fs ict noa seminar - js - 07.09

8/4/2019 Fs Ict Noa Seminar - Js - 07.09

1/9

1

Enabling Successful Offshoring

September 7th 2010

London


2/9

2

Contents

1. Introduction

2. The Offshoring Paradigm

3. Impact From The Current Economic Climate

4. Barriers to Successful Offshoring

5. Critical Success Factors For Offshoring

6. Conclusion & Recommendations


3/9

3

1.) Introduction

Services are being moved abroad increasingly by an outsourcer

Cap

tive

Ou

tsourced

OWNER

SHIP

LOCATIONOnshore Offshore

Outsourced Offshoring

Captive Offshoring

Outsourced Onshore

Captive Onshore

2008 2013

2008 2013

$3,000BN 3% $3,090BN

$664BN

18% $784BN

2008

$164BN

$225BN

37%

2013

2008

$182BN

$220BN

21%

2013

Outsourced offshoring is an integral partof our strategy, but I do think seriousconsideration have to be made to ensurequality

Customer Service Manager, IT serviceprovider

This is not about labour cost. If you donot do it you will not surviveMD, Bank

I do not see public sector organisationsmaking the cost saving without starting toconsider offshoringCIO, Central Government Organisation

Increasingly all companies must have anoffshoring and outsourcing strategyCIO, Telecom Vendor

We first embarked on outsourcing andoffshoring for cost reasons but we realisethat the benefit really lies in the additionalvalue and flexibility we are gettingCOO, Retail Chain

Outsourced offshoring is an integral partof our strategy, but I do think seriousconsideration have to be made to ensurequality

Customer Service Manager, IT service

provider

This is not about labour cost. If you donot do it you will not surviveMD, Bank

I do not see public sector organisationsmaking the cost saving without starting toconsider offshoringCIO, Central Government Organisation

Increasingly all companies must have anoffshoring and outsourcing strategyCIO, Telecom Vendor

We first embarked on outsourcing andoffshoring for cost reasons but we realisethat the benefit really lies in the additionalvalue and flexibility we are gettingCOO, Retail Chain

Sources: Business Week, 2006, Gartner, 2009 andFrost & Sullivan, 2010


4/9

4

2.) The Offshoring Paradigm

Back to the Future: It is becoming all about costs again

Source: Frost & Sullivan, 2010

Key Drivers for Offshoring Over TimeKey Drivers for Offshoring Over Time

Reduce CostReduce Cost

Core BusinessCore Business

Access to SkillsAccess to Skills

Knowledge BaseKnowledge Base

Strength of Driver in 2005

Core BusinessCore Business

FlexibilityFlexibility



Strength of Driver in 2008


FlexibilityFlexibility

CapacityCapacity


Strength of Driver Beyond 2010

From Cost to Competency and back to Cost and Revenue

Drivers have been and are Cost, Revenue and Competency relatedDrivers have been and are Cost, Revenue and Competency related


5/9

5

3.) Impact of the Current Economic Climate

End users expect more business value add but have no extra money to spend

Sources: Frost & Sullivan, 2010 and Computer Economics, 2010

Impact: HigherExpectations

Impact: HigherExpectations

Expect business value add Processes must have further cost and/or revenue benefits. Expect greater ability for close collaboration with offshoree and offshorers staff

Expect no change in service and quality levels

Expect business value add Processes must have further cost and/or revenue benefits. Expect greater ability for close collaboration with offshoree and offshorers staff

Expect no change in service and quality levels

4.1%

5.0%

4.0%

0.0% 0.0%0%

1%

2%

3%

4%

5%

6%

2006 2007 2008 2009 2010

IT Budget % Change: Previous YearIT Budget % Change: Previous Year

42%: Decrease spending

13%: Spend the same

45%: Increase spending

Spending per user decreased by 13.7% 2006/10

42%: Decrease spending

13%: Spend the same

45%: Increase spending

Spending per user decreased by 13.7% 2006/10

Computer Economics Survey, 2010Computer Economics Survey, 2010

StagnatingIT Budgets

DecreasedSpending

StagnatingIT Budgets

DecreasedSpending

Revenue generating whilecutting costs

Revenue generating whilecutting costs

CostCostDriverDriver Cost & FlexibilityCost & Flexibility FlexibilityFlexibility

Forced into it

Tier 2 countries

Forced into it

Tier 2 countries

Offshoring more processes Multi-sourcing

Offshoring more processes Multi-sourcing

Value forMoney:Cost and

Revenue

Value forMoney:Cost andRevenue


6/9

6

4.) Barriers to Successful Offshoring

Successful offshoring is about people attention to culture, communication and change

Sources: Frost & Sullivan, 2010

Lack of Cultural AwarenessLack of Cultural Awareness

Key Barriers to Successful OffshoringKey Barriers to Successful Offshoring

Lack of Efficient CommunicationLack of Efficient Communication

Lack of Partnership MentalityLack of Partnership Mentality

Lack of Common ExpectationsLack of Common Expectations

Key Actions to Achieve Successful OffshoringKey Actions to Achieve Successful Offshoring

Prepare to Tackle Cultural DifferencesPrepare to Tackle Cultural Differences

Ensure Appropriate Structure, Communication Toolsand Processes

Ensure Appropriate Structure, Communication Toolsand Processes

Ensure Structure and Foundation for Collaborationand Several Visits to OffshorerEnsure Structure and Foundation for Collaborationand Several Visits to Offshorer

Ensure Common ExpectationsEnsure Involvement of Key Stakeholders

Ensure Common ExpectationsEnsure Involvement of Key Stakeholders

CASE STUDY: UK Service Provider

We had the expectation that as soon as we offshored, we would cut costs. It turned out to be a disaster, and quality really suffered.It has taken a lot of work to efficiently work with people half way around the world. We should have put a lot more effort into tackling, especially,cultural differences and communication from the beginning.We have now invested in video conferencing to enable closer collaboration between our UK and Indian staff, which has helped.We have reduced costs, but it has happened over time.


7/9

7

5.) Critical Success Factors for Offshoring

By following these 10 steps organisations can successfully offshore

Checklist for Successful Offshoring

Identify and Analyse What to Outsource and Offshore

Ensure an Experienced Partner

Manage Change

Enable partnership Know the Key Stakeholders and Their Expectations

Manage Cultural Differences

Sign a Complete Contract and Involve Senior Management

Be Flexible Consider Alternative Approaches to Risk

Establish a Sustainable Relationship and Structure

By following thischecklist webelieve users are a

step closer toenablingsuccessfuloffshoring

Remember That Reaping the Full Benefits Take Time

1

2

4

5

6

7

8

9

10

Ensure a Common Goal and Be Specific About Benefits3

We have later realised,that the highest value wasthe partner approach thatallowed us access to bestpractices and knowledge.

Head of IT, CentralGovernment Department

We have later realised,that the highest value wasthe partner approach thatallowed us access to bestpractices and knowledge.

Head of IT, CentralGovernment Department


8/9

8

6.) Conclusion & Recommendations

Remember that check points for end users are selling points for vendors

Offshoring increasesOffshoring increases Outsourcing IncreasesOutsourcing Increases Outsourced Offshoring IncreasesOutsourced Offshoring Increases

Offshoring is about Cost again, but there must be business value add- Cut Costs and Increase Revenue

Offshoring is about Cost again, but there must be business value add

- Cut Costs and Increase Revenue

Key Step To Successful OffshoringKey Step To Successful Offshoring

Systematically Choose Offshore ProcessesSystematically Choose Offshore Processes

11 Manage Cultural DifferencesManage Cultural Differences

66

Sign a Complete Contract & InvolveManagement

Sign a Complete Contract & InvolveManagement77

Be Flexible Alternative Approach to RiskBe Flexible Alternative Approach to Risk88

Establish Sustainable Relationships andStructure

Establish Sustainable Relationships andStructure99

Remember It Takes Time To Reap BenefitsRemember It Takes Time To Reap Benefits1010

Ensure an Experienced PartnerEnsure an Experienced Partner22

Ensure Common Goal and Specific BenefitsEnsure Common Goal and Specific Benefits33

Manage ChangeManage Change44

Enable Partnerships Involve StakeholdersEnable Partnerships Involve Stakeholders55


9/9

9

If you have any queries, please do not hesitate to contact us

Jon Stephansen

Senior ConsultantICT Practice, Europe, Israel & Africa

Tel. +44 207 343 8336Mob. +44 787 216 6975

Fax +44 207 730 3343

E-mail: [email protected]

Sille Gavnholt Jygert

ConsultantICT Practice, Europe, Israel & Africa

Tel. +44 207 343 8312Mob. +44 777 190 2474

Fax +44 20 7730 3343

E-mail: [email protected]

fs ict noa seminar - js - 07.09

Documents