Information Technology & Outsourcing

Migration to Central & Eastern Europe

Outsourcing Industry

Outsourcing will be a $483 billion global industry by the end of 2013, with significant emphasis on three broad areas: 

Logistics, sourcing and distribution services;

Information technology services, including the creation of software and the management of computer centers;

Business process outsourcing (BPO) areas such as call centers, financial transaction processing and human resources management.

Source: Plunkett Research

Software and IT Outsourcing to Grow

▪ IT outsourcing and hardware maintenance will grow by 7.3%, as firms especially in Europe, Japan, and other struggling economies turn to outsourcing to save money. 

▪ Elsewhere, software will be the growth story, with global growth of 6.5%. 

▪ Computer equipment will join software as the fastest growing categories at 7.0% and 8.8%

▪ IT consulting and systems integration services at 6.8%.

Source: ITO News

KPMG 2013:State of the Outsourcing Industry

▪ Key Findings:

– Efficiency & Effectiveness

▪ Cost Reduction (87%)

▪ Greater Scalability of Operations (82%)

▪ Process Standardization (74%)

– Strategic Focus

▪ Accessing Better Talent (70%)

▪ Accessing Better Technologies (62%)

▪ Improving Analytics Capabilities (62%)

Source: KPMG 2013 State of the Outsourcing Industry

The Tholons2013 Top 100 Outsourcing Destinations

Southeast Asia South AmericaEastern Europe

“Dynamic shifts occurring across regional outsourcing landscapes. For this year, the outsourcing landscapes of three particular regions have progressed significantly”

Source: Tholons

Trends Shaping the Outsourcing Market

Source: IT Business Edge

▪ Going Vertical▪ Outcome-based pricing▪ Shifting to managed

services▪ More strategy less staff

augmentation▪ Supporting an

empowered employee

▪ Restructuring of contracts

▪ Asking for help, expecting solutions

▪ ITO trumping BPO▪ Developing best-of-

breed strategies▪ In the Cloud…now

what?

Global Outsourcing Trends

Global demand is higher than supply

Eastern Europe is target market

Ukraine is the target for Western and Eastern Europe

Czech

Romania Ukraine

Poland

Trends that Influence IT in Ukraine

IT & Outsourcing CEE

▪ Facts:

– Companies are increasingly considering alternative locations to India for services work, and one of the leading choices is CEE.

– CEE has a strong talent pool and strengths in sophisticated software engineering.

– CEE’s core competency is high-end, sophisticated custom software development.

Source: Forrester

Ukraine – IT Specialists

▪ Approximately 25,000 IT specialists graduate from Ukrainian universities each year.

▪ The country holds the 4th position globally for the number of IT specialists.

▪ Ukraine holds leadership position together with the USA, India and Russia.

▪ Over the last 8 years the volume of software development and IT outsourcing services market has grown by a factor ten or 30-40% annually in average.

Source: ITO News

Ukraine – IT Specialists

▪ Geographical distribution of

Ukrainian IT specialists:

– 40% Kyiv

– 19% Kharkiv

– 16% Lviv

– 7% Dnepropetrovsk

– 4% Odessa

▪ More than 50% of the Ukrainian IT

market is exporting IT services or

software development outsourcing.

▪ Experts say that the most promising

areas of the industry from now on

will be services related to

outsourcing and system integration

plus development of cloud computing

technologies.

Source: ITO News

Higher Education

▪ Ukraine’s higher education systems comprises:– 81 Universities– 48 Academies– 149 Institutes– 2 Conservatories– 327 Technical

schools– 216 Vocational

schools

Kiev UniversityNational University of Kyiv-Mohyla Academy

Kiev University

Kharkiv Polytechnical Institute

Lviv UniversityDonetsk National University

Donetsk National Technical University

Kiev Polytechnic Institute Kharkiv University

Source: ITO News

Ukraine and Outsourcing Facts

▪ Ukraine was ranked the first among 16 countries of the CEE region by the volume of IT outsourcing services and the number of IT outsourcing companies.

▪ According to the 2010 Global Services 100 list, Ukraine is 11th among 20 leading countries in the area of IT Outsourcing and High Tech Services. 

Source: ITO News

IT & Outsourcing Ukraine

Source: Code Spring

IT & Outsourcing Ukraine

Source: ITO News

Top needs…Analytics, Big Data, Mobility and Cloud

▪ In software, business intelligence and analytics apps will be the hot products, along with mobile smart process apps for collaborative business processes. 

▪ The latter, which are primarily sold on a software-as-a-service basis, will help SaaS subscription revenues grow two-to-three times faster than combined license-and-maintenance software.

Source: ITO News

Organization Strategy

Service Offering

Organizational Capability

Enablers

Organizational structure

KPIs andGovernance

Organization Strategy

Execution Strategy

• Depth of verticalisation in organization structure (sales, solution design, delivery, support functions) – aligned to strategy and scale/scope

• Reporting relationships and formal hierarchy (matrix etc.)

• Alignment of Organization strategy with evolving client needs

• Clear articulation of horizontal and vertical strategy

• Investment strategy – Organic and M&A

• Leadership development

State of verticalisation in the OPD context has been assessed on six broad parameters

• Defining market and services based

on strategy

• Platform development

• Skill sets, knowledge and competencies development

• Change in KPIs to enable/implement the change – defining accountabilities and control

• Implementation of the change in mind set – Behavioral changes and policies• Change management• Alignment of training and hiring in accordance with strategy and organization structure• Talent management

Verticalization by OPDs is defined as alignment of their strategy, offering and operating model to meet the needs of specific industry verticals

Global OPDs Today

With the maturity of market, OP/AD organizations will increasingly need to redraw their strategies to meet evolving client needs

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Cost reduction for transactional scope

• Primary focus to reduce cost of operations / LA

• Need to outsource non-core functions

• Buyer (client): Example SVP R&D

Core R&D support

• Need for value-added OPD offerings

• Need for client-specific solutions

• Proven track-record

• Buyer (client): CTO and Functional Heads

Transformation Partner

• Buyer (client): CEO and COO, CTO

• Adopt outcome – based models

• Provide process transformation in core R&D processes

• Provide Eco-system delivery for 360⁰ relationship and VAS

• Reliable, risk sharing, financially stable strategic partner

• Need for ideation or TCO impact to support growth

• High Value Services PA, DA and UI/UX

• Move beyond basic QA and R&D functions

• Develop vertical experience in client focus areas

• Customise for clients – Example integrate custom Product IP Support

• Offer outsourcing services for non-core R&D Functions

• Offer competitive pricing to win contracts

• Develop standardised services across clients

Global OPDs have focused on ‘Core-Technology Support’ but will increasingly need to focus on becoming transformation partner and develop verticalized thinking for an industry relevant value proposition.

SoftServe Transformation• UI/UX

Consulting• Product

Ideation• Actionable

Analytics• Mobility /

Security

Highly Risk Adverse Risk Acceptance

Abiliton Infusion

Systems of engagement guide people in their physical world

Mobile is the new face of engagement

Systems of record host transactions in the

virtual world

Systems of engagement empower people with context-rich apps to take the next most likely

action

Source: November 16, 2012, “Great Mobile Experiences Are Built On Systems Of Engagement” Forrester Report

Context-rich experiences are the key to successful systems of engagement

Ukraine… the Clear Choice for Outsourcing

▪ IT outsourcing market volume of US$ 1.1bn

▪ More than 1,000 outsourcing companies operating in the industry

▪ More than 25,000 IT specialists involved in outsourcing.

Source: ITO News

Ukraine is one of the most attractive nearshore outsourcing destinations for both North American and European businesses.