Agenda Offshore Outsourcingread.pudn.com/downloads80/ebook/309102/Outsourcing 12-7... ·...

Offshore Outsourcing

Copyright © 2003 Lyn Dellinger

December 2003 Outsourcing Page 1Copyright © 2003 Lyn Dellinger


The Challenge and the Prize

Lyn Elliott Dellinger001-757-565-5152

[email protected]

December 2003 Outsourcing Page 2Copyright © 2003 Lyn DellingerCopyright © 2003 Lyn

Agenda

Introduction to outsourcingThe good news – growth and market shareThe bad news – cautions The competitive edge and how to get it


What Is Outsourcing?Outsourcing generally refers to the practice of farming out jobs from their home base to other countries to cut costs.

But it is much more than that –It is a long-term relationship for a business activity over which the provider has significant control and managerial discretion.

Outsourcing is using outside business resources to perform activities and processes instead of internal capabilities.


What do Outsourcing Customers Want?

Highest quality work productsLowest possible costOn-time deliveryReliabilityOrganizational stability

This is what all buyers expect from their Suppliers!


Why companies OutsourceConserve Capital

5%

Foster innovation2%

Improve Quality5%

Increase Speed to Market

5%

Grow Revenue2%

Create a Variable Cost Structure

13%

Reduce Operating Cost

36%

Focus on the Core of the Business

32%

From: Information Week


Agenda





How the Average IT Budget is Spent

20032002

12.8%11.2%Everything else

21%20%Applications

27.9%32.1%Salaries and benefits

3.3%2.5%Research and development

18.0%14.7%IT consulting or outsourcing

17.0%19.5%New product or technology purchases

Data Source: InformationWeek 02=356.6m 03=353m


Outsourcing as Part of Overall Budgets

0

5

10

15

20

25

30

35

40

1998 1999 2000 2001 2002 2003* 2004

IT Budget

Data Source: META Group


US IT Outsourcing Survey

The US has 70% of outsourcing global market shareUS corporations spent more than $30 billion on IT outsourcing in 2002 ($60 billon budgeted)73% of US executives said their companies outsource one or more business processes84% of large company CEOs are satisfied with their outsourcing experience

Data Source: Price WaterHouse Coopers Survey


US IT Outsourcing Survey-2Almost all (95%) CEOs who outsource will increase spending next yearMarket perception has shifted

from outsourcing as a way for companies to meet short term financial objectives to a technique for strong companies to improve competitive positions.

Business Process outsourcing is growingestimated at a compound annual rate of 21.1% from now through 2004.

Data Source: Price WaterHouse Coopers Survey


New Trends in Offshore Outsourcing

IT outsourcing successes have caused companies to look further for other opportunitiesThere are significant gains in outsourcing new industries


New Trends in Offshore Outsourcing

0 5 10 15 20 25 30

Financial services

IT

Telecom

Manufacturing

Retail

Other

IndustryData Source: Gartner Group




The China Outsourcing Market Share

China expected to catch up with India by 2006Big domestic market plus offshore customersImproving infrastructuresShanghai strategically placing itself to be the world leader in R&D by 2010Multi-nationals are shifting orders to Shanghai Last year the city’s SW exports were up 2.4 times from 2000 (Valued at US $175 million) Low cost, rich talent pool, and good quality of lifeStable political & social environments

Data from articles printed in the China Daily (Oct 15) and Business Weekly (Oct 28)December 2003 Outsourcing Page 14Copyright © 2003 Lyn DellingerCopyright © 2003 Lyn

Agenda



Outsourcing WorriesWhat concerns were part of your company analysis of outsourcing?

0 10 20 30 40 50 60 70

Con

cern

s

% of respondents

Quality of workHigh or unexpected costsSecurity of data or physical assetsNegative impact moraleForeign countries' laws Backlash and political issuesShareholder criticismMedia criticismPicketing or boycottsUnion walkoutOther

From Information Week 10/02/03


In a Nutshell…Quality, unexpected costs, and project delays are the top concerns of managers considering offshore outsourcing.To head off quality problems, managers need to focus on project management discipline and communication and cultural barriers that can send efforts off track.

Taken from an article by Mary Hayes published in Information Week


Failure to Manage Half of all outsourcing contracts fail due to the client's inability to manage their service provider or because the client's requirements have changed.

“Outsourcing failures abound, experts say”Business Week, November 20 2003 by Ciaran Buckley

“If an IT manager thinks he can hand a project to a third party and be done with it, he's wrong.”

“Outsourcing Management: Mistakes to Avoid”IT Management April 8, 2003, By Sharon Gaudin


Failure to CommunicateSuccessful outsourcing is dependent on not only how well you define your customer requirements but how well you can measure how they're being met.

Delivery and quality aren't always used in the same sentence, but they should be. Be very specific and deliberate when documenting your expectations on delivery and quality.

The root cause [of failure] is the missing link between the customer's expectations and the perceived results. This is due to the lack of understanding between the service provider and the customer. Source: Software Outsourcing India

The root cause [of failure] is the missing link between the customer's expectations and the perceived results. This is due to the lack of understanding between the service provider and the customer. Source: Software Outsourcing India

Harris Kern Enterprise Computing Institute




Outsourcing RisksCultural DifferencesLanguage BarriersDifferent Business PracticesDifferent Time ZonesHidden Costs

Contracted go betweensTravelChange needed in internal procedures

Most data taken from Business Week article “Hidden Costs of IT Outsourcing”


Agenda



Elements of A Successful Offshore Partnership

From a Keane White Paper—”Offshore IT Outsourcing”

Partnership

Quality culture fit

Maturity and stabilityof offshore operations

Bridge cultureand process gaps

Flexibility inprovision of service

Process and metricsdriven

Compatibility between the hiring ITorganization and offshore outsourcingfirm’s quality standards

Offshore outsourcing firm’s ability tomitigate risk

Offshore sourcing firm’s ability tomanage diverse teams andunderstand cultural nuances

Offshore sourcing firm demonstratesthe ability to scale and shiftresources when necessary

Offshore outsourcing firm iscommitted to process,methodologies, and metricsmanagement


Shopping Offshore Development needs are identified that can’t be readily met at homeIdentified willingness to work together to meet the needs Criteria considered for selection of offshore developers – who can provide:

Higher QualityHigher ReliabilityLower CostProcess CentricExperience in Domain in Question


Process Management

Your processThe organization with more mature processes is more competitive because it is generally able to provide better quality products at lower cost

Client’s processIs your client compliant with the models required of the suppliers?


Quality & Process Control Models

Six SigmaISO9001CMM (lots of options)CMMI (various disciplines)

Continuous Representation Staged Representation




Process Models

Software developmentContinuous SPICE Model

workforceStagedPeople CMM

Software acquisitionstagedSoftware Acquisition CMM

Integrated product developmentHybridIPD-CMM

Software engineering, systems engineering, and acquisition

ContinuousFAA-iCMM

Individual software developmentStagedPersonal Software Engineering CMM

Security engineering continuousSystem Security Engineering CMM

System engineeringcontinuousSystem Engineering Capability Model

System engineeringcontinuousSystem Engineering CMM

Software developmentstagedSoftware CMM


CMMI to the Rescue Integrates systems and software disciplines into one process improvement framework.Provides a framework for introducing new disciplines as needs arise. Disciplines currently covered are:

SoftwareSystemsIntegrated Product and Process Development, and Supplier Sourcing

Don’t forget –CMMI

Does not directly address Six Sigma & ISO

Compliance


Quality Leverage PointsA

B

CD

Major determinants of project cost, schedule, and qualityMajor determinants of project cost, schedule, and quality

…even our finest people can’t perform at their best when the process is not understood or operating at its best.

Mike Phillips, European SEPG Conf.

Process

Technology

Procedures

People


Defined ProcessesGuide teams in

knowing what to do, what they can expect from their co-workers, and what they are expected to provide.

Provide organizations with a consistent working framework.Have the flexibility for individual adjustments allowing for coordination of the way people do their work.Improve communication and understanding of the processes in use.These are all prerequisites for all maturity levels.


Process StandardizationReduces problems in training, review, and tool support.Contributes to overall process improvement through individual project experiences and lessons-learned.Provides the basis for process and quality measurements.It is impractical to create new processes for each project.


CMMI works for Buyers and Suppliers

Both parties know more about what to expectEasier to ensure that you have agreementBoth are following similar rules

It is easier to understand what is expected if we all follow processes




CMMI Supplier Agreement ManagementMain Activities:

Determining the type of acquisition that will be used for the products (services) to be acquired. Selecting suppliersEstablishing and maintaining agreements with suppliersExecuting the supplier agreementAccepting delivery of acquired productsTransitioning acquired products to the project

Implementation adds predictability to the Buyer’s processes,

Suppliers also implement when they purchase hardware or services

Buyers may tailor SAM to better fit outsourcing. Unfortunately, not all buyers are compliant!


Offshore Partner Selection Criteria*

QualityRecent quality assessments at offshore facilitiesRecognizes the importance of CMM within the client site

ManagementDemonstrated experience in distributed team managementExhibits project management certifications at the individual levelGenerates effective engagement management tools

Keane White Paper—”Process Improvement Management”


Offshore Partner Selection Criteria-2

DedicationDedicated to deliver long-term competitive advantageOffers long-term client relationship referencesInvests in training and employee retention

SecurityFormalized and documented contingency plansInsulation from risk, nuances and complexitiesAbility to seamlessly distribute work to local facilities


Offshore Partner Selection Criteria-3

InfrastructureIllustrates telecommunications capabilities and technology equipmentDemonstrates rapid and seamless migration abilities

DeliveryDemonstrates a commitment to metrics-based measurementProves consistent delivery on-time and on-budget


The Supplier AgreementThe Supplier Agreement should documents the

following: Statement of work, specification, terms and conditions, list of deliverables, schedule, budget, and acceptance processWho from the project and supplier are responsible and authorized to make changes to the supplier agreementHow requirements changes and changes to the supplier agreement are to be determined, communicated, and addressed


The Supplier Agreement (2)

Standards and procedures that will be followedCritical dependencies between the project and the supplierThe type and depth of project oversight of the supplier, procedures , and evaluation criteria to be used in monitoring supplier performanceType of reviews that will be conducted with the supplier




The Supplier Agreement (3)The supplier’s responsibilities for ongoing maintenance and support of productsWarranty, ownership, and usage rights for the products Acceptance criteria


Dealing with an Immature Buyer

Ensure that requirements are understood by both partiesEnsure that critical elements of the Supplier Agreement are present and understood.Ensure that the management process is understood by both buyer and supplierFollow processes regardless of what the buyer will pay for

Build costs of following processes into the estimate provided to client

Be ready to tell buyer “no”


Contract Negotiation

Allow time to ensure all bases are coveredBe detail orientedRemain focused on the primary objectivesVerify and understand the assumptionsConsider the complexity


Success Factors for Offshore Development

Competent process improvement expertise is essentialLines of communication need to be well establishedRequirements Management process accepted by both parties and well practicedProgram Management process must be proactive


SummaryUnderstand cultural, communications, and language differences between buyer and offshore supplierFocus on the Long-Term

Establish strong relationships with buyersEstablish repeatable, institutionalized processes to support the overall business objectivesImproved processes are a prerequisite for competing in the global marketCMMI® implementation can help


Questions?




Presenter’s Bio and Contact Information

Lyn Dellinger has extensive experience in project management, software development management, acquisition, process engineering and education. She was an Acquisition Management Professor at Defense Systems Management College, and was a member of the Steering Group for developing the Software Acquisition Capability Maturity Model® at the Software Engineering Institute (SEI) and was a reviewer of the CMMISM. She was a consultant for the US Congress for acquisition reform and information technology. Ms. Dellinger has published and presented papers on management, software acquisition, software engineering methodologies, and process improvement. She is a Certified Computer Professional, a Project Management Institute certified Professional Project Manager, and is an authorized SW and SA CMM Lead Evaluator under the SEI Lead Appraiser program.

Contact information:

PIERA ConsultingRm 501, 309 Yu Yuan Road

Shanghai PRC 200040Tel: 6249-3276

US Tel: 1(757)565-5152E-mail:[email protected]

Date post:	04-Aug-2020
Category:	Documents
Upload:	others
View:	4 times
Download:	0 times

Agenda Offshore Outsourcingread.pudn.com/downloads80/ebook/309102/Outsourcing 12-7... ·...

Documents