project on Offshore Outsourcing


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project on Offshore Outsourcing

  1. 1. Offshore Outsourcing R esearch Project Executive Summary By Sivarama Putcha Student, CS632, Summer 2009 Boston University
  2. 2. Introduction <ul><li>What is outsourcing ? </li></ul><ul><li>Advantages </li></ul><ul><ul><li>Reduce and control OPEX </li></ul></ul><ul><ul><li>Improve company focus </li></ul></ul><ul><ul><li>Gain access to world-class services </li></ul></ul><ul><ul><li>Free internal resources </li></ul></ul><ul><ul><li>Resources not available internally </li></ul></ul><ul><ul><li>Accelerate Engg benefits </li></ul></ul><ul><ul><li>Function difficult to manage/out-of-control </li></ul></ul><ul><ul><li>Make funds available </li></ul></ul><ul><ul><li>Share risks </li></ul></ul><ul><ul><li>Cash infusion </li></ul></ul><ul><li>Different Methods </li></ul><ul><ul><li>Outsourcing </li></ul></ul><ul><ul><li>Offshore Outsourcing </li></ul></ul><ul><ul><li>Offshoring </li></ul></ul><ul><li>Project Management Role </li></ul><ul><ul><li>Dependence on Project and Organization Structure </li></ul></ul><ul><ul><li>Monitoring and control in all phases of outsourcing </li></ul></ul>2 of 13
  3. 3. Phases of Outsourcing <ul><li>Phases </li></ul><ul><ul><li>Pre-contract </li></ul></ul><ul><ul><li>In-contract </li></ul></ul><ul><ul><li>Post-contract </li></ul></ul><ul><li>Process </li></ul>Decision to Renew/ Terminate Decision to outsource Evaluation Operations/ Relationship/ Monitoring/ Control Implementation Outsourcing contract Vendor selection Outsourcing Process 3 of 13
  4. 4. Why do we need project Management in outsourcing ? Because quadruple constraints are still applicable and offshore outsourcing has its own issues to address. <ul><li>Issues in offshore Outsourcing: </li></ul><ul><li>Instability due to geo-politics </li></ul><ul><li>Mismatch in cultures, values and norms </li></ul><ul><li>Protection of Intellectual capital </li></ul><ul><li>Imperfect info on offshore vendors </li></ul><ul><li>Unrealistic expectations on cost savings </li></ul><ul><li>Time zone differences </li></ul><ul><li>Location of client and vendor team members </li></ul><ul><li>Knowledge transfer difficulties in both directions </li></ul><ul><li>Layoff and loss of human capital </li></ul><ul><li>Disruption of work practices for employees </li></ul><ul><li>Lack of diligence resulting from offshore bandwagon mindset </li></ul><ul><li>Awareness of local laws on outsourcing – Obama govt restriction on outsourcing </li></ul>4 of 13
  5. 5. Best Practices <ul><li>Type of Relationship – tends toward mature relationships. Mature Relationships have </li></ul><ul><ul><li>Relationship Management </li></ul></ul><ul><ul><li>performance Monitoring </li></ul></ul><ul><li>Type of Contract – Time and Materials based to Fixed contract </li></ul><ul><li>Communication methods – F2F contact to formal documentation </li></ul><ul><li>Vendor staff location – on-site  offshore </li></ul><ul><li>Trust Building Methods </li></ul><ul><li>Work Condition Methods – SLAs </li></ul><ul><li>Information flow – client to vendor to reverse </li></ul><ul><li>Communication challenges Experienced – due to cultural diff, time zones, geographic location </li></ul><ul><li>Value delivered – Mature relationships, technology integrationa nd standardization expertise, knowledge transfer back to client. </li></ul>5 of 13
  6. 6. Risk management in Outsourcing <ul><li>Risk factors identification: </li></ul><ul><li>Pre-contract period </li></ul><ul><ul><li>Lack of Market information </li></ul></ul><ul><ul><li>Inadequate outsourcing plan of lack of outsourcing strategy </li></ul></ul><ul><ul><li>Lack of vendor information </li></ul></ul><ul><li>Contract Period </li></ul><ul><ul><li>Lack of project management knowledge and tools </li></ul></ul><ul><ul><li>Lack of Quality control process </li></ul></ul><ul><ul><li>Cost related risks </li></ul></ul><ul><ul><ul><li>Unexpected transition and management cost </li></ul></ul></ul><ul><ul><ul><li>Switching cost </li></ul></ul></ul><ul><ul><ul><li>Costly contractual amendments </li></ul></ul></ul><ul><ul><ul><li>disputes and litigation </li></ul></ul></ul><ul><ul><ul><li>Service debasement </li></ul></ul></ul><ul><ul><ul><li>Cost escalation </li></ul></ul></ul><ul><ul><ul><li>Loss of organizational competency </li></ul></ul></ul><ul><ul><ul><li>Hidden service cost </li></ul></ul></ul><ul><li>Post-contract period </li></ul><ul><ul><li>Lack of asses measurement, metrics and tools </li></ul></ul><ul><ul><li>Lack of certification and quality model </li></ul></ul>6 of 13
  7. 7. Risk Mitigation <ul><li>Risk mitigation Example – Composite persona (CP), CP talks to geographically separated developers, single contact source, 24-hr Knowledge factory (KF) concept. </li></ul><ul><li>Translators and interpreters </li></ul><ul><li>Multimind – Its an expert system that incorporates </li></ul><ul><ul><li>Automate everything that is possible </li></ul></ul><ul><ul><li>Store everything that is possible </li></ul></ul><ul><ul><li>Provide human operator the key information only </li></ul></ul><ul><li>Participating teams should be of equal size – else, largest team tends to dominate. </li></ul><ul><li>Selection of vendors who have the required certification of standards in practice </li></ul>7 of 13
  8. 8. IT Governance and Standards, certifications <ul><li>IT Governance Institute (ITGI) </li></ul><ul><ul><li>Non-profit org </li></ul></ul><ul><ul><li>Providence guidance in </li></ul></ul><ul><ul><ul><li>Strategic alignment </li></ul></ul></ul><ul><ul><ul><li>Delivering new value </li></ul></ul></ul><ul><ul><ul><li>Using IT to manage business risk </li></ul></ul></ul><ul><ul><ul><li>Risk management </li></ul></ul></ul><ul><ul><ul><li>Performance measurement </li></ul></ul></ul><ul><li>ISO 31000 is a risk management guidance standard in </li></ul><ul><ul><li>Communicating and consulting </li></ul></ul><ul><ul><li>Identifying, Analyzing, Evaluating, Treating and Monitoring risk </li></ul></ul><ul><ul><li>Reporting the results </li></ul></ul><ul><li>Federation of European Risk Management Association (FERMA) </li></ul><ul><li>Capability Maturity Model Integration (CMMI) certification </li></ul>PM should be aware of the applicable standards 8 of 13
  9. 9. Types of activity outsourced <ul><li>The Project Management Concepts and techniques apply to all outsourced projects </li></ul><ul><li>Some tools and templates change for different outsourced activities as below </li></ul><ul><ul><li>Full IT outsourcing </li></ul></ul><ul><ul><li>User Support </li></ul></ul><ul><ul><li>Network and Security </li></ul></ul><ul><ul><li>Data center Operations </li></ul></ul><ul><ul><li>Database Management </li></ul></ul><ul><ul><li>Application Development and Maintenance </li></ul></ul><ul><ul><li>Business processes (HR, ACC, Logistics, SCM etc….) </li></ul></ul><ul><ul><li>E-commerce </li></ul></ul>9 of 13
  10. 10. Interview Q1. From your experience, what are the additional project management related activities that you had to do with Outsourcing compared to the activity being done in-house.   Q2: In late 90's when outsourcing was in the boom it made an excellent option for companies to outsource. In the given economic situation, is Outsourcing posing any new PM challenges? 10 of 13
  11. 11. Summary <ul><li>Larger companies tend to benefit more than small players </li></ul><ul><li>Long term contracts seem to have better edge than short term </li></ul><ul><li>The identified success factors in outsourcing are ( all are PM activities ) </li></ul><ul><ul><li>Use of best practices </li></ul></ul><ul><ul><li>Clearly understand the quadruple constraints </li></ul></ul><ul><ul><li>Identify outsourcing strategies – degree of integration, allocation control, performance monitoring </li></ul></ul><ul><li>Select reputable vendor and communicate well on the outsourcing plan </li></ul><ul><li>Realize legal issues in contract negotiating and signing </li></ul><ul><li>Communicate with employees and stakeholders the outsourcing plan – reduce severity of resistance </li></ul>11 of 13
  12. 12. References <ul><li>References are from various journal articles and interview </li></ul><ul><li>Creating Better Governance of Offshore Services. By Judith C. Simon, Robin S. Poston, and Bill Kettinger, University of Memphis, Memphis, TN, USA </li></ul><ul><li>The value impact of strategic intent on firms engaged in information systems outsourcing by Beasley, Mark, Bradford, Marianne and Dehning, Bruce. Source: International Journal of Accounting Information Systems; Jun2009, Vol. 10 Issue 2, p79-96, 18p </li></ul><ul><li>Information systems outsourcing life cycle and risks analysis. By: Chou, David C.; Chou, Amy Y.. Computer Standards & Interfaces, Sep2009, Vol. 31 Issue 5, p1036-1043, 8p; DOI: 10.1016/j.csi.2008.09.032; </li></ul><ul><li>Deriving Mutual Benefits from Offshore Outsourcing by Gupta, Amar. Source: Communications of the ACM; Jun2009, Vol. 52 Issue 6, p122-126. </li></ul><ul><li>Challenges of A Small Enterprise in the Sourcing Life Cycle: Evidence from Offshoring to India by Shailendra C Jain Palvia. Source: Journal of Information Technology Case and Application Research; 2008 </li></ul><ul><li>Interview with Director, Sustenance Engg of fortune 500 company. </li></ul>12 of 13
  13. 13. Thank YOU Thank you for listening to my research presentation. Any questions or comments, mail to [email_address] 13 of 13