Zinnov s Location Analysis Framework and BOT Analysis Framework

Transcription

1 Zinnov s Location Analysis Framework and BOT Analysis Framework This document is solely for the use of Zinnov Client and Zinnov Personnel. No Part of it may be quoted, circulated or reproduced for distribution outside the client organization without prior written approval from Zinnov.

2 Zinnov Procurement Offerings - Evaluation Parameters Evaluation Parameters - Pillars Innovation Cost Talent Management Processes Talent Pool Labor Cost Ecosystem Maturity Strategic Relevance Business Environment Service Provider Capabilities Cost BOT Experience Overall Service Provider Experience Globalization Strategy Portfolio Analysis Engagement Model Transition Roadmap COMPARITIVE ANALYSIS LOCATION ANALYSIS BOT ANALYSIS ENGAGEMENT PROPOSAL 2

3 AGENDA About Zinnov Engagement Models Location Analysis BOT Analysis Engagement Proposal 3

4 About Zinnov 15 Years 200 Customers Zinnov 6 Global Offices 750 Partner Network Offerings Global Engineering Excellence Enterprise Digital Transformation GIC Accelerator Platform Innovation Enablement Zinnov Zones Ratings Tech Platforms & Internet Solutions Healthcare, Manufacturing & Engineering Telecom & Networking Consumer Electronics & Semiconductor BFSI Service Providers Vendors 4

5 AGENDA About Zinnov Engageme nt Models Location Analysis BOT Analysis Engagement Proposal 5

6 Zinnov has deep expertise on location analysis and has conducted studies for MNCs catered across various verticals Zinnov partnered with one of the world s largest banking and financial services group in India to study talent and locations for future investments Zinnov conducted a deep dive study on R&D operations of selected global Semiconductor companies for one of the Fortune 500 company Location Analysis Zinnov helped a leading MNC R&D center in healthcare space to identify key dimensions of value creation and establish correlation with talent and costs Zinnov helped a global social networking major evaluate various locations to setup operations in Asia Source: Zinnov Research and Analysis 6

7 ENGAGEMENT MODEL Technology companies can set up a captive in global locations using three different modes Build Operate Transfer (BOT) This involves partnering with vendors who specialize in outsourced product engineering service offerings. Here the vendor will Build, Operate and Transfer a team of engineers for Technology companies after a certain duration. There is a transfer cost involved to transfer employees from the vendor team to subsidiaries of technology companies Fully Owned Subsidiary (Captive) This includes technology companies setting up its fully owned subsidiary operations in the selected location. The center will operate as a captive center to technology company Engineering Team Acquisition R&D centers may be acquiring a small company based in the location i.e. within a team size of people. Technology companies will have access to the infrastructure, support ecosystem & resources of the acquired company thus helping it to scale quickly Source: Zinnov Research and Analysis 7

8 COMPARATIVE ANALYSIS POSSIBLE HIGH DIFFICULT Culture POSSIBLE Culture Culture Culture Innovation Cost HIGH LOW INTEGRATION DEPENDENT TECH + VENDOR TECH Culture Talent Ramp up SLOW FAST MODERATE HIGH LESS HIGH Management Overhead Processes NEED TO BE SET UP HAVE EXPERTISE Talent Quality GOOD AVERAGE AVERAGE Captive BOT Model Team Acquisition LEGEND HAVE TO BE RE-ALIGNED Source: Zinnov Research and Analysis 8

9 AGENDA About Zinnov Engagement Models Location Analysis BOT Analysis Engagement Proposal 9

10 Zinnov s Location Analysis Framework Zinnov location analysis and BoT framework Cost Talent Pool Ecosystem People cost Communication cost Govt Regulatory cost Travel cost Cost of operations Setup cost Headcount by experience Headcount by skills Headcount by function Headcount by domain Average Hiring time Attrition Number of universities/colleges Number of graduates Number of start-ups Presence of VCs /Incubators /Angel investors Number of IT service providers R&D presence in MNC companies Peer companies 4 Strategic Relevance Customer proximity Business continuity City perception Realignment of business model Growth of various divisions Mergers and acquisitions 5 Business Environment Region attractiveness Government policies Macro risks of operations Micro risks of operations Connectivity 10

11 ENGINEERING ACTIVITY A few high cost locations have total product ownership and serve as centers for product development lifecycle Conceptualization Design Development Testing Support Concept Definition Feature Definition Product Development Unit/Interface Testing Technical Support (Level 1 & 2) Concept Evaluation Project Planning Product Maintenance Component/Feature Testing Performance Benchmarking Prototype Design/ Architecture Requirement Gathering & Analysis Re-Engineering & Migration Regression Testing Technical Support (Level 3 & 4) Technology Evaluation Software Architecture Requirement Management Testing Automation Professional Services Prototype Development High-Level Design of Product Concept Program Management Product Validation/ Acceptance Documentation Prototype Validation Project Management 1 C1 1 C1 1 C3 1 C5 1 C4 2 C2 2 C2 3 C4 4 C1 2 C3 3 C4 4 C2 2 C1 3 C2 4 C3 5 C5 5 C1 5 C5 C1 City 1 C2 City 2 C3 City 3 C4 -- City 4 C5 City 5 Source: Zinnov Research and Analysis 11

12 IDENTIFICATION OF LOCATIONS OF INTEREST Installed Talent All the 4 locations of interest identified have adequate installed talent to meet technology company s requirement Overall Installed Talent (Key Skills by City) Overall Talent Cost (By Country) Good mix of competitive cost, favourable macroeconomic business conditions and adequate talent due to proximity to Warsaw C1 (~X) Cost C3(~X) C4(~X) C2 (~X) Cost CT 2(~X) C1 City 1 C2 City 2 C3 City 3 C4 -- City 4 Favourable location by virtue of being the most cost effective city of interest Business Environment Embedded (System C/C++) Mobile Middleware development UI (Java, C++, Javascript) Others Embedded Mobile Middleware UI Others C1 X X X X X C2 X X X X X C3 X X X X X C4 X X X X X CT 1 Country 1 CT 2 Country 2 CT 1(~X) Business Environment Factors used for Analysing Business Environment: 1. Future talent availability: Universities and ICT Graduates 2. Presence of start-ups, VCs and service providers 3. R&D for MNC and peer companies 4. Presence of telecom companies 5. Ease of doing business and no of technology hubs (SEZs and Parks) 6. Government policies and Tax benefits 7. Connectivity, Multi-lingual population and Cultural Compatibility Source: Zinnov Research and Analysis 12

13 AGENDA About Zinnov Engagement Models Location Analysis BOT Analysis Engagement Proposal 13

14 Zinnov s BOT Analysis Framework Zinnov BOT Framework Build Operate Transfer SP Experience SP Capabilities BOT Experience Overall BOT experience Transfer time Revenue Experience Global Headcount Clients serviced Existing development units Cost People Processes Infrastructure *SP Service Provider Resource pricing Average cost increase 14

15 BOT APPROACH The BOT approach: Vendor partnership with an option to transfer resources to offshore captive is a good sourcing option Own subsidiary BOT Startup cost L The start up costs are high, especially investment in infrastructure and hiring H The start up costs are lower as the vendor absorbs the initial investment Data Privacy H Data privacy concerns are lower as the resources are parent company's own employees L Data privacy concerns might arise in instances where the vendor works with competitors Talent pool H May be able to attract better talent if the parent company has a brand name in India M Vendors have well established training and capability development programs Vendors are usually able to attract talent especially resources looking for onsite exposure Processes L Processes needs to be setup from scratch and often take a while to mature H Vendors have mature process expertise and would help in streamlining process quicker Benefits L Low M Medium H High V V. High 15

16 BOT MODEL BOT model may take anywhere between months for it to be taken over entirely/partially as a captive A Build Operate Transfer (BOT) engagement model involves an MNC partnering with an offshore (Indialocated) IT vendor who will establish a development center, staff and operate it for a specified period of time and subsequently, transfer its resources to the MNC. BUILD OPERATE TRANSFER Setup infrastructure and facilities and recruit and train resources Commence IT project delivery, scale up operations, build technical and domain capabilities Transition functioning, fully staffed offshore IT center to the MNC B-O-T TIMELINE 6 months Typically months 6 months 16

17 BEST PRACTICES BUILD PHASE BUILD OPERATE TRANSFER 1 VENDOR SELECTION 2 CONTRACT NEGOTIATION 3 RESOURCE SETUP Work with medium sized vendors Select vendors with product development experience Select vendors with a good brand name in India Negotiate hard on transfer period and transfer pricing Negotiate for early transfer of employees Negotiate sliding scale transfer pricing Negotiate with the vendor to allow your resources to work alongside vendor resources. Negotiate HR policies in line with your company HR policies. Be transparent about the Transfer clause with new hires Ensure salary parity between your own hires and vendor hires. Explore option of providing stock options to vendor hires. 17

18 BEST PRACTICES OPERATE PHASE BUILD OPERATE TRANSFER VENDOR OPERATES FACILITY An organization representative must conduct quarterly audits or appoint a third party auditor to ensure project metrics and process metrics at the vendor site are being captured and that they adhere to the organization s standards On a quarterly basis, ensure seating capacity increase and resource ramp-up is occurring as per agreed-upon timelines Ensure a Business Continuity Plan is created and resources are aware of the processes to be followed in the case of a disruption to regular business activity Ensure a sustained knowledge transfer process is in place between onsite and offshore delivery locations to ensure processes are aligned Monitor quality of resources being hired especially during the initial resource ramp-up phase. Vendors usually don t hire from the top 10 percentile of the talent pool but rely on training and capability development - ensure training and capability development processes are instituted Ensure all guidelines related to center operations, as described in the Governance Framework are being adhered to and identify interventions to address gaps 18

19 BEST PRACTICES TRANSFER PHASE BUILD OPERATE TRANSFER 1 2 INFRASTRUCTURE TRANSFER RESOURCE TRANSFER Transfer key employees before the transfer of the rest of the team Decide between using vendor infrastructure vs. own infrastructure Structure sign on and retention bonus schemes New infrastructure requires Custom de-bonding of the existing facility Decide on hardware transfer vs. new hardware Employees tend to expect the best policies from their organizations so it is important to map and compare policies and procedures to identify gaps or overlaps Map salary ranges of transferred employees with prevailing market data to ensure there aren t large discrepancies / underpaid resources 19

20 AGENDA About Zinnov Engagement Models Location Analysis BOT Analysis Engageme nt Proposal 20

21 ENGAGEMENT SCOPE Zinnov will help technology companies define a globalization strategy for its various business functions spanning product development, professional services, deployment and integration Engagement Scope Globalization strategy definition Understand the current globalization philosophy and future expectations Design the globalization strategy based on detailed location, portfolio and captive/bot/acquisition option evaluation. The data would be benchmarked with peers to recommend optimal global delivery model Discuss and sign off on the proposed strategy with key stakeholders Discuss and sign off on the proposed strategy with key stakeholders Outcome Zinnov will help technology companies define a globalization strategy with detailed insights and recommendations on optimal global delivery of its various business functions spanning product development, professional services, deployment and integration 21

22 ZINNOV APPROACH FOR CAPTIVE SETUP It is typically a five step approach involving strategic review, design (location, portfolio and engagement model evaluation) and implementation overview What are the strategic goals and objectives for the technology company? How would global operations help in achieving the intended business goals? 1 Globalization Strategy Review Review the high-level globalization philosophy, its alignment with the organization s goals and the expected future state What is the optimal global delivery model for the various business functions in technology companies? Location Analysis Portfolio Analysis Engagement model Determine the most suitable location to establish captive presence based on detailed analysis of identified locations in India and Eastern Europe Conduct a detailed portfolio assessment to determine the transition suitability for the various business functions. Triangulate with similar services of peers Identify the engagement model (BOT, captive, acquisition) based on portfolio distribution and client preferences What would the target end state of global operations look like for technology company? What steps are required to be undertaken to ensure that the transition is seamless? 5 Transition Roadmap definition Define the end state of future globalization strategy for in terms of organization structure, governance framework etc. Define the roadmap for implementing future strategy with clear goals and checkpoints. 22

23 PORTFOLIO ANALYSIS Zinnov has developed a framework for portfolio analysis to determine suitability of transition of offerings for global delivery 1 Tech company s offerings (Product/Services) Team 1 Team 2 Team 3 Team 4 Team 5 2 Technology Complexity Service Delivery Cycle Architecture Complexity Technology Complexity Domain Knowledge Dependencies Testing complexity Process Complexity Knowledge Transfer Communication Project Tracking Development process QA Documentation Risk management Change management Customer Complexity Customer Feasibility Support SLA Data Sensitivity New market location Compliance Application criticality Business criticality Complexity Analysis for products/ services External Dependencies Existing third party vendor relationships Existing supplier relationships Dependency on other service teams, BU or external group of same organization Resource Complexity Organization structure Skill sets required Cross functional skills Cultural dependencies Resource requirements Infrastructure Complexity IP Security Hardware, Software, Network Workspace Support Functions 3 Team 2 Portfolio Transition Prioritization Team 3 Team 1 23

24 ENGAGEMENT MODEL In order to choose the most suitable engagement model, a review of key dimensions must be done The objective of this phase is to identify the engagement model (BOT, captive or acquisition) for captive setup based on portfolio distribution and technology company s preferences Category Criteria Engagement Models Human capital Talent acquisition, Talent motivation, Talent utilisation, Talent retention Infrastructure and support Facility, IT support, Administrative support, Legal support, Finance and Accounting Captive Strategic flexibility Flexibility in growth plans, Organization structure flexibility BOT Regulatory/ Government Statutory liabilities, Income tax Acquisition 24

25 LOCATION AND BOT ASSESSMENT The location assessment covers cities and countries in geographical regions for the analysis, while the BOT assessment evaluates service providers with operations in Customer Experience Excellence (CEE) A Locations considered for assessment B Service Providers considered for assessment Strategic)Alignment)Score Product/Service-Group-9 Product/Service-Group-13 Product/Service-Group-12 Product/Service-Group-8 Product/Service-Group-1 Product/Service-Group-7 Product/Service-Group-2 Product/Service-Group-5 Product/Service-Group-3 Product/Service-Group-4 Product/Service-Group-6 Product/Service-Group-10 Distributed)Delivery)Suitability Product/Service-groups-with-high-suitability-fordistributed-delivery Product/Service-groups-with-low-to-mediumsuitability-for-distributed-delivery Source: Zinnov Research and Analysis 25

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