Global Outsourcing Strategy, Execution and Top 5 Trends

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Global OutsourcingStrategy, Execution and Top 5
Trends
1549 Clairmont Road, Suite 200 Atlanta
30033 www.icainstitute.org
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Typical Project What the end customers want
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What the Project Management Interpreted ?
As Specified in the Product Request
As Proposed by the Onsite Lead
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Partial Understanding of Customer Needs
As Designed by the Senior Offshore Designer
As Produced by the Offshore Programming Unit
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Offshore Project Final Delivery
As Used by the Customer
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Doing it Right the First Time

• Strategy
• Must Tie it to Sustainable Business Growth
  Strategy
• Long-term (RD - Intellectual Capital /)
• Near-term (Capacity enhancements, New markets)
• Short-term (Labor arbitrage, volume
  fluctuations)
• Factor Compliance, Intellectual Property,
  Culture, Productivity Competition
• People and their global mind-set ?
• Cultural Challenges
• Project Management skills are vastly different
• Operational excellence is key differentiator
• Process is maturity measured ?
• Hand-offs and Touch points
• One business language and consistent
  environments
• Metrics drives behavior
• Tools

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Structural Transformation in Global Business
Unspoken Law of Economics A labor cost
differential of 5-10x means that the movement of
work offshore is inevitable
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Structural Transformation global Outsourcing
Who is Doing It?
Global 3000 Market Segment is Priority 1 Market
Leaders Software, Financial Services and Retail
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The Evolving Country Decision -- ROI Economics
Vary Considerably by Process and Location
Singapore
Ireland
High
Australia
Hong Kong
Czech
Canada
Hungary
Mexico
India
South Africa

• Location Attractiveness
• Cultural Compatibility
• Infrastructure
• Communication
• Basic infrastructure
• Country risks
• Time zone attractiveness
• Tax Incentives

Russia
Philippines
Costa Rica
China
Brazil
IT Map
Low
Low
High

• Capabilities of Workforce
• Wages
• Education Qualifications/Capabilities
• Quality of work/Work ethic
• Attrition Rates
• Middle Management Talent

Source McKinsey, E-Business Strategies
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First Generation Business Models
Contracting
Pure
Offshore
Third
Party
Staff
Outsourcing
Outsourcing
Vendor
Augmentation
Offshore
Joint Venture
N/A
Cosourcing
Development
(Collaborative)
Relationship Structure
Centers
Completely
SharedServices
Captive Shared
Owned
Internal Delivery
Services
Subsidiary
Offshore in
Offsite in
Onsite
Same Country
Foreign Country
Geographic Location
Source Offshore Outsourcing Business Models,
ROI and Best Practices
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Second Generation Business Models
Global Delivery Model
Pure
Contract
Hybrid Model
Outsourcing
Onsite
Offshore
Multi-sourcing
Joint Venture
Build Operate Transfer
(Collaborative)
Relationship Structure
Model
Completely
Owned
Global Shared Services Model
Subsidiary
Offshore in
Offsite in
OnsiteOnshore
Same Country
Foreign Country
Geographic Location
Source Offshore Outsourcing Business Models,
ROI and Best Practices
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Sourcing Evaluation Process
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The Offshore S Curve and Tipping Point
Life Cycle of Technology Driven Innovation
ITO
Tipping Point
BPO
Birth
Growth
Maturity
2004 - Offshore adoption is at a tipping point.
It is becoming a must-do management practice.
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Indias BPO Acceleration maturity levels
Billion
Demand-Side Economics

• 3.0

• Encouraging track record of early movers
• Successful track record of IT outsourcing
• Early ROI are fueling more investments

• 2.0

• 1.8

• 1.6

• 1.4

• 1.2

• 1.0

• 0.8

• 0.6

• 0.4

• 0.2

• 0.0

• 1992

• 1993

• 1994

• 1995

• 1996

• 1997

• 1998

• 1999

• 2000

• 2001

• 2002

• 2003

• 2004

Source McKinsey, E-Business Strategies
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Inside the S CurveThe General Model of
Innovation The Vendor Side
Time
Offshore vendor space will go through a boom-bust
cycle So its important to pick your partners
carefully.
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Demand Side Timing and Market Diffusion
Consider the following Pattern
Offshore Adoption Curve
Offshore Hype Curve
Demand /
Visibility
Early Majority
Early Adopter
Late Majority
Innovators
Laggards
'93
03
04
05
'06
'07
'08
09
10
11
12
13
'14
'15
Time
Prediction Offshore adoption will take longer
than most analysts are predicting. Significant
Business Process Changes are required!
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Offshore Outsourcing Process Trends Return on
Investment (ROI)
Going forward ROI will be derived less from
simple labor arbitrage and more from creative
process improvement and integration
Adapted from Utterback-Abernathy Model
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India and China Sourcing
Some Insights from first-hand experience

• Services Sector
• Game is labor arbitrage its the intellectual
  capital
• IT embedded Systems and managed services
• BPO
• Legal
• Financial services
• Creative Processes
• Medical business processes
• HR
• Manufacturing
• Hardware
• Infrastructure what does it mean really ?
• Some myths and data interesting points
• Culture
• Language is a big barrier in China really ?
• Maturity of your own processes plays a big role
• Cost
• Dalian Vs. Shanghai
• Bangalore Vs. Chennai Vs. Jaipur

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Top 5 Trends seeing beyond the obvious

• Distributed Outsourcing will be a norm
• Competition will come from homes Future Factory
  Nodes
• Positioning of new cost structure is vital for
  growth
• Ability to globally project manage is essential

• Domain Knowledge goes global
• Utilities, Banks, Financial Services,
  Healthcare, Legal, Entertainment, Opening
  Markets and Access to Information make the domain
  global and all pervasive

• Product Innovations not sustainable
• Commoditization of Industrial Era Technologies
• Design and Engineering can be done any where
• Engineering Services will be big

• Product Development must be global
• Case of Innovative Drug Development Programs
• Purchasing Power Parity Drives future ability to
  grow

• Globalization of baseline education
• An era of interdependence will drive
  competitiveness
• Its NOT We vs. They it may be We They
• Creativity and Competitiveness will sustain your
  growth

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QA
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