Offshore Development: Overview and Best Practices


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  • First, the benefits of globalization: Talk about TTM Productivity Combined Improvement = 30% Immediate Cost Eff Reduction 40% But to top it all, Productization Benefits which are unique to Virtusa
  • Offshore Development: Overview and Best Practices

    1. 1. Offshore Development Overview & Best Practices Kris Canekeratne Chairman & CEO, Virtusa Corp
    2. 2. Virtusa: A Quick Overview <ul><li>DNA based on building and releasing over 500 product-class solutions for Global 2000 and leading ISVs </li></ul><ul><li>Over 1000 Professionals </li></ul><ul><ul><li>94% employee retention </li></ul></ul><ul><li>Location </li></ul><ul><ul><li>US : Westborough (Head Quarters), New York, </li></ul></ul><ul><ul><li>San Francisco, Atlanta, Chicago, Columbus </li></ul></ul><ul><ul><li>Asia : Colombo, SL; Hyderabad, India </li></ul></ul><ul><li>7 Years of Sequential Growth </li></ul><ul><ul><li>50% growth in LTM </li></ul></ul><ul><ul><li>3-Year CAGR, 50% </li></ul></ul>Leading US Provider of Outsourced Engineering Services Bringing Time and Cost Efficiencies Through Productization & Globalization
    3. 3. Representative Clients <ul><li>Virtusa enjoys a 100% referenceable client base </li></ul>Financial Services Telecommunications Manufacturing/Transportation Retail Software Products
    4. 4. Global Delivery Model Has Disrupted IT Services <ul><li>2002 IT Outsourcing to Indian Sub Continent $7.5B growing to over $70B by 2008 – Nascomm & McKinsey </li></ul><ul><li>Forrester Research: 20% of US IT Services Jobs will move offshore </li></ul><ul><li>Global 2000 already spend 28% of their IT budget on Offshore Services </li></ul><ul><ul><li>“ Pick something to move offshore today! ” </li></ul></ul><ul><ul><li>- Brian Valentine, No. 2 Exec, Microsoft </li></ul></ul><ul><ul><li>“ We tell our clients to let us help them use India as a hub. ” </li></ul></ul><ul><li>- Richard Brown, CEO, EDS </li></ul><ul><ul><li>“ We are going to aggressively move everything we can offshore. ” </li></ul></ul><ul><ul><li>- Ann Livermore, EVP, HP Services </li></ul></ul>2 out of 5 Fortune500 companies have gone offshore to meet their IT services needs, ISV’s following similar pattern
    5. 5. Real Issue: Offshore Services Getting Commoditized <ul><li>Offshore industry evolved on the premise of labor cost arbitrage </li></ul><ul><li>For every vendor, there is a lower bidder somewhere in India or China </li></ul>4 th Gen Business Transformation 3 rd Gen On-site/Offshore 2 nd Gen Offshore Code Factory 1 st Gen Staffing <ul><li>Business Consulting </li></ul><ul><li>IT strategy + Biz Integration </li></ul><ul><li>IT Maintenance, integration </li></ul><ul><li>Good for inline cost cutting </li></ul><ul><li>Focused on Cost reduction </li></ul><ul><li>Legacy skills, quality issues </li></ul><ul><li>Replacement shops </li></ul><ul><li>Little strategic impact </li></ul>How do clients gain efficiencies beyond simple head-count related unit cost reduction?
    6. 6. Learning From The Auto Industry’s Global Disruption <ul><li>Product Line approach: </li></ul><ul><ul><li>Quick assembly of reusable components </li></ul></ul><ul><ul><li>Modular, flexible design </li></ul></ul><ul><ul><li>Honda: 80% reuse across Civic, Accord, Odyssey, Insight </li></ul></ul><ul><ul><li>Toyota: “Global Body Line” </li></ul></ul>Japanese Automakers entered US markets as the cheaper alternative to Detroit’s Big Three American companies struggle to keep up with the quality, innovation and product-line efficiencies of Honda, Toyota, Nissan Yesterday Today <ul><ul><li>Productization + Globalization </li></ul></ul><ul><ul><li>Quality + Efficiencies </li></ul></ul>Automakers know how to create efficiencies, move up the value chain
    7. 7. Next Gen Outsourcing: Productization + Globalization <ul><li>Bringing Product-Class rigor into IT services using Global </li></ul><ul><li>Collaboration Model </li></ul><ul><li>Productization </li></ul><ul><ul><li>Product Line Approach to Software building </li></ul></ul><ul><ul><li>Reusable components (self-contained units of business logic and data) </li></ul></ul><ul><ul><li>Assemble components to create new systems, products and applications </li></ul></ul><ul><ul><li>Build these components using global efficiencies </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Immediate ROI through quicker software development cycles </li></ul></ul><ul><ul><li>High Quality Products and product-class applications </li></ul></ul><ul><ul><li>Robust, lasting design through engineering rigor </li></ul></ul><ul><ul><li>Significant downstream economies of scale and scope </li></ul></ul><ul><ul><li>Flexible architecture to scale to future challenges </li></ul></ul>
    8. 8. New Breed Of Global Service Providers Reduce Engineering Cost by 40-50% 30% Productivity Increase Focus on Velocity and Productivity <ul><li>Rigorous Engineering Processes. Mature talent </li></ul><ul><li>An environment that fosters creativity and innovation </li></ul>Immediate ROI <ul><li>A pleasant by-product of globalization </li></ul><ul><li>Lower blended costs without compromising quality </li></ul>Accelerate Time-To-Market <ul><li>Next Gen, nimble Global Collaboration Framework </li></ul><ul><li>24-hour work days via optimally distributed global teams </li></ul>Globalization Significant Downstream Value via Productization <ul><li>Reuse of software assets & engineering best practices </li></ul><ul><li>Ease of exploiting multiple markets & customers </li></ul>Immediate & Long Term ROI Productization
    9. 9. Core Differentiators of Next Gen Providers <ul><li>Benefits of Productization </li></ul><ul><ul><li>Productivity and quality </li></ul></ul><ul><ul><li>Pervasive Reusability, Component Technology </li></ul></ul><ul><ul><li>Significant Downstream Value </li></ul></ul><ul><li>Peace-of-mind of a US-based Services Company </li></ul><ul><ul><li>Executive, technical, domain leadership in close proximity to clients </li></ul></ul><ul><ul><li>Intimacy with Client Business Practices </li></ul></ul><ul><ul><li>High-touch, high-end value </li></ul></ul><ul><li>Next Generation Global Delivery Framework </li></ul><ul><ul><li>Predictable, transparent global collaboration model </li></ul></ul><ul><ul><li>Timeline Acceleration </li></ul></ul><ul><ul><li>Cost Efficiencies </li></ul></ul>Productization
    10. 10. Risk-Mitigation Engagement Strategies <ul><li>Do the leg work in detailed due diligence. Look for </li></ul><ul><ul><li>References from clients </li></ul></ul><ul><ul><li>On-site visits to assess capabilities, culture fit, maturity </li></ul></ul><ul><li>Engineering talent is a provider’s key asset. Look for: </li></ul><ul><ul><li>Quality and maturity of engineers (college grads Vs. Senior level) </li></ul></ul><ul><ul><li>History of attracting and retaining top talent </li></ul></ul><ul><ul><li>Recruiting, Interviewing and training process rigor </li></ul></ul><ul><li>Performance metrics for productivity (not just unit costs, quality, etc.) </li></ul><ul><li>Work with a partner who offers </li></ul><ul><ul><li>Collaborative models that force your deep involvement </li></ul></ul><ul><ul><li>Regular performance audits </li></ul></ul><ul><ul><li>Client Dashboards to take the temperature at any given time </li></ul></ul><ul><ul><li>Executive team visibility </li></ul></ul>
    11. 11. Boston Chicago Atlanta San Francisco New York Columbus Hyderabad Colombo