Managing Global Processes and Remote Teams
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IT Challenges
IT Departments worldwide are challenged to simultaneously:
Realize Cost Savings/Containment
Ensure the Stability/Availability of Production Environments
Enable New Business Strategies
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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?
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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
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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
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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
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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
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Knowledge Transfer
Create Knowledge Transfer Plan with detailed responsibilities
Start with pilot
Maintain employees offshore
Understand cultural differences
Visit offshore facilities - establish relationship
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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
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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
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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
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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
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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
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Thank You!
Carlos D’Elia CEORobert Morgan – EVP & COO