2. Introduction
OFFSHORE OUTSOURCING
• Began in 1970s with U.S. computer manufacturers
hiring technical staff from India for service centers
(initially to save costs).
• India developed skilled base of technologists
(understand wide range of ops systems and service
a variety of hardware).
2
3. Pros of the Trade
OFFSHORE OUTSOURCING
• Cost savings – up to 80 percent
• More resources = attention to core competence,p ,
design and business knowledge
• Offshore needs meet ith competence• Offshore needs meet with competence
• Demand for temporary work and consulting met
• On-demand, at short notice, without commitments
3
4. Cons of the Trade
OFFSHORE OUTSOURCING
• Communication due to language/cultural barriers
• Time differentiationsTime differentiations
• Technical/skill mismatches
• Quality discrepancies/lack of repeatable process
• Security issuesy
• Bad management/hierarchical stubborn organizations
4
5. Not Just India
OFFSHORE OUTSOURCING
Meeting growing demands for inexpensive yet
competent programming talent:competent programming talent:
• ChinaChina
• Philippines
• Russia
5
6. Why India???
OFFSHORE OUTSOURCING
y
• Most mature
• Holds 85 90 percent of offshore outsourcing• Holds 85-90 percent of offshore outsourcing
market today
• Maturity due to government support for past
decades and their continued improvements of the
education system built by the British
6
7. Size of Market
OFFSHORE OUTSOURCING
In 2003: 5% of the US IT services market is operating
offshore
300 of Fortune 500 have a relationship with anp
Indian IT service firm
360,000 US jobs moved offshore
$7 billion dollar market$7 billion dollar market
In 2005: 15% of US workforce (2 million) moved offshore.
$10 billion market
In 2007: $15 billion market
By 2015:3.3million US jobs and $136 billion in wages will
7
y j g
transfer offshore.
8. Offshore Cost Savings
OFFSHORE OUTSOURCING
g
US Companies charge $80 to $120 per hour for programmers
S b IBM
p g p p g
Offshore providers charge about $40 per hour
More than 50%
Survey by IBM
Consulting Services,
Respondents asked
Less than 10%
Thirty to 50% 9%
9% p
percentage of savings
from offshore
i f IT
40%
42%
outsourcing of IT
services and software
development
Ten to 30%
42%
8
p
9. Offshore Quality Improvement
OFFSHORE OUTSOURCING
y
UnchangedSome Decrease Survey by IBM Consulting
Services Respondents asked
Significant
Improvement
7%
25%
27%
Services, Respondents asked
Level of quality change
After offshore outsourcing of
41%
IT services and software
development
Some Improvement
9
10. Offshore: The Quality Issue
OFFSHORE OUTSOURCING
y
Top 5 Indian Vendors
Level 5Level 4
Number of SEI Capability Maturity Organizations
Countries
p
4628India
10 (2)Russia
20China
6973World
10 (2)Russia
Company: Annual Revenuesp y
Tate Consultancy Services $689m
Wipro Technologies $661.7m
Infosys Technologies $413.9m
10
Satyam Computer Services $308.2m
Cognizant Technology Solutions $177.8
11. IT Activities Moving Offshore
OFFSHORE OUTSOURCING
g
Data Centers
Data Integration & Cleansing
Transaction Processing
BPO
Data Centers
Contact Centers
Infrastructure Management
Packaged Application
Implementation
g g
IT Consulting
Legacy Transformation
Application Outsourcing
Application Design
And Development
Application Maintenance
Software Testing
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Percentage of Respondents
And Development
0 10 20 30 40 50 60 70
12. Most Important Vendor Selection Criteria
OFFSHORE OUTSOURCING
Significant Presence in US
Multivendor Capabilities
Near-shore Capabilities
B i P E ti
Certifications
Full Outsourcing Capability
Significant Presence in US
Speed of Delivery
Project Management Capabilities
Business Process Expertise
Vendor Maturity
Cost
Quality of Resources
12
0 1 2 3 4 5 6 7
Not
Important
Extremely
Important
13. Offshore Outsourcing Benefits
OFFSHORE OUTSOURCING
g
• Cost Savingsg
• Increased Productivity
Ti t M k t• Time to Market
• Access to Expertise and Skills
• 24/7 Operation
• Higher Software Quality• Higher Software Quality
• Make capital funds available-Cash infusion
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• Sharing of risks
14. Offshore Outsourcing Issues
OFFSHORE OUTSOURCING
g
• Unclear objectives and design requirements
• Lack of Control• Lack of Control
• Time zone differences
• Language barriers
• Domestic layoffsDomestic layoffs
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15. Outsourcing Inhibitors
OFFSHORE OUTSOURCING
g
•Geopolitical Risks
•Time Zone Differences
L k f I f t t•Lack of Infrastructure
•Readiness of Client
•Client’s Fear of Losing Control
•Loss of Critical Skills
•Client’s Fear of Loss of Confidentiality
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•Lack of Understanding of Business
16. Outsourcing Enablers
OFFSHORE OUTSOURCING
g
• Client/Provider Relationships Trust FlexibilityClient/Provider Relationships, Trust, Flexibility
• Comprehensive Contract/Project Management
• Large Pool of Highly Skilled Resources
• Advanced Infrastructure, Telecommunications, Facilities
• Mature Delivery Models
• Business Oriented People Offshore• Business Oriented People Offshore
• SLAs/Metrics Well Defined and Understood
• Clear Objectives
• Top-down Support
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17. New Model Differentiators
OFFSHORE OUTSOURCING
On-site Support Local staffing, project management and bench strength through
staffing company partnerships
US Project Management Experienced, US-based management team for effective project
management
Onshore
Cost Equal to or less than competition
Solution Oriented Interactive, collaborative, and end-to-end business perspective
Time Zone Work day corresponding to that of the US
Culture Westernized culture and values correspond to that of the US,
facilitating communication and understanding
Offshore
Geography Provides geographic alternative
Communication English speaking dialect culture similar to US
Scope Services are scaleable and available for small and medium companies
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Communication English speaking dialect, culture similar to US
18. GLOBAL OUTSOURCING MODEL
OFFSHORE OUTSOURCING
Offshore
Completely outsourced
to single offshore
provider
Riskiest
Onshore
provider
Bring offshore resources
to local geography
Costlier, more
overhead
Mixed
to local geography overhead
Combination of onshore/ Most effective
Mixed offshore model
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19. On-site/Off-site Resource Mix
OFFSHORE OUTSOURCING
• On-site/off-site mix varies by project:y p j
– Size of project
– Complexity of project/technology
L l f ifi it f i t– Level of specificity of requirements
– Duration of project
• On-site team is critical and must be skilled in global projects
– Technical ‘translation’
– Cultural differences
– Compliance with quality standards
– Commitment to plan
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– Commitment to plan
