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Telcom Offshoring
1. Assessing the Viability of Offshore
Outsourcing for Telcos
Cablevision’s Investigation into
Offshore/Near-shore IT Engagements
Presented by:
John Blanco
Vice President, Strategic Communications
2. Our Discussion for Today
⇒ An Introduction to Cablevision and its
Corporate Information Systems group
⇒ Our Offshore Investigation Roadmap
⇒ Should You Go Offshore/Near-shore
⇒ Assessing Risks and Benefits
⇒ Final Thoughts
⇒ Q&A
5. A total media and telecommunications
company
• More than 22,000 employees
• Service Offerings Provided:
• Cable Television
• Digital Satellite (Q4, 2003)
• Entertainment and Sports Programming
• News and Information
• Internet Service Provider
• Telephone Service Provider
• Live Venues
• Advertising
6. A solid customer base
• 3 million cable television customers in the
New York Metropolitan Area
• More than 400,000 Digital Video subscribers
• More than 850,000 High-speed Data
(Internet) customers
• More than 16,000 residential and commercial
telephone customers
• $4 billion in total annual revenue, YE 2002
7. Corporate Information Systems
(Responsible for all Cablevision IT Needs)
• Preeminent provider of state of the art, reliable,
efficient Information Systems and Production
Support Services for all Cablevision Businesses
• “Federated yet Centralized” Organizational
Structure
• Several business-focused groups led by Business
Information Officers (BIOs) report to Company CIO
• Each BIO commands dedicated technology staff
aligned to each of Company’s several business units
8. Corporate IS supports…
• 150 business applications
• Business-critical apps include:
• DST Innovis (CableData)
• Kenan Billing Systems
• MetaSolv
• Remedy
• 680 UNIX and Intel servers
• 120 Terabytes of Raw Data Storage
• More than 10,000 e-mail users
• 1,500 Network Components
9. A quick look back at 2002…
• Two major re-organizations/downsizings:
• March, 2002
• August, 2002
Combined for 3,000 layoffs across company
• Total Cablevision Corporate IS Staff now:
• 421 employees
10. Current IS Staff As Compared
to Years Past
3 0 ,0 0 0
702 913
2 5,0 0 0
421 421
2 0 ,0 0 0 24,000
22,300 21,080 21,080
FTE
15,0 0 0
10 ,0 0 0
5,0 0 0
-
2000 2001 2002 2003
Year
Cablevision Staff* IS Staff**
* Cablevision Staff represents all non-Corporate IS employees.
** IS Staff represents budgeted FTE’s for years indicated. Associated consultant
11. Reduction-in-Force Did Not Mean
Reduction-in Work!
• Current economic and business trends
require Cablevision to expand technology
needs for customers
• Customer Self-Provisioning
• Digital Cable Offering (iO)
• Optimum Online
12. Reduction-in-Force Did Not Mean
Reduction-in Work!
• Corporate IS must keep pace internally
with business unit’s strategic need for
innovative Information Technology
• Upgrade existing applications
• New Application Rollouts
14. Let’s Not Forget Ongoing IT Support
15 , 0 0 0 14,435 14,264 14,264
12 , 5 0 0 11,000
10 , 0 0 0
Qty
7,500
5,000
2,500
-
2000 2001 2002 2003
Year
Desktops
15. Past Options Used to Handle the Workload
Option One: Handled by Cablevision’s Internal IS Staff
• Add project/activity to current workload
• Low cost to internal user
• Questionable timeline for completion
• Changing requirements during engagement
• Quality could be questionable
Option Two: Handled by traditional outsourcing company
• High cost to internal user
• Solid timeline established to guarantee completion
• Changing requirements during engagement possible, raising cost to complete
Option Three: Just Say No…
• Delay project until next fiscal year or do in place of one already scheduled
• Could impact the development of business-critical app
16. Consider a New Option
2003
Reduce IT Spending in face
of current economic climate
Cost Savings/
Containment Focus
“Monetize” the Company’s
IT Assets
Gain IT Agility and
Scalability
Outsourcing
Skills Shortage Drivers Quality
Speed of Delivery
Accelerate the software
acquisition integration process
Specialist
Requirements Time to Market
Hand off the “busy”
(low value-add) work
17. Consider a New Option
2003
Cost Savings/
Containment Focus
Offshore/Near-shore
Engagement
Skills Shortage Quality
Specialist
Requirements Time to Market
19. Cablevision Offshore/Near-shore Investigation Roadmap
Go/No Go? Go/No Go?
Activities
• Fact-finding • BIO Meeting(s)* • Exec Meetings (CEO, etc.) • Review potential
• Set basic parameters • EA Meeting • Develop RFI/RFP vendor capabilities • Create GDO-centric
• Attend seminars • CIO Briefing and determine • Create vendor teams
• Vendor talks* • Business Planning evaluation criteria long/short lists • Establish Metrics
• Expert talks* Meeting • Tweak RFI with Experts • Assess internal • Choose vendor/sign
• Reference talks • Discuss contract process readiness contracts
• Collect and assess parameter w) Legal, HR) , • Assess staff
sample templates • Begin development of readiness
the GDO** concept • Develop training
•Share results of Pilot curriculum
Engagement process • Site visits
1 2
Socialization Operationalize
Initial Analysis And Strategy Educate and Engage
Idea Sponsorship Prepare
• Offshore/Near-shore • IT Pilot Project Feasibility • Executive mandate • All IS staff trained on
White Paper White Paper developed from CEO to proceed improved Internal • Approved contracts with
• Identified group of IS after interviews with BIOs • RFI/RFP Processes to handle vendor and Cablevision
“friendlies” championing • IT pilot project chosen for • Approved Strategy engagement • Established GDO
initiative to business unit engagement Roadmap • Rollout of IS • Formalized documentation
and IS staff • Published Offshore/Near-shore (SOWs, etc.)
mission/goals of Awareness Campaign • Release Pilot project
proposed GDO
Results
Communication Education Relationship Mgt.
* Begin discussing potential savings areas
** Global Delivery Office concept
20. Cablevision Offshore/Near-shore Investigation Roadmap
Go/No Go? Go/No Go?
Activities
• Fact-finding • BIO Meeting(s)* • Exec Meetings (CEO, etc.) • Review potential
• Set basic parameters • EA Meeting • Develop RFI/RFP vendor capabilities • Create GDO-centric
• Attend seminars • CIO Briefing and determine • Create vendor teams
• Vendor talks* • Business Planning evaluation criteria long/short lists • Establish Metrics
• Expert talks* Meeting • Tweak RFI with Experts • Assess internal • Choose vendor/sign
• Reference talks • Discuss contract process readiness contracts
• Collect and assess parameter w) Legal, HR) , • Assess staff
sample templates • Begin development of readiness
the GDO** concept • Develop training
•Share results of Pilot curriculum
Engagement process • Site visits
1 2
Socialization Operationalize
Initial Analysis And Strategy Educate and Engage
Idea Sponsorship Prepare
• Offshore/Near-shore • IT Pilot Project Feasibility • Executive mandate • All IS staff trained on
White Paper White Paper developed from CEO to proceed improved Internal • Approved contracts with
• Identified group of IS after interviews with BIOs • RFI/RFP Processes to handle vendor and Cablevision
“friendlies” championing • IT pilot project chosen for • Approved Strategy engagement • Established GDO
initiative to business unit engagement Roadmap • Rollout of IS • Formalized documentation
and IS staff • Published Offshore/Near-shore (SOWs, etc.)
mission/goals of Awareness Campaign • Release Pilot project
proposed GDO
Results
Communication Education Relationship Mgt.
* Begin discussing potential savings areas
** Global Delivery Office concept
21. Initial Analysis (Fact Finding)
• 4-month process
• September to December 2002
• More than 30 Offshore/Near-shore
IT Vendors interviewed
• “Boot Camp” Meetings with Experts
• Gartner, META, Giga
• Participation in IT Offshore User Group
to share experiences
• Merck
• Avis
22. We interviewed the Leaders
Vendor Revenue
(Millions)
Tata Consultancy Services (TCS) $698
Wipro $687
Infosys $464
Covansys $421
HTMT, Inc. $269
Satyam $261
HCL Technologies $205
IBS Group (Luxoft) – Russia $200
Syntel $165
Silverline $155
Cognizant $137
* Information provided by META Group, Inc., 2002
23. Principal Locations of Offshore/Near-shore
Vendors Interviewed
Offshore: India, Russia, Argentina, Brazil
Near Shore: Canada, Mexico
24. Initial Analysis (Fact Finding)
• Offshore vendors asked to answer 41
Questions about its engagement process
• Questions categorized by:
• Business Strategy • Resource Pool
• Benefits • Security
• Process Management • Location
• Scope • Start-up/Transition
• Development Cycle • End Case
• Trends • Support
• Offshore vendor “One-on-One” meetings
provided additional insight
• Data published in Offshore/Near-shore
IT Strategy White Paper
26. No Surprise: Every Global IT
Provider Says They’re a “Perfect Fit”
• Offshore/Near-shore IT Providers cite growing
Telecom client base:
• Satyam (SONY, Cable and Wireless)
• Cognizant (Nielson Media Research, CBS)
• HTMT, Inc. (Time Warner, parent MSO)
• TCS (Major MSO)
• InfoSys (Verizon, Telenet)
• Others have vertical market familiarity with
popular applications
• PeopleSoft
• SAP
• Oracle
27. Most Offshore/Near-shore IT Providers
have strong development background
Legacy Integration
(Older, more static systems)
Core Business Apps
(Oracle Financials, HRMS)
Maint./Modernization
(Enhancements, Upgrades)
New Development
(Project or new Project
Development)
e-Business/Web
(Java, Site Hosting)
App Integration
(APIs, middleware,
customizations)
0 5 10 15 20 25 30 35 40 45 50
Percentage of IT Applications Cited for Offshore Development Outsourcing
* Information provided by The Offshore Development Group Benchmark Report, 2002
28. Cost savings are evident…
$100/hr.*
(minimum rate)
$68.50/hr.
(current rate) $45/hr.*
(minimum rate )
U.S. Senior Corporate IS Offshore Senior
Programmer Senior Programmer
Programmer
* Information provided by A. T. Kearney, Inc., 2002
29. How Do You Determine Whether
Offshore/Near-shore Works for You?
• Gauge Your Organization’s Maturity to
handle Offshore
• Does your company make ongoing changes to project
specifications and deliverables after kick-off?
• Does your company follow process?
• Does management need to be “hands-on” throughout
project’s lifecycle?
• Are supportive project managers in place to oversee
offshore engagement?
30. How Do You Determine Whether
Offshore/Near-shore Works for You?
• Ready to perform the Due Diligence?
• Offshore IT Providers will talk to you because
they want your business
• Put them on the spot
• Ask for credentials and references
• Probe their operations
• What is the employee turnaround?
• What is the average years of experience?
• Do professionals work exclusively on your account?
• Visit the Offshore Development Center when
it’s time
• See the working environment first hand
31. How Do You Determine Whether
Offshore/Near-shore Works for You
• Do you have the right projects for consideration?
• Don’t off-load business-critical IT projects
• Eliminate ones where a unique understanding is needed for
application development
• Consider non-business-critical, legacy projects
• Sharply defined and specified
• Develop a feasibility approach to gauge project viability
• Are you ready to handle the media?
• Offshore/Near-shore IT engagements receiving more press
• NY Daily News, Time, New York Times, CBS
• Offshore/Near-shore proponents acknowledge situation but
don’t promote a successful response
• May be a tough sell both outside and internally
• Why can’t IT staff be re-hired?
32. Challenges that can arise…
• Offshore/Near-shore is a Philosophical Change
•Transition to an offshore model will cause some initial
disruption to business
• Business executives and sponsors must “buy-in”
to concept
• Internal IT customers must “adjust” to model
• The Communications Gap
• Poor communication is fatal flaw in global IT engagements
• Communication also crucial within IT organization itself
• IT staff will see engagements as threat to their position
• IT management must provide as much info as possible
• Legal/Human Resources must beon board from the “get-go”
33. Challenges that can arise…
• Regional/Cultural Differences
• Language issues must be recognized
• Turn into a positive: forces more diligence to ensure
requirements are correctly understood – on both sides
• Cultural differences may be a larger issue
• What is understood as a business action here may not be
understood the same by your offshore counterpart
• Operational issues
• Gaps in quality middle management offshore
• Address issue immediately with your vendor
• Rising salaries of Offshore IT resources
• Use as a “bargaining chip” with the vendors to ensure
rising costs still provide competitive advantage
• Establishing a detailed Master Agreement
• Negotiate everything – even possible changes to your
business model
34. Weighing the Benefits…
• Ease for your IT organization to concentrate
Business Critical Projects
• Long Term Cost Savings
• Added Emphasis on Quality
• Improved Time to Market
• Scalability
• Clear Communications Strategy and Reporting
• Well Defined Requirements and Deliverables
35. Keep in Mind…
• Successful engagements happen when an offshore
IT provider is considered a seamless, transparent
extension of your own IT organization
• Looking at Offshore as another “body-shop” opportunity
dooms it to failure
• Active mutual management of the relationship is crucial
• Offshore/near-shore IT engagements are a long-term
investment in money, time and resources
• Initial “ramp-up” costs are involved with initial preparation
by offshore IT vendor
• It takes approximately 6 months to 2 years for Global IT
engagements to get traction
36. Keep in Mind…
• Communicate, Communicate, Communicate!
• Ensure all internal staff, senior executives, and
business customers understand the strategy and benefits
• Prepare Human Resources, Legal and PR teams for
possible challenges
• Establish strong metrics and communication tools with
your Global IT vendors