Information Technology Outsourcing .pptx

iT Outsourcing

1. Internal Outsourcing

2. Table of Content What is Outsourcing? Trends Necessity Engagement Models Managed Services Vendor Consolidation Advantages Benefits

3. The offshore outsourcing trend and practice is due for a transformation. Client concerns about changing business objectives, the proliferation of “as-a-service” offerings, and demand for deep industry specialization suggest that only the most collaborative, innovative, and trusted vendors will succeed. Forrester What is outsourcing? 3

4. Trends…#01/2 The number of external IT service providers that buyers use, on average, is already too high. Organizations continue to show a wider interest in outsourcing. Organizations are looking for better ways to manage strategic providers. Clients are less tolerant of finger pointing in a cost-focused market. Alliance offerings from outsourcers are gaining traction. - Gartner

5. Trends..#02/2 By 2008, approximately USD 300-400 billion worth of services will be moved offshore Source: Gartner, Dataquest, Aberdeen Group, McKinsey Analysis’ Evalueserve Analysis Market size figures include offshoring of IT and business processes In-Sourcing / Shared Services Onshore Outsourcing Outsourcing and Offshoring CAGR: 12% CAGR: 38% CAGR: 0% Captive Offshoring CAGR: 26% Onshore Captive Outsourced Offshore Location Ownership Sourcing from a non-affiliated firm located abroad Offshore Outsourcing Sourcing from an affiliated firm located abroad Captive Offshoring Sourcing from a non-affiliated firm in the home economy Onshore Outsourcing Sourcing from internal sources or from an affiliated firm in the home economy In-sourcing / Shared Services 17 164 20 40 60 80 100 120 140 160 180 2001 2008 (in USD billion) 3000 3000 500 1000 1500 2000 2500 3000 3500 2001 2008 (in USD billion) 35 182 20 40 60 80 100 120 140 160 180 200 2001 2008 (in USD billion) 304 664 100 200 300 400 500 600 700 2001 2008 (in USD billion)

6. Necessity - Competition 6 Global sourcing is becoming a core component of F500 companies’ corporate strategy The scope is expanding beyond traditional ITO or transaction processing to Centers of Excellence or Specialized Skills Companies are using global sourcing as a means to position themselves for long-term capability building (both skills and capacity) Global sourcing has become a competitive necessity The new frontier is to integrate process and IT operations to improve effectiveness and efficiency “The board of directors of virtually every big company are now insisting on very articulated outsourcing strategy” – Businessweek, 2006 “Don’t tell me how much I can save. Show me how we can grow by 40% without increasing our capacity in the US” – Client executive, Jan 2006 This isn’t about labor cost…the issue is that if you don’t do it you won’t survive – MD of Deutsche Bank Global Business, Jan 2006 Cisco wants to raise revenue productivity to $1M per employee by enhancing operational effectiveness and focusing employees on value-adding activities - John Chambers, CEO Cisco Systems Key Trends in Global Sourcing

7. Engagement Models Time and materials (still the most common). Portfolio-based pricing based on SLAs. Managed Services (Volume-based). Managed Services (Metrics-based). Co-Innovation. Hybrid.

8. Managed Services 8 This allows the client IT to engage with the organization better, as an enabler of business results , going beyond the traditional role as a procurer of services Areas which can provide high returns in terms of business alignment for time & effort invested Activities which can be competently performed by mature vendors with some oversight by the Client IT Organization Typical Split of IT Organization focus in Staff-augmentation Typical Split of IT Organization focus in managed services IT Direction Setting Vendor Performance Management Business Liaison IT Project Management IT Direction Setting Partner Performance Management IT Project Management 10% 15% 25% 50% 35% 20% 35% 10% Technology visioning, Architecture direction Relationship metrics, Value monitoring and management Business value monitoring and management Day-to-day monitoring of project progress Business Liaison Enables the IT organization to focus on areas where it can add value vs. primarily monitoring

9. Vendor Consolidation 9 Consolidation is the natural evolution of most outsourcing strategies LOB 1 Pre-Outsourcing In House Arbitrary Outsourcing Logical Outsourcing Outsourcing adoption timeline 80’s/90’s 2000’s 2010’s Minimal use of contractors Local work High cost Lower productivity, e.g. no global delivery Widespread use of contractors Adoption of global delivery Contract awards largely driven by hourly rates Ad hoc selection of vendors Peak benefits achieved within several years Focus on handful of key “strategic vendors” to do vast majority of work Adoption of new commercial models focused on results, not inputs Contracts awarded based on work history, capabilities and synergies with existing work In -House In House In House LOB 2 LOB 3 LOB 1 LOB 2 LOB 3 In -House In -House Vendor A Vendor B LOB 1 LOB 2 LOB 3 In -House In -House In -House Vendor A Vendor C

10. Benefits…#01/2 Ability to concentrate on your core business Effective utilization of management & personnel time in the areas of direct responsibility Budget - fixed budget, milestone based, time bound approach Access to expertise pool for specialized and current know-how Quick solving of problems through fast availability Access to latest tools and technologies Direct cost savings External expertise brings in shorter learning curve and thus, related lesser costs Fixed budget (inclusive of resources and tools) outlook ensures proper planning and avoids ad-hoc expenses Domain specialist as a quality consultant minimizes cost of acquisition of current know-how Shielded against personnel attrition or down time Constant high quality Objectivity and independence through external specialist Avoid conflict of interests for Quality Management resources Schedule adherence and control of the Quality of deliverables Leverage knowledge (cross industry / cross model) of the experts for optimal solutions including benchmarking Up-to-date at all times Regular training of employees Facilitation of workshops Regular reporting

11. Benefits…#02/02 In addition to the overall advantages stated in the previous slide … Knowledge, experience and expertise in process improvement & implementation programs having partnered with various global organizations Expertise in identifying and prioritizing areas for improvement through strategic planning Expertise in developing, deploying and continuously improving processes through a thorough understanding of industry best practices Knowledge and experience in interpreting international process models and standards to aid in the process improvement of the organization Skilled process consultants with hands on experience in guiding change management Ability to ramp up or ramp down skilled resources, on a need basis

12. Thank You!