Managing Global Processes and Remote Teams. © 2004 GIT – All rights reserved2 IT Challenges IT...

Managing Global Processes and Remote Teams

© 2004 GIT – All rights reserved 2

IT Challenges

IT Departments worldwide are challenged to simultaneously:

Realize Cost Savings/Containment

Ensure the Stability/Availability of Production Environments

Enable New Business Strategies


IT Outsourcing Strategies

Companies are:– Reshaping according to core competencies, bringing

greater value to the customer and higher productivity to the company

– Making outsourcing a long term strategy instead of a tactical solution

– Hoping to achieve numerous benefits from appropriate outsourcing

– Increase Agility– Rapidly Capitalize on Emerging Opportunities– Get Products to Market Faster – Realize Tremendous Cost Savings– Mitigate IT Risk


Offshore Outsourcing Trends

META Group, October 2004 (Penni Sanchez, Alan Katz)

By 2006, Most IT Organizations will have an Offshore Strategy

Offshore Outsourcing Market Exceeds $10 Billion Average Enterprise to Offshore 60% of Application Work by

2006 Political Backlash Toward Offshore Not Deterring Market

Adoption Offshore Outsourcing Market to Grow 20% Annually

Through 2008


IT Outsourcing Trends

Offshore Outsourcing Trend Still Gathering Momentum

– Gartner predicts that one out of 10 jobs with US-based IT vendors and service providers will be staffed offshore by the end of 2004

– Jones, Lang, and LaSalle, Inc. study states that 31% of the companies surveyed had offshored some of their jobs. An additional 32% said they planned to do so in the next three years.

– Ross Research’s prediction of the top 10 offshore outsourcing trends of 2004:

• Outsourcing contracts will widen in Scope, Geography and Price in 2004 as offshore elements become more global and accepted

• The number of countries providing offshore outsourcing services will rise substantially in 2004


Indian IT Services

the Main Player

0% 10% 20% 30% 40%

India

China

Mexico

Ireland

Canada

Malasia

Philippines

Russia

Singapore

Computerworld Survey of IT Managers in US

June 2004

US Managers Currently Outsourcing IT Work to the Following Countries


Top Indian Vendor Growth

TCS Infosys Wipro*

Comparative Parameters (FY04)

Sales Growth % 32.6 36.7 35.1

Profit Growth % 27.5 25.5 N/A

Operating Margins % 27.3 25.5 22.0

*Only for Global IT Services

Source: META Group, July 2004


More OutsourcingPredictions

Some Changes on the Horizon

•TPI (Greg Blount and Paul Schmidt, 2004) - ‘We believe that the Indian market will continue to experience increased competition. What India has done is to create a blueprint for other countries to emulate so it should be expected that other locations such as China, the Philippines, Eastern Europe, and South America will increase their capabilities and become more competitive.’

Also: •‘Managing risk through multi-sourcing through multi-geographies will continue and grow’•‘Competition will provide more downward pressure on rates and pure play Indian companies’ margins will continue to erode’

Giga Research predicts that attrition will skyrocket in the Indian IT services arena in 2004.


Prominent Causes of

Outsourcing Failures

23%

13%

11%8%3%

15%

11%

11%5%

Buyer's unclearexpectations up front

Poor governance

Poor Communication

Provider's poorperformanceBuyer's multi-supplierenvironment

Interests becomemisaligned over timeNot mutually beneficial

Other

Poor cultural fitSource: Outsourcing Center 2004 Survey


Other Outsourcing Inhibitors

•Geopolitical Risks

•Time Zone Differences

•Lack of Infrastructure

•Readiness of Client

•Client’s Fear of Losing Control

•Loss of Critical Skills

•Client’s Fear of Loss of Confidentiality

•Lack of Understanding of Business


Client Challenges

Clients that understand the success factors of outsourcing, and can also mitigate the inhibitors, will achieve significant benefits

Companies need to be ready - which means experienced, capable internal Project Management and standardized processes

Top down management support required for successful outsourcing relationship

Companies need to be flexible and embrace mixed models according to project objectives


Provider Challenges

Providers of outsourcing must understand the challenges of IT departments to reduce costs, support business strategies, and maintain aggressive technology agendas

Providers must eliminate many of the inhibitors to successful outsourcing

New providers need to differentiate themselves from the usual outsourcing paradigm by combining:

• Compelling Low Cost• Same Time Zone Communication• Collaborative End-to-end Perspectives• Cultural Affinity• Scaleable for Small/Medium Companies• Strong Local Project Management


Outsourcing Enablers

Client/Provider Relationships, Trust, Flexibility Comprehensive Contract/Project Management Large Pool of Highly Skilled Resources Advanced Infrastructure, Telecommunications,

Facilities Mature Delivery Models Business Oriented People Offshore SLAs/Metrics Well Defined and Understood Clear Objectives Top-down Support


Premise for New Outsourcing Model

Successful IT outsourcing does not have to be limited to the big tech centers in India

As long as the provider country has:– Large technically educated middle class

– Stable, modern infrastructure

– Business experience

If providers can be from anywhere that satisfies above requirements, why not reduce inhibitors such as time zone differences, cultural misunderstanding, communication issues


New Model Differentiators

Cost Equal to or less than competition

Solution Oriented Interactive, collaborative, and end-to-end business perspective

Time Zone Work day corresponding to that of the US

Culture Westernized culture and values correspond to that of the US, facilitating communication and understanding

Geography Provides geographic alternative

Communication English speaking dialect, culture similar to US

Scope Services are scaleable and available for small and medium companies

Offshore Differentiators

On-site Support Local staffing, project management and bench strength through staffing company partnerships

US Project Management

Experienced, US-based management team for effective project management

Onshore Differentiators


IT Outsourcing Cost Model

Application Development Sourcing Cost Model

AD Project Phases

Efforts on a Phase

Billing RatesAdditional

Project Costs

Effectiveness Communication

External/Market Adjustment

•Technology Expertise•Project Management Expertise•Business Domain Expertise

•Language•Collaboration

Project Sourcing Cost Factors Project Sourcing Cost Adjustments

Source: Gartner 2004


GIT’s Value Proposition

Compelling Low Cost and Low Total Cost of Ownership (TCO)

Rates equal to or less than Eastern companies and with less overhead required due to local presence

Same Time Zone CommunicationWork day corresponding to that of the US, facilitating communication and providing geographic alternative to Eastern companies

Collaborative, End-to-end Business Perspective

US and International business/technology experience of executives provide mature, interactive, big-picture business view

Measurable, Agreed Upon Expected Results

Project and life cycle processes ensure collaborative measures of success and prompt delivery of expected results

Exclusive, Dedicated ResourcesFlexible staffing models allow assignment of committed resources to client projects and ongoing engagements

Strong Local Project and Risk Management

US based executives with extensive project management and risk management experience ensure project control and success

Accessible to Small/Medium Size Companies

Scaleable services allow access by small and medium size companies unable to attract the attention of large providers

Cultural AffinityWesternized culture and values similar to that of the US, facilitating communication and understanding


Global Intelligence Technology LLC

USA Sales, Liaison and Delivery

USA Clients

Development CentersIT Factory and Staffing

Specialized Subcontractors/Partners

(when necessary)

Service Master Agreement

Global Intelligence Technology, LLC (GIT)

Service Master Agreement

Mirroring

LA Clients

Argentina

USA

GIT Corporate Structure


Latin America Shows Outsourcing Promise

Study by Jones, Lang, LaSalle, Inc., reported by the Wall Street Journal, Oct. 2004, (Ryan Chittum)

•Latin America comes out ahead of India and China in the offshoring equation when factors like labor quality, labor supply, and time-zone differences are taken into account.

•Increasing need for work forces that speak Spanish could mean more jobs for places like Mexico City and Buenos Aires.

•Ranked by the size of the labor pool and the quality of labor, the top city was Manila, the Philippines. Sao Paulo; Mexico City and Buenos Aires were next.


Why Argentina?

Cost– Among lowest countries for global

outsourcing

– Superior location advantages: time zone, distance, responsiveness

Infrastructure– Solid communication and power-supply

infrastructure development over the last ten years

– 2001 most significant renewal of PCs and servers in Latin America

– Commitment to innovation and ongoing investment in infrastructure

Human Resources– Large, highly skilled IT work force– Proven competencies in developing and

maintaining large-enterprise infrastructures and programs

– Workers possess a wide range of technology skills, business background, and client interaction skills

Available Skill SetsUniversity Students per 100.000 inhabitants


1414

3535

3838

4040

3636

Knowledge JobsKnowledge Jobs

GlobalizationGlobalization

Economic Dynamism and CompetitionEconomic Dynamism and Competition

Transformation to a Digital EconomyTransformation to a Digital Economy

Technological Innovation CapacityTechnological Innovation Capacity

Ranking of Argentina according to Meta patterns

Ranking of Argentina according to Meta patterns

Overall Ranking 32Overall Ranking 32

Argentina is ahead of:Poland 40Turkey 36Slovenia 36Russia 34China 34Philipines 34India 33

Argentina is ahead of:Poland 40Turkey 36Slovenia 36Russia 34China 34Philipines 34India 33

Argentina is behind:Czech Rep. 28Brazil 27Hungary 27Estonia 27

Argentina is behind:Czech Rep. 28Brazil 27Hungary 27Estonia 27

Best Ranking 1Worse Ranking 49Best Ranking 1Worse Ranking 49

Source: Meta Group, March, 2003

Argentina is at the same level of many of today’s outsourcing leaders in terms of its infrastructure, workforce, and country’s commitment to change.

Why Argentina?


Outsourcing Agreements define Statements of Work (SOWs), Service Level Agreements (SLAs), Operating Principles and Metrics

Project Management Processes and Tools used offshore/onshoreStandardized Development Life Cycle being used offshore with phase

deliverables defined in detailed schedulesRisk Assessments and Contingencies produced as early phase

deliverablesOnshore/Offshore Architecture:

– VPN or Frame Relay connection to US allowing offshore developer access to shared files

– Same firewall rules apply as currently in place at company– Repository file servers may be required onshore if deemed appropriate by

clientReporting

– Detailed Project Status Report weekly– Executive Status/Early Warning Report monthly/ad hoc– Ongoing Issue Log maintained and reported

Tools– MS Project, Configuration Tools, Collaboration Tools (as required by client)

Processes/ Methodologies


Contract/Agreement

StructureMaster

Contract/Agreement

Operating Principles

SOW 1 SOW 1 SOW N

SLA 1 SLA 2 SLA N

Metrics Definitions

Defines the legal terms of the agreement

Defines the procedures shared between client and

outsourcer

Specifies the metrics to be used

(context and content)

Defines the acceptance

criteria

Defines the work to be performed


Project Organization Sample

Project Director

CUSTOMER

Project Manager

PMO

Business Systems

Technology

Project Manager

PMO

Business Systems

Technology

PROVIDER

Projector Director

Communication

Reporting

STEERING COMMITTE(weekly)

Project DirectorsProject Managers (Ad-hoc)

•Project Plan

•Issue Log

•To Do’s


Risk Management

Early Risk Assessment with Impacts/Mitigators

Robust Project Management Processes

Software and Data Backup and Recovery

Physical Site Security

Business Continuity Protection

Infrastructure Redundancy


Knowledge Transfer

Create Knowledge Transfer Plan with detailed responsibilities

Start with pilot

Maintain employees offshore

Understand cultural differences

Visit offshore facilities - establish relationship


Global Outsourcing Models

Offshore

Onshore

Mixed

Completely outsourced to single offshore provider

Riskiest

Bring offshore resources to local geography

Costlier, more overhead

Combination of onshore/offshore

Most effectivemodel


On-site/Off-site Resource Mix

On-site/off-site mix varies by project:– Size of project– Complexity of project/technology– Level of specificity of requirements– Duration of project

On-site team is critical and must be skilled in global projects

– Technical ‘translation’– Cultural differences– Compliance with quality standards– Commitment to plan


Application Delivery Model

Architecture Integration

Development of Tools, Utilities & Middleware

Report Creation

User Interface Design

Iterative Development

Application Maintenance & Enhancement

Package Customization

Conversion

Highly Specified Development

Re-engineering

Unique/Creative

Efficient/Repeatable

Low/Freestanding High/Interactive

Required Client Interaction

TaskCharacteristics

Source: Clarity Consulting, Ian Hayes


Choosing the Right Partner

Agile MethodologiesUnique/Creative

Efficient/Repeatable

Low/Freestanding High/Interactive

Required Client Interaction

TaskCharacteristics

Source: Clarity Consulting, Ian Hayes

Offshore Delivery Model On-site Staffing Model

More Open Culture

Robust Project Management Processes

Hierarchical Culture

Offshore Delivery Model Mixed Delivery Model


Other Model Characteristics

Parameters– Ratio of onshore to offshore– Location of data, source code– Location of computer resources– Project governance– Interfaces - who works with who– Level of knowledge transfer needed

Logistics– Communications

• Data

• Telephone

• Video-conferencing

• Face-to-face

– Collaborative Work Environment– Support Tools (project management, configuration, testing, QA)– Travel


Thank You!

Carlos D’Elia CEORobert Morgan – EVP & COO

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