Offshoring Trends

© 2003 IBM Corporation

IBM Global Services

1

Offshoring TrendsOffshoring Trends

Arash Shahideh

IBM Global Services

© 2003 IBM Corporation2

Offshore becoming mainstream -- 25%+ growth India continues to dominate, but country diversification imminent New entrants, new competition New decision makers -- business buyers and consultants Big names, preferred vendors Most of the work is still project work NOT outsourcing Concerns about risk, distance and no “cookbook” Longer decision-making cycles; Increasing interest in other segments -- ITO, BPO, Network Tendency to build relationship and then leverage across services Way too much focus on rates Some backlash globally as a result of IT jobs flowing offshore

Offshore Trends in 2004-2005Offshore Trends in 2004-2005

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“Offshore” is becoming Mainstream

Number ofEnterprises

Using OffshoreSourcing For

The First Time

1995 to 2001 2004 +2002 to 2003

Type A:Early Adopters

Type C:Laggards

Type B:Pragmatists

Largest segment ofenterprise buyers

comprise thiscategory; thus, therewill be a large volume

of activity

All types ofenterprise suchas healthcare,retail and energycompanies arepiloting oroutsourcing

Global deliverymoves to the main

stream

Early adopters ofsourcingprogramming in Indiainclude:•Financial service•High-Techmanufacturing

IBM Global Services


Offshore: Lower costs Round the clock Resources Quality

Mexico

Canada

Ireland

India

Russia

China

Current PrioritiesLonger-Term Prospects

Philippines

Eastern Europe/Baltic States

Nearshore Easier travel Cultural

similarities Time zone Team integration

90% of enterprises

source from here

Regions of Supply for Offshore IT ServicesRegions of Supply for Offshore IT Services

South America

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A Simple Value Proposition….A Simple Value Proposition….

Lower costs – For example, UK based SAP consultants cost £600 and up, where SAP

consultants in India cost $22 - $35 an hour

– The savings in labor is enough to pay for the incremental overhead remote management incurs and still save 30% – 50%

Flexibility of Resources– India, China and the Phillipines supply 90% of the market

– Other low cost geographies quickly gaining in popularity (Canada, South America, Ireland)

Quality/Stability of Service– High quality infrastructure

– Highly educated staff Time zone difference

– Faster turnaround of tasks

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Loss of communication

richness

Loss of teamness

Cultural differences

Loss of Collaboration

Coordination breakdown

Service architecture

Managerial techniques Development

methodology

Telecom infrastructureCollaborative

technologies

Constructive Responses

Disruptive Issues

Team building

… … But a very complex executionBut a very complex execution

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Delivery teamon-site

Charged hourly, maybe milestone fees

Risk shared between client and vendor

Dedicated offshore facilities

Committed long-term revenue

Typically connected to client site by direct leased telecom link

Project manage-ment and client services in the UK; deliveryteam offshore

Quasi-captive offshore facilities

Value commitment

Processes& technology infrastructure common between client and center

Complexity of Service DeliveryLow

High

Simple Complex

Stage 1On-site

Contract Work

Stage 2On-site Project Team

Stage 3On-site/ Offshore Projects

Stage 4Offshore

Development Centers

Stage 5Transformational

Outsourcing

Pe

rsis

ten

ce

of

Se

rvic

es

Evolutionary StagesEvolutionary Stagesin Offshore Sourcing Relationshipsin Offshore Sourcing Relationships

IBM Global Services


High level approach to off-shoringHigh level approach to off-shoring

ScopingSupplierSelection

PortfolioAssessment &

MigrationStrategy

ApplicationSpecific

MigrationPlans

KnowledgeTransfer

ParallelPerform

ApplicationCutover

IBM’s Story

Fit with wider initiatives

Transform retained organisation (IS and business)

Change Leadership, Communications and Stakeholder Management

6 weeks 6 months 2-3 months 1-2 months 1-2 months 1 month On-going Support

IBM can either consult on the approach and/or provide off-shore services

Transition

© 2003 IBM Corporation

IBM Global Services

9

Remote Delivery Models Adopted by Our Remote Delivery Models Adopted by Our ClientsClients

IBM Global Services


Delivery ModelsDelivery Models

Customer facing rolesLocated at the Customer Site15 to 25% of application resourceOverall application ownership

End user interfaceSubject Matter Expert SupportPlanning & estimating requiring (<1) day turnaround timeRequirements analysisArchitecture / high level designIST / UAT supportSeverity 1 supportProduction support for online systemsOn Demand Maintenance processInstallation & data migrationApplication team lead

Practices:

Global resource rolesLocated in remote centers75 to 85% of application resourceWork as part of a 'single' application team

Process,Methods,

Tools

Planning & estimating requiring (>1) day turnaroundRequirements analysisArchitecture / high level designDetailed designProgrammingUnit TestDevelopment testingSystem testing IST/UAT support SME'sProduction support for online systemsODM processesFunction point countingMetrics collection Environment supportDBA supportInstallation & data migration

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Application Migration Criteria Application Migration Criteria

APPLICATION CRITERIA

ASSESSMENT

TRANSITION VALUE

SIMPLE MEDIUM COMPLEX

HIGHLOW MEDIUM

AP08 AP02 AP06 AP01 AP09 AP05 AP03 AP04 AP07 AP09 APnn ....

SET 1 SET 2 ....

FIRST LAST TRANSITION SEQUENCE

Criticality

Service Level AgreementsNo. Of End UsersDisastor Recovery PlanAttrition / VacanciesRatio of Contracts/ Employees

ComplexitySkill LevelInterfacesTraining RequiredRelease & Sunset plansDocumentationFuntion Point & Lines of CodeTeam Size & Structure

Performance Pattern

Defect HistoryPerformance HistoryProduct History

PlatformDevelopment EnvironmentProgramming Language

VERY COMPLEX

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Migration /Transition Process OverviewMigration /Transition Process Overview

Contract Engagement Transition Operation

Phase 1:TransitionPlanning

Phase 4:Parallel Perform

Phase 5:Application Cutover

= Quality Gate/Review

Phase 2:Guided Perform

Phase 3:Assisted Perform

Detailed transition planning

First phase of knowledge transfer – Customer Team to

mentor suppl. staff

Second phase of knowledge

transfer – suppl. staff to deliver 75% of support calls

Assurance checkpoint for

knowledge transfer - new

team now ready support independently

Formal milestone for completion of

knowledge transfer.

Suppl. team is ready to

take on project management

of new services

Application supported

by in steady state

Ap

pli

cati

on

ski

ll l

evel

IBM Global Services


Typical Application Support Structure at Typical Application Support Structure at Steady StateSteady State

Client Site Global Delivery Center

Business Help Desk (L1)

Incident/Problem Manager - assigns PT to appropriate support queue Owns the issue till it is closed

Application Support Desk (L2)

Functional consultants Owns the PT till the fix is tested and approves the code. Reassigns the PT to the L1 queue for closure with the comments

Technical Support Desk(L3)

Tech Consultants, DBAs, Queue,Interface monitoring 24x7 for sev 1 calls emergency fix, unit testing

Tools (SDMS, PELICAN)

Quality Processes

WW SAP ICM Database

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Production Maintenance Call ManagementProduction Maintenance Call Management

Onsite TeamLevel 2 Support

Problem Reporting database

Global Delivery CenterOn-Site

Controlled Access

PT

Updates

E-mailTelephoneCell phonePagersTravelOn-line chat

Updates

PT PT

with

Resolves data related problems& working

Customerpersonnelassign severitylevels

Customer

Global Delivery Team Level 2 Support

Global Delivery Team Level 3, Emergency Fix

Business Help DeskLevel1 Support

PT

Updates

e-Meeting

Status Reports

PR

Flexible 24 x 7 support services based

on severity levels

The teams are equipped with

Pagers and cellphones

Laptops to connect from home

Central repository of all key contacts in the production support team

Roster charts

Backup contact details

Daily status update conference callsacross all the support teams

Monthly reporting on performance based on the agreed SLA’s

Based on criticality (sev 1), hourlymanagement calls on status

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Key Performance Indicators : At Steady StateKey Performance Indicators : At Steady State

Customer SatisfactionApplication AvailabilityApplication Response TimeIncident ResolutionService Request Proposal (Non-urgent)

Project EstimationUrgent Service RequestMilestone Completion

SEI/CMM Level Attainment

Productivity (Support & Maint)Productivity (Development)

Adherence to Specifications

Resource Availability

Output / Productivity Human Resource

Customer Satisfaction

Process Adherence

SEICMM

Cost/Schedule

Quality

Offshoring Trends

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