsourcing Israeli Trends <ul><li>Comprehensive outsourcing </li></ul><ul><li>Loss of Flexibility </li></ul><ul><li>Increased Risk </li></ul><ul><li>Loss of Internal Expertise </li></ul><ul><li>Selective examples: </li></ul><ul><li>EDS: Kneset </li></ul><ul><li>HP: Tower </li></ul><ul><li>Malam – Team: Dan </li></ul><ul><li>Ness: Tadiran Appliances </li></ul><ul><li>Selective outsourcing </li></ul><ul><ul><li>Vendor Competition </li></ul></ul><ul><ul><li>Shared Objectives </li></ul></ul><ul><ul><li>Core Competencies </li></ul></ul><ul><li>Selective examples: </li></ul><ul><li>Malam-Team: Tel-Aviv municipality </li></ul><ul><li>HP: Telrad </li></ul><ul><li>EDS: Alvarion </li></ul><ul><li>Ness? </li></ul>
    13. 13. Infrastructure Outsourcing <ul><li>TACTICAL IT </li></ul><ul><ul><li>Tactical functions simply keep the business up & running on a day-to-day basis: </li></ul></ul><ul><ul><ul><li>HW/ SW maintenance </li></ul></ul></ul><ul><ul><ul><li>DBA </li></ul></ul></ul><ul><ul><ul><li>System management </li></ul></ul></ul><ul><ul><ul><li>Network management </li></ul></ul></ul><ul><ul><ul><li>Security </li></ul></ul></ul><ul><ul><ul><li>ERP </li></ul></ul></ul><ul><li>STRATEGIC IT </li></ul><ul><ul><li>Strategic functions drive the company’s dollar, stock value , & competitive advantage: </li></ul></ul><ul><ul><ul><li>Business development </li></ul></ul></ul><ul><ul><ul><li>New system development </li></ul></ul></ul><ul><ul><ul><li>Product marketing support </li></ul></ul></ul><ul><ul><ul><li>Sales force automation </li></ul></ul></ul><ul><ul><ul><li>R&D </li></ul></ul></ul><ul><ul><ul><li>Business & IT alignment </li></ul></ul></ul>Outsourcing In-house Perform similar activities better than rivals -Perform different activities than rivals do. -Perform same activities but in different ways than rivals
    14. 14. Service Desk Israeli Trends <ul><li>IT service & support represents up to 10% of IT </li></ul><ul><li>operating budget </li></ul><ul><li>ITOs that do not manage operating costs efficiently will likely find themselves outsourced </li></ul><ul><li>Selective examples: </li></ul><ul><li>Calanit-Carmon – IAI; Malam-Team-Tel-Aviv Municipality, EDS - Alvarion </li></ul>Personalized service does not equal higher quality of service
    15. 15. Service Desk Israeli Trends <ul><li>To compete with outsourcers ITO must: </li></ul><ul><ul><li>Manage Labor Resource Career Pathing </li></ul></ul><ul><ul><li>Leverage technology to automate the processes (self-service, integration between the HD, asset & change) </li></ul></ul><ul><ul><li>Adopt methodology (ITIL) </li></ul></ul>
    16. 16. Service Desk Israeli Trends Labor Resource Career Pathing <ul><li>Vendors expertise in managing problematic HD 1 st level support: </li></ul><ul><ul><li>High turnover </li></ul></ul><ul><ul><li>Lack of loyalty </li></ul></ul><ul><ul><li>Lack of vivid career path </li></ul></ul><ul><li>Dedicated HR & specific qualification </li></ul><ul><li>Mngt of the career paths of staff </li></ul><ul><ul><li>Rotation of 36 month </li></ul></ul>
    17. 17. QA/Testing Management Israeli Trends <ul><li>Rapidly growing field </li></ul><ul><li>Acknowledging the advantage & cost saving by outsourcing: the transition from PS to outsourcing </li></ul><ul><li>Israeli near shore: </li></ul><ul><ul><li>Main Player: Matrix (Talpiot) </li></ul></ul><ul><ul><li>Malam (Ma’alot) </li></ul></ul><ul><ul><li>Ness (EDC) </li></ul></ul><ul><ul><li>Aman (Tehila) </li></ul></ul><ul><li>Main Players: </li></ul><ul><li>Ness & Tescom, Malam-Team, Matrix </li></ul>
    18. 18. Business Process Outsourcing <ul><li>BPO adoption: unraised in past two years </li></ul><ul><li>Strategic concerns about losing their core capabilities </li></ul><ul><li>Intellectual property, privacy, & security issues </li></ul><ul><li>BPO will increase in markets dependent on unskilled labor </li></ul>
    19. 19. Measurement <ul><li>Major obstacle - measurement </li></ul><ul><li>ITOs are not satisfied with their abilities to acquire & use productivity metrics </li></ul><ul><li>ITOs still struggle with metrics design & implementation </li></ul><ul><li>ITOs mostly rely on the vendor's estimate </li></ul><ul><li>The measurement problem pertains not only to outsourcing but also to the overall operation of a firm </li></ul>
    20. 20. Professional Services Israeli Trends <ul><li>Professional services growth has narrowed </li></ul><ul><ul><li>In-sourcing trend as management perception </li></ul></ul><ul><ul><li>Opposite trends in private versus public sectors </li></ul></ul><ul><ul><li>Need for flexibility & specific proficiency: </li></ul></ul><ul><ul><ul><li>Demand on professional niche experts (BI, SQL, Security, Oracle Applications, etc) </li></ul></ul></ul>
    21. 21. Professional Services Israeli Trends <ul><ul><li>ITOs prefer fix prices ( overtime hours, sick pay, miluim ) </li></ul></ul><ul><ul><li>Transparency with the suppliers </li></ul></ul><ul><ul><li>Paradoxical situation </li></ul></ul><ul><ul><li>PS Advantages </li></ul></ul><ul><ul><li>Employee’s preservation ( training, professional support, excursions, pay increase, high mobility) </li></ul></ul><ul><ul><li>FTE Advantages </li></ul></ul><ul><ul><li>Employee’s sense of belonging </li></ul></ul><ul><ul><li>Cost saving </li></ul></ul>
    22. 22. Professional Services Trends <ul><li>Increase in professional services rates: </li></ul><ul><ul><li>BI– major increasing: 15-20% </li></ul></ul><ul><ul><li>Programming .NET & Java ~ 10% </li></ul></ul><ul><ul><li>Oracle Apps ~ 10% </li></ul></ul><ul><ul><li>System ~ 10% </li></ul></ul><ul><ul><li>QA – increasing demand ~ 10% </li></ul></ul><ul><ul><li>HD & PC technicians - no change </li></ul></ul>
    23. 23. Which IT skills are you planning to outsource? Source: Cutter
    24. 24. Thank you! Galit Fein Senior Analyst & VP [email_address]