11
Dr. Joseph W. Rottman
Dr. Joseph W. Rottman
November 06, 2006
Presented to BA5800
The Global IT Market: Helping students understand offshore
outsourcing and its impacts
The Global IT Market: Helping students understand offshore
outsourcing and its impacts
22
AgendaAgenda
• Explain research base• Explore global trends• Explore impacts to US students
workers• Create dialogue
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1989-2001: Outsourcing: n = 72 organizations:
British Aerospace DuPont Inland Revenue Enron IRS South Australia
1989-1996: Insourcing/Backsourcing: n = 18 organizations:Westchester County Occidental Petroleum Ralston Purina Vista Chemicals
1999-2001: Application Service Provision: n =10 organizations: Corio EDS Host Analytics mySAP Zland
2001-2004: Business Process Outsourcing: n = 4 organizations: BAE Systems Lloyd’s of London
2004-2006: Offshore Outsourcing: n = 41 organizations:Anonymous Case Studies: Primarily Fortune 500 companies & their offshore suppliers
2006: Global IT Workforce Development: Team of 20 researchers In - Progress:Corporate members of the Society for Information Management
Sourcing Research
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Salient Research ArticlesSalient Research Articles• Rottman, J., and Lacity, M., "Proven Practices for Effectively
Offshoring IT Work," Sloan Management Review, Vol. 47, 3, Spring, 2006, pp. 56-63.
• Rottman, Joseph W., “Successfully Outsourcing Embedded Software Development” IEEE Computer, Vol 39, 1 pp. 55 – 61, 2006.
• Zwieg, P., Kaiser, K. M., Beath, C., Bullen, C., Gallagher, K., Goles, T., Howland, J., Simon, J. Abbott, P., Abraham, T., Carmel, E., Evaristo, R., Hawk, S., Lacity, M., Gallivan, M., Kelly, S., Mooney, J., Ranganathan, C., Rottman, J., Ryan, T., Wion, R., “ The Information Technology Workforce Trends and Implications 2005-2008,” MIS Quarterly Executive Vol. 5, 2, 2006, pp. 47-54.
• Rottman, J., and Lacity, M., "Twenty Practices for Offshore Sourcing," MIS Quarterly Executive, Vol. 3, 3, 2004, pp. 117-130.
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Global IT Sourcing Market TrendsGlobal IT Sourcing Market Trends
DEMAND TRENDS: Global IT spend is increasing U.S. IT spend is increasing U.S. IT spend as a percentage of global IT spend is decreasing U.S. organizations will significantly seek to hire IT workers over next 7 years
SUPPLY TRENDS: U.S. IT unemployment rate is decreasing U.S. Computer Science & MIS enrollments down 25% since 2002 U.S. use of foreign IT workers is a small percentage of overall IT workforce, but growing Many foreign countries are creating viable IT service industries
U.S. Executives must manage a global network of IT employees and suppliers
U.S. universities must educate the current and future IT workforce to compete in the global IT market.
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Demand Trend: Total US vs. Global ICT Spending 2000- 2007
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$US
Mill
ions
2000 2001 2002 2003 2004 2005 2006 2007
US Spend Global Spend
Source: Digital Planet/Global Insight as downloaded from www.itaa.org
77
36%
37%
38%
39%
40%
41%
42%
2000 2001 2002 2003 2004 2005 2006 2007
Total U.S. ICT Spending as % of Global ICT Spending
DEMAND TREND:
Forecast
Source: Digital Planet/Global Insight as downloaded from www.itaa.org
88
8.00%
8.20%
8.40%
8.60%
8.80%
9.00%
9.20%
9.40%
9.60%
2000 2001 2002 2003 2004 2005 2006 2007
Forecast
U.S. ICT Spending as % of Gross Domestic Product
DEMAND TREND:
Source: Digital Planet/Global Insight as downloaded from www.itaa.org
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DEMAND TREND:Of 30 fastest growing jobs between
2002 and 2012, 7 are in IT
Source: U.S. Department of Labor, Bureau of Labor Statistics
Occupation 2002 2012 Percent Growth
Rank
Network systems & data communication analysts
186,000 292,000 57% 2
Computer software engineers/applications
394,000 573,000 46% 7
Computer software engineers/systems software
281,000 409,000 45% 9
Database Administrators 110,000 159,000 44% 12
Computer systems analysts 468,000 653,000 39% 20
Network and computer system administrators
251,000 345,000 37% 24
Computer & information systems managers
284,000 387,000 36% 27
1010
Supply Trend:National Unemployment
(non-adjusted Rate)
0%
1%2%
3%4%
5%
6%7%
8%
National IT
Source: Pfannenstein, L. and Tsai, R., “Offshore Outsourcing: Current & Future Effects on American IT Industry,” Information Systems Management, 2004,Vol. 21, p. 72-81
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Supply Trend:U.S. use of offshoring is small
• In 2004, total number of reported US IT workers varies by source from 10.3 million IT workers reported by ITAA to 3.38 million by BLS in 2004.
• In 2004, about 90,000 U.S. IT jobs lost offshore
• Percentage of U.S. lost IT jobs fall between and .9% and 2.7%
Sources: Pfannenstein, L. and Tsai, R., “Offshore Outsourcing: Current & Future Effects on American IT Industry,” Information Systems Management, 2004,Vol. 21, p. 72-81; NASSCOM, U.S. of Labor, Bureau of Labor Statistics; Chabrow, “IT Employment On Upswing,”
Information Week, April 4, 2005.
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Supply Trend:Number of U.S. Jobs Moving
OffshoreCategory 2000 2005 2010 2015
Computer 27,171 108,991 276,954 472,632
Business 10,787 61,252 161,722 348,028
Management 0 37,477 117,835 288,281
OtherServices
Total 102,674 587,592 1,591,101 3,320,213
Sources: U.S. Department of Labor & Forrester Research $136 billion in wages
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The Information Technology Workforce Trends and Implications 2005-2008
The Information Technology Workforce Trends and Implications 2005-2008
Zwieg, P., Kaiser, K. M., Beath, C., Bullen, C., Gallagher, K., Goles, T., Howland, J., Simon, J. Abbott, P., Abraham, T., Carmel, E., Evaristo, R., Hawk, S., Lacity, M., Gallivan, M., Kelly, S., Mooney, J., Ranganathan, C., Rottman, J., Ryan, T., Wion, R., The Information Technology Workforce Trends and Implications 2005-2008, MIS Quarterly Executive Vol. 5, 2, 2006, pp. 47-54.
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Research MethodResearch Method
• 20 Academic researchers working in U.S. and Europe
• 96 interviews of 81 IT leaders in 77 departments
• 82% of respondents are IT top management
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Training Methods Used Within the First Year
Training Methods Used Within the First Year
Entry Level Hires Mid Level HiresTraining classes customized
for our organizationTraining classes customized
for our organization
Self-tutorials Assign a mentor
Assign a mentor Self-tutorials
Generic Training classes offered by third parties
Generic Training classes offered by third parties
Job rotation Job rotation
OTJ
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Plans for Obtaining Needed Skills
Plans for Obtaining Needed Skills
• Hire experienced people• Formal training in house• Formal training through outside programs• On-the-Job-Training• Support tuition reimbursement• College hire-entry-level• Mentor programs • Convert contractors to employees• Learn from contractors/3PP
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Skills to keep in house 2005Skills to keep in house 2005
1818
Top Skills Sourced 2005Top Skills Sourced 2005
1919
Top Desired Entry Level Skills
Top Desired Entry Level Skills
2020
Skills and Capabilities Critical to Keep In House Now (05 - 06)
Skills and Capabilities Critical to Keep In House Now (05 - 06)
Project Planning/Budgeting/Scheduling
Functional Area Process Knowledge
Company Specific Knowledge
Systems Analysis
Industry Knowledge
Business Process Design/Re-engineering
Systems Design
Project Leadership
Project Risk Management
IT Architecture/Standards
Change Management/Organizational Readiness
2121
Skills and Capabilities Newly Important and Critical to Keep In
House by 2008
Skills and Capabilities Newly Important and Critical to Keep In
House by 2008• Functional Area Process Knowledge• Industry Knowledge• Business Process Design/Re-engineering • Company Specific Knowledge• IT Architecture/Standards• Communication• Project Leadership• User Relationship Management• Change Management/Organizational Readiness• Managing Stakeholder Expectations• Managing 3rd party providers
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Canada
Mexico India
Brazil
EURussia
Israel China Japan
Philippines
Singapore
Australia
Supply Trend: 95% of US Offshore IT sourcing activity is taking place in these
nations:
Carmel, E., and Agarwal, R., “The Maturation of Offshore Sourcing of Information Technology,” MIS Quarterly Executive, Vol. 1, 2, pp. 65-77.
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Supply Trend: The Global Outsourcing Report
• Overall rankings based on cost and risk (geopolitical, human capital, IT competency, economic, legal, cultural, IT infrastructure:
Country GOI County GOI
India 2.02 Romania 2.46
China 2.16 Ireland 2.50
Costa Rica 2.24 Singapore 2.50
Czech Republic
2.26 Philippines 2.56
Hungary 2.28 Poland 2.56
Canada 2.40 Armenia 2.58
Latvia 2.40 Brazil 2.58
Russia 2.40 Ukraine 2.74
Chile 2.42 Israel 2.76
Source: “The Global Outsourcing Report,” CIO Insight, March 2005.
http://commonziffdavisinternet.com/download/0/2216http://commonziffdavisinternet.com/download/0/2216
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Offshore Learning Curve
Phase 1:Hype & Fear
Phase 2:Early AdoptersBest & Worst Practices EmergeFocus on Costs
Phase 3: Market MaturesRicher Practices EmergeFocus on Quality
Phase 4:InstitutionalizedFocus on Value-added
Siz
e of
Mar
ket
Cus
tom
er L
earn
ing
Time
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What does it look like?Engagement Model 1:
Onsite SupplierEngagement Manager
OffshoreSupplierDelivery
Team
LocalBusiness
Units
Architects/DBAs/etc.
ProjectManagers
OffshoreSupplierDelivery
Team
OffshoreSupplierDelivery
Team
PMO
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Onsite SupplierProject Managers
OffshoreSupplierDelivery
Team
OffshoreSupplierDelivery
Team
OffshoreSupplierDelivery
Team
Onsite SupplierProject Managers
OffshoreSupplierDelivery
Team
OffshoreSupplierDelivery
Team
OffshoreSupplierDelivery
Team
Architects/DBAs/etc.
ProjectManagers
PMO
LocalBusiness
Units
What does it look like?Engagement Model 2:
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Offshore training models
Industrial Equipment Manufacturing
Content Product, technology, project specific
Audience New hires for customer (developer/architect/team lead)New assignments from supplier organizationsProject Leads
Delivery Onsite Training sessions of new customer employees and supplier employees.Sessions are taped and placed on customer’s intranetApproved vendors are given access through secure data circuitsOne-to-to for Project Leads
Charges For large offshore supplier:Customer pays supplier onshore rates if training is onshoreCustomer pays supplier offshore rates if training via Intranet
For small specialized offshore supplier:Customer pays supplier offshore rates for onshore training
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Case Study: Industrial Equipment Manufacturer
Case Study: Industrial Equipment Manufacturer
• Fortune 100 / Six Sigma • 75,000 employees in 20 countries
– Software Center of Excellence– 150 IT employees / $32 Million
3030
Training Model
Customer Project Leads and Architects
Supplier Project Lead 1
Train
On Shore - On Site Off Shore
On Site Overlap
3 – 6 Months
Supplier Project Lead 2
Trains
Supplier Project Lead 3
On Site Overlap
Trains
Offshore Delivery Team
Trains
IndustrialEquipment
Manufacturing
Project Duration
3131
Talent Pipeline IssuesTalent Pipeline IssuesEntry Level Programmers
Analysts
Project Manager
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ConclusionConclusion
• Research Base• Career Implications and Trends• Case Study
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