14/10/2015. Introduction Outsourcing. Discussion. What & Why History Why Offshoring? Communication Cultural Contractual SDLC

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1 Outsourcing: Problem or solution Mieke Gevers (Aqis) & Dominic Maes(Quintes) Agenda Introduction Outsourcing What & Why History Why Offshoring? Discussion Communication Cultural Contractual SDLC. IE-Net - Software 2 Testen 1

2 Outsourcing: What Two organizations may enter into a contractual agreement involving an exchange of services and payments. Outsourcing is said to help firms to perform well in their core competencies and mitigate shortage of skill or expertise in the areas where they want to outsource, Outsourcing: What In the early 21st century, businesses increasingly outsourced to suppliers outside their own country, sometimes referred to as offshoring or offshore outsourcing 2

3 Offshoring: What Offshore: relocation of (part of) activities. Usually done for cost cutting or legal reasons. Two forms: An organization outsources some of it s activities to a service provider in other countries Set up service operations in other countries For more than 15 years already Service providers from different parts of the world History Industry Statistics from 2005 Global IT spend expected to rise to $3.3 trillion in 2005 Gartner confidently predicts 40% of an IT budget is spent on testing activity. That s an incredible $1.3 trillion Spending on Test Tools is forecast to be $2.6 billion by 2005 Software bugs cost the US. $60 billion per year 64% borne by end-users, 36% borne by developers and vendors. Businesses are losing in excess of $200 billion per year due to Application disruptions Over 80% of development & migration is conducted independent of infrastructure considerations Sources: Garner, Forrester, KPMG, Evoke Technologies, StickyMinds 3

4 History (2) Industry Statistics from GlobalITspendexpectedtoriseto expected to to $3.8 trillion in 2015 Gartner observed that most of the organizations are allocating more than 40 $1.5 trillion Spending on Test Tools is forecast to fall to between 4% and 7% a year Cost of IT failures in the 12 months to Dec 2014 cost an unplanned $602,700 for each technology-related problem they faced Global Outsourcing Testing Services Business $80 billion in 2015 Sources: Garner, Forrester, KPMG, Evoke Technologies, StickyMinds Evaluation of Offshoring options c2008 Options Expand in Home Market only Pricing= time and materials Expand into other selected Home market countries within OITR scope Expand into all HMC s Retender and Rationalise Local Suppliers Include applications on selected platforms Include all platforms Nearshore Supply offshore resources from a single supplier Supply offshore resources from multiple suppliers Alternatives A1 A2 A3 A4 A5 Add an offshore Add an offshore Joint Venture with Captive partner for onshore partner for onshore Partner working Home Market Local supply only Expand Test Centre using existing set up Single OTC Multiple OTC s Offshore Farshore Follow the sun Pricing = Managed Services New Legal Entity Share Captive Buy Property Lease Property Own captive X and offshore working 4

5 Cost Trends 2008 Global Offshore Market by Industry Global demand for Offshore by region Industry Percentage Offshoring % Region Percentage Offshoring % Information Technology 43 USA 59 Financial i Services 17 Europe 27 Telecoms 16 Asia 9 Services 15 Rest of the World 5 Others 9 Cost of Test Analyst Employee Resources by region Employee working in region Salary (US$ per Year) USA Europe Australia India Sources: Andy Redwood, The quality shift, BTD 2015 Scaling via Offshoring rs K (miilions) or Numbe of Resources SEK Retain 54 FTEs 250 Fixed Budget, Scalability by Alternative Scale 25% over 1A 114 Current FTE s and Consultants Sourced Locally Scale 65% over 1A 1A A1 1B A2 2A A3 2B A4 Alternatives Scale 90% over 1A Cost (Million) Resource Scaling Allows for SEK 24M OTC set up costs Offshore partnership will increase resource incrementally, for no budget increase Sources: Andy Redwood, The quality shift, BTD

6 14/10/2015 Cost reduction through Offshoring Fixed Headcount, Cost Reduction by sourcing Alternative SEK (millions) or S Number of Resources 15% Saving over 1A Retain 54 FTEs 30% Saving over 1A 40% Saving over 1A Fixed Resources Cost (Millions) Allows for SEK 24M OTC set up costs 1A A1 1B A2 2A A3 2B A4 Alternatives Sources: Andy Redwood, The quality shift, BTD 2015 Agenda Introduction Outsourcing What & Why History Why Offshoring? Discussion Communication Cultural Contractual SDLC IE-Net - Software Testen 12 6

7 Discussion Thanks! 7