eleks.com

IT-outsourcing: Retrospection & opportunities

Michael Kramarenko, PhD, CSO

The mists of time

Ancient HistoryDeep roots:

● Publicani - Roman taxes collection(1st century BC)

● Domestic system (18th century)● Impact of Division of labor.

Adam Smith (1776)

Modern HistoryRoots:● Vertically integrated organization of General Motors.

Alfred Sloan (1930s)

● “ Do what you do best and outsource the rest! ”.Peter Drucker

● Blue Cross of Pennsylvania agreement with Electronic Data Systems manage its data processing services (1963)

● Kodak’s agreement with IBM to outsource the management of its data center facilities (1989)

Key DriversCommon reasons:● Reduce and control operating costs

● Resource shortage

● Enhance capability to newproduct/service development

● Speed up time-to-market

● Improve service quality

● Focus on core competencies

● Access to new technology/skills

Triggers:● Y2K problem

● Dot.Com bubble(1997–March 10, 2000)

1995

1000

2000

3000

4000

5000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Ukrainian OutsourcingBlack Hole

1987

Cooperativestage

Product setup stage

Outsourcingstage

Our Modern History

1988 1989 1991 1992 1993 1995 2000 2001

LaNiT ELEKS1c

SoftServeEPAM

Luxoft InterObject Lohika

Joint ventureLaw

Law on Cooperative

UARNETUTEL

Our DNA

Key capabilities:

● Entrepreneur mindset

● Product thinking

● R&D

● Value over processes

● Universal Soldiers

Turbulent times

Current stage ● Disruptive technological innovations

● Ukrainian IT outsourcing market

● Startups

○ New financing sources

○ High level of uncertainty

○ Constant readiness for pivoting

○ Domestic startups

Venture Investments Q4 2015

Domestic Startups

Customer Expectations ● Partnership vs captive

● Business value vs performed tasks

● Time-to-market speedup

● Craftsmanship vs resources

● Flexibility & readiness for changes

● Size matters

Cooperation model decision ● Image

● Trusted relationships

● Adoption lifecycle

● Risk sharing capability

Possible cooperation models ● Low risk

○ Dedicated Team

○ Time & Material

● Medium risk○ Payment for feature

○ IP as an asset

● High risk: “Shared risk, shared success”○ Bonus for success○ % of shares

Discovery SoWSoW

Shared success probability

New focus of discovery phase● Customer validation

● Idea validation

● Feasibility study

● MVP reverse order:○ what we need to learn?○ what we need to measure?

○ what we need to build for hypothesis validation?

○ who we need to engage?

Cooperation challenges ● Funding shortage

● Team reduction

Discovery SoW SoW

● Short SoW

● Pre-payment

Capability challenges

● Cross-discipline & cross-technology knowledge

● Evolving architecture

● Connectivity, scale & volume

● Optimal design and technological decisions

● Measurable deployability

● Testability and operational resilience

● Routine automation

Universal Soldiers

● Business understanding

● Holistic view

● Design Thinking

● Background matters

Mindset matters

Empathy

Passion

Creativity

Commitment

Passion

Commitment

Creativity

EmpathyEntrepreneur

Curiosity

Commitment

Speed

Summary

● Startup as a new opportunity

● Consider your capabilities

● Cooperation model matter

● Don’t forget about mindset and culture

● Don’t lose our DNA

● New turbulent times are possible

Thank You!Q&A