Post on 30-Dec-2015
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
REVIEW OF IT OFFSHORE OUTSOURCING ISSUES
Helen M. CarothersGerhard Steinke
Seattle Pacific Universitygsteinke@spu.edu
8 October 2004
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
OVERVIEW
BackgroundOutsourcing ModelsDriversBenefitsRisksFutureConclusion
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
BACKGROUND
“Offshore outsourcing” and/or “offshoring” refers to moving work and the related costs from a developed country to a lower-cost, developing country.
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
OUTSOURCING MODELS
OwnershipSubsidiary Partnership
ContractProvider owned facilitiesProvider employs staffProvider responsible for
deliverables
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
OUTSOURCING LEVELS Simple - Provide Resources
Repetitive tasks
Moderate - Cost ReductionsRule-based decision-making Problem resolution
Complex - Process ImprovementsFully analytical tasksResearchNon-rule based decision-making
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
Figure 1: Outsourcing TrendsSource: Australia Outsourcing and Utility Services: Research Fact Sheet.
IDC’s IT Outsourcing and Utilities Services (2004)
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
MATURING MARKET • More sophisticated providers• Focus on higher value work• Distinguish and differentiate
offerings• Driver shifting from cost to quality• Some fragmentation• Variety of business models• Disparity in provider maturity• New service offerings
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
GROWTH POTENTIAL Fewer Opportunities
Application developmentMaintenance work
More OpportunitiesEnterprise application integrationImplementation of application packagesBusiness integration
Greatest OpportunitiesCall centersBusiness processesInfrastructure
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
Figure 2: Applications Being Sent OffshoreSource: Behind the Numbers: Offshore Outsourcing Projected to Grow.
Information Week. (2004)
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
Figure 3: Type of Work Being Sent OffshoreSource: Behind the Numbers: Offshore Outsourcing Projected to Grow.
Information Week. (2004)
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
BENEFITS• Cost reduction• Enhanced processes• Reengineered processes• Cost reduction• Enhanced processes• Reengineered processes• Process improvements
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
RISKS• Rapid growth• Renegotiated contracts• Leaving shareholder value
on the table• More complex operations• Not always satisfactory• No competitive advantage• Poor quality
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
Figure 4: Success of Offshore OutsourcingSource: Behind the Numbers: Offshore Outsourcing Projected to Grow.
Information Week. (2004)
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
CHALLENGES
• Communication • Cultural differences• Time-consuming travel• Intellectual property
considerations• Privacy and security regulations• Political risks• Infrastructure capabilities
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
FUTURE
IT industry is changingGlobalization of software Globalization of it services Stronger job demand
Support specialistsSoftware applications engineersSoftware systems engineers
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
JOB DEMAND
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
WHAT DOES THIS MEAN?
• Large businesses• Globally blended outsourcing
options• Enterprise software development• Paper-based transaction processing• Project manager• Business requirements analyst
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
CONCLUSIONS
Man was not meant to fly.The horseless carriage was a fad.There was no place in business for the
personal computer.
Offshore outsourcing is a fad. Most of the offshore projects will fail.
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
PREDICTIONS
Globalization will happen and it is about more than the offshore outsourcing of IT related jobs.
If you work in the IT industry, your work environment will be changed by offshoring.
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
OFFSHORE OUTSOURCING
• Reduces costs• Facilitates innovative solutions• Facilitates growth• Increases productivity• Increases demand for IT-related
jobs• Leaner, more competitive U.S.
economy
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
EPILOGUE
Since 2000, U.S. has lost 372,000 IT jobs Reasons:
Dot-com bustRecessionGrowth in productivity
Global Insight study Sponsored by the Information Technology Association of
America (ITAA) The Benefits of Offshore Outsourcing
Michael J. MillerPC Magazine, 28 April 2004
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
WHAT CAN WE DO? Increase worker training, retraining, and educationFix failing K-12 education system (future competitiveness
depends on it)Increase basic research in physical sciencesEncourage foreign nationals earning masters and Ph.D.
degrees to stay and workAdopt a broadband policy to facilitate communicationsSupport open markets and oppose protectionist legislationReduce the costs of doing business
Adapted from the American Electronics Association report:Offshore Outsourcing In An Increasingly Competitive And
Rapidly Changing World: A High-Tech Perspective March 2004
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
NOT FOR EVERYONE
"We'd be nuts to outsource."
Linda DillmanExecutive VP and CIO of Wal-Mart Stores Inc.
InformationWeekSept. 27, 2004
8 October 2004Review of IT Offshore Outsourcing Issues
Helen M. Carothers Gerhard Steinke
REVIEW OF IT OFFSHORE OUTSOURCING ISSUES
Helen M. CarothersGerhard Steinke
Seattle Pacific Universitygsteinke@spu.edu
8 October 2004