Offshore Alternatives META Group, Inc., Stamford, CT-USA, +1 (203) , metagroup.com

Transcription

1 Offshore Alternatives

2 Business and Technology Scenario Offshore footprint is Expanding & blurring Leading offshore vendors developing consulting and deep vertical expertise Domestic vendors deepening global delivery Currently a $10B Market with annual growth rates at 20% Costs, savings, risks, rewards, and assessment models remain inconsistent and immature Alternatives are available but not for the feint of heart Critical Issues 1. Understanding offshore 2. Alternative Options 3. End User Actions: The To Do s an approach Offshore outsourcing will not go-away organizations must determine how to address it 2

3 Issue 1: Understanding Offshore Adopting Offshore Assessing, identifying, and managing offshore risk Creating an enterprisewide model for evaluating and adopting offshore Improving effectiveness through preferred vendors Motivating enterprisewide adoption Overcoming prejudice Creating incentives Testing the Waters Swimmers Deep Divers Application Headroom Status Watching/ Wondering % F % 33% 8% 4% % of IT Offshore 0% 5% 10%-30% 40%-50% Offshore is being redefined as a delivery model, but will neither diminish nor decline 3

4 Issue 1: Understanding Offshore Offshore Balancing Act Looking beyond labor savings Offshore s hidden costs Emerging opportunities offshore Augmenting scarce resources Next-generation solutions emerging from vendors Business process and vertical industry expertise Consulting and transformation Vertical domain knowledge Driving organizational structures Significant research Business consulting Leading firms all have 1,500+ staff that function as full-time consultants BPO for back-office processes is growing Finance and accounting Human resources Procurement Extending existing offerings in customer care Offshore is not JUST about cost reduction it is increasingly a new delivery model for many services 4

5 Issue 2 Assessing Offshore/Outsourcing Risks What do you need to maintain in-house? Do you want to own your IT infrastructure? How much control do you want to maintain over your legacy applications? How much is IT viewed as an asset vs. a cost? How much control do you want over your IT architectural direction? How tightly do you want your IT infrastructure tied to your global business processes? Do you have the resources, skills, and commitment to manage a distributed, global, outsourced IT environment? Are you comfortable addressing compliance mandates in an outsourced environment? Globalization adoption spans a range of options rather than simple saying yes or no 5

6 Shore Enough: Worldwide Sites Abound "Elsewhere" ADM Costs/Rates Programmer Pay $ Hourly Rate (ADM) Low High Low High Russia $5,000 $9,000 $20 $40 Vietnam $3,000 $6,000 $15 $25 Ireland $23,000 $36,000 $40 $80 Canada $20,000 $40,000 $40 $80 India $5,000 $9,000 $20 $40 Mexico $7,000 $12,000 $20 $35 China $3,000 $7,000 $15 $25 Philippines $5,000 $9,000 $20 $40 Singapore $9,000 $20,000 $30 $60 Also: South Dakota, Arkansas, Arizona, Romania, Russia, Morocco India still has 85% of this market Offshore Near Shore Best Shore Your Shore Pauly Shore Dinah Shore Offshore resourcing is not limited to India Issue 2 6

7 Issue 2 Alternative Options Do nothing- wait it out Build out offshore captive center Build out domestic, lower cost captive center Invest in process discipline for the internal organization Selectively outsource: onshore, near shore None are easy decision, nor can be made by knee jerk reactions. 7

8 Issue 2 Alternative Options: Offshore Center Build out offshore captive center Cost Corporate presence / leverage Culture Time Training Management remote / on-site, etc. Political Uniqueness Organizations considering this option need to holistically and realistically assess can it and how will it work Organizational Skills Economic 8

9 Issue 2 Alternative Options: On-shore Center Build out domestic, lower cost captive center Investment required Recruit (attract) and retain Training Relocation Time Benefit? Organizations are investigating the Nationalistic approach but many questions remain 9

10 Alternative Options: Process & Quality Focus Invest in process discipline for the internal organization Cost (Investment) Time Measurability Value to the Organization Patience / Commitment Optimizing (5) Issue 2 Capability Maturity Model (CMM) Process change management Technology innovation Managed (4) Quality management Process measurement and analysis Defined (3) Peer reviews Intergroup coordination Software product engineering Integrated software management Training program Organization process definition Repeatable (2) Software configuration management Software quality assurance Software subcontract management Software project tracking and oversight Software project planning Initial (1) When embarking in process maturity, the challenges of alignment and justification to the business remain 10

11 User Actions META Group s Sourcing Life Cycle ACTIVITIES RISK STRATEGY PHASE Business Alignment Harmonize IT strategy with business plans and objectives Business risk: Potential major changes in business goals Establish set of consumables for IT services Involve IT in business strategy sessions Capabilities Assessment Examine IT skills, strategic value, and ability to improve Technology risk: Changes to technology requirements Benchmark IT costs against outsourcers Determine service quality and customer satisfaction Sourcing Strategy Compare strategic value of IT services to capabilities Assess degree of competitive advantage possessed by IT Circumstances to consider outsourcing Process for making final sourcing analysis and decision Vendor Selection Develop vendor evaluation matrix based on strategy Risk factors guide selection and prioritization for procurement RFP for vendor selection should be competitive Terms and conditions reflect risk factors identified Vendor Management Staff vendor relationship organization and tools Relationship risk: Issues if vendor below expectations Monitor SLAs and customer satisfaction Benchmark services/prices for industry comparability 11

12 User Actions Addressing and Assessing High Differentiated Business Strategy Functional Strengths/ Weaknesses Competitive Analysis Synthesize Value to Core Business Possible Outsourcing Candidates Strong Outsourcing Candidates Strong In-House Candidates Gray Area: Time to Market? Scarce Resources? Retrain Staff? Low Quality of IT High The assessment processes enables the further development & rationale for the decision-making 2004 META Group, Inc., Stamford, process CT-USA, +1 (203) , metagroup.com 12

13 Recalculating the Offshore Equation Offshore outsourcing will not go away! Seek assistance as required Transformation Steps Offshore outsourcing is part of an ongoing economic evolution and requires organizational attention and focus View offshore and alternatives holistically, and approach from a balanced standpoint to maximize potential benefits Organizations must address offshore proactively, especially when considering alternatives META Group can assist with workshops on strategy, sourcing, and governing offshore initiatives 13