IT OUTSOURCING / OFFSHORING OVERVIEW

Transcription

1 IT OUTSOURCING / OFFSHORING OVERVIEW BARRON W. GREEN June 12, 2014 TODAY S QUESTIONS I. Who Are You? Who Am I? II. What is IT Outsourcing? III. Is Outsourcing Important? IV. Why Outsource? V. Does Outsourcing Work? VI. What Are the Management Challenges? Copyright 2014 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL, and A&M are trademarks of Alvarez & Marsal Holdings, LLC. 1 1

2 WHO ARE YOU? WHO AM I? WHO ARE YOU? Seeking careers in IT Corporate IT Independent / Contracting Entrepreneurs Consulting Technical or Managerial Ladder Working in: Texas United States International 3 2

3 WHO AM I? 1983 BA Biology, Double Minor Chemistry & Political Science 1987 MBA - Finance 2yrs 2 yrs 14 yrs 7 yrs 5 yrs 4 WHY IS THIS DISCUSSION PERSONALLY IMPORTANT (TO YOU)? Outsourcing is pervasive and growing and can impact you in many different ways You may work for an outsourcer You may join a firm that works with outsourcers You may partner with outsourcers You may manage outsourcers You may join a firm that later commits to outsourcing You may evaluate outsourcers You may suddenly find yourself working for an outsourcer You may be displaced by an outsourcer Even if you re not in IT, outsourcing will likely impact you 5 3

4 WHAT IS IT OUTSOURCING? DEFINITIONS Source: dictionary.com 7 4

5 DEFINITIONS Source: dictionary.com 8 POLITICAL STATEMENT Whether outsourcing is good or bad depends on whether you are the employee or the consumer 9 5

6 SCOPE OF OUTSOURCING Any of the listed services (and more) can be outsourced IT Management Governance Stewardship Demand Management PM Architecture Vendor Management ITO (aka hosting, co-lo, PaaS, IaaS) Facilities Servers Storage Network Web Hosting Security Disaster Recovery Desktop Support Other AMO (aka applications mgt, SaaS) Package Customization Package Upgrades Custom Development Applications Support Data Management Other Help Desk BPO (aka business process) Call Center Fulfillment Procurement Accounting Payroll Human Resources Other 10 OUTSOURCING OVERVIEW Which functions are most likely to be outsourced? Source: Horses for Sources and London School of Economics Survey of 347 Buy-side Organizations 11 6

7 WHAT IS OUTSOURCING? Any portion of a business process may be outsourced. For example, AMO may include ANY or ALL parts of the SDLC Requirements Maintenance Design Testing & QA Coding 12 GLOBAL OUTSOURCING LEADERS The market is both huge and extremely fragmented, ITO Revenue Leaders Name 2011 Revenues Market Share IBM $ % HP $ % Fujitsu $ % CSC $ % Accenture $ % Others $ % Total $ % Source: Gartner Group (May 2012) AbsolutData Accenture Aditya Birla Minacs ADP Advanced Technology Services Aegis Altisource Amdocs Aon Hewitt AppLabs Artezio Auriga Birlasoft Bleum Capgemini Cassidy Turley CBRE Ceridian CGI Group ChinaSoft International Ci&T CIeNET International Colliers Global Corporate Solutions Compass Group Concentrix Convergys Cross-Tab Marketing Services CrysTelCall CSC DATROSE DieboldIntegratedServices Donlen Donnelley Global Outsourcing EMCOR Group Emerio GlobeSoft emids Technologies Endava EPAM Systems First Line Software Firstsource Freeborders Genpact Getronics Workspace Alliance Grupo Prominente Harbinger Systems HCL Technologies Hexaware Technologies HGS hisoft Technology International HP Enterprise Services igate Patni Indecomm Global Services Infosys Infotech Enterprises Insigma Inspur Intetics ISS ITC Infotech Itransition Johnson Controls Jones Lang LaSalle Kelly Outsourcing and Consulting Group LeasePlan USA LegalBase Lionbridge Long View Systems Luxoft Nagarro National Medical Billing Services NCR Neoris Neusoft Newmark Knight Frank NIIT Technologies Océ Business Services PCCW Solutions Pitney Bowes Management Services ReSource Pro Scicom Sodexo SoftServe Softtek SPi Global Sutherland Global Services Syntel Synygy TEAM International TeleTech TIVIT Towers Watson transcosmos Unisys VanceInfo Williams Lea Wipro Technologies WNS Global Services Xceed Xchanging Zensar Technologies 13 7

8 CONTEXT: OVERSIMPLIFIED HISTORY OF I.T. DELIVERY Self Managed Custom Own HW Build SW Self Managed Packages Who develops, owns operates, and updates the technology? Which party has which risks? Own HW Enterprise Lease, customize Solutions SW Hosting HW Configure SW Multi-Sourcing Multivendor Cloud products & services Own nothing 1970s 1980s 1990s 2000s 2010s 14 CONTEXT: OPERATIONS VS. PROJECTS Depending on role, markedly differing agendas regarding stability, control and change 15 8

9 IS OUTSOURCING IMPORTANT? GLOBAL OUTSOURCING MARKET Strong growth rate projected to resume through 2015 Source: Gartner Group 17 9

10 OUTSOURCING MATURITY CURVE Industry-specific and function-specific BPO models are following the trail pioneered by Call Centers, ITO and ADM Source: Horses for Sources, State of Outsourcing 18 IT OUTSOURCING HAS STAYING POWER Percentage Decreasing, Maintaining, or Increasing Amount of Work Outsourced Source: Computer Economics 19 10

11 IN THE PAST, NORTH TEXAS HAS BEEN HOME TO THE HUNTED" 20 SAMPLE OF NORTH TEXAS HEADLINES IT Outsourcing is pervasive with North Texas companies Cogizant TCS Infosys BearingPoint > Dell OSI > EFX 21 11

12 WHY OUTSOURCE? WHY OUTSOURCE? Listed below are typical rationale for IT outsourcing. Source: Info-Tech Survey (264 organizations) 23 12

13 DOES OUTSOURCING WORK? DOES OUTSOURCING PROVIDE GOOD SERVICE? Percentage Finding Service Better, Same or Worse with Outsourcing Source: Computer Economics 25 13

14 HOW WELL HAVE OTHERS REALIZED OUTSOURCING BENEFITS? Returns on AMO have been mixed with a few big winners and big losers and many stuck in the middle. Application Outsourcing Project Success* Resource Availability 16% 55% 27% Faster Delivery 16% 46% 32% 6% Increasing End User Satisfaction 14% 47% 35% Knowledge Transfer to IT Staff 15% 47% 34% 5% Meeting Project Budget 17% 45% 32% 7% Meeting Project Timelines 13% 44% 36% 8% Improving Deliverable Quality 15% 41% 35% 9% Reducing Costs 17% 31% 42% 10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very Successful Somewhat Successful Somewhat Unsuccessful Very Unsuccessful Source: Info-Tech Survey 26 OUTSOURCING - GOOD OR BAD? ADVANTAGES DISADVANTAGES Vendor economies of scale Fixed-price and agreed service levels can considerably reinforce predictability Efficient business best practices and service levels Access to leading-edge technology Specialized functional expertise Vendor may have deeper technical expertise Company can refocus internal experts on core business and most important demands Variable capacity Rapid, round-the-clock development Vendor may have tighter methods and controls Costs Fit / Benefits Expertise / Fit Unplanned costs unidentified needs, loose contracts, cost of managing vendor, vendor opportunism Standard environment may not fit Service levels Financial benefits may not be realized as assumptions become invalid over time Vendor may not have knowledge of company details Outsourcer may not be able to retain former critical employees Inability to select / control individuals assigned to the company Loss of internal technical knowledge Capacity May pay for unused capacity in vendor shop Control Free up capital for other purposes Remedies Possible loss of control; especially with total outsourcing Confidential issues Performance penalties small relative to business impact Enormous Exit-Barriers 27 14

15 WHAT ARE THE MANAGEMENT CHALLENGES? THE CONTRACT LIFECYCLE ACCORDING TO VENDORS 29 15

16 THE CONTRACT LIFECYCLE ACCORDING TO CLIENTS End-of-contract is a critical period in an outsourcing agreement 30 YOU ARE STILL ON THE HOOK FOR THE OUTCOME Client organization MUST retain key skills after outsourcing relationship initiated 31 16

17 NOT A SILVER BULLET Our mess, in someone else s hands, is still a mess 32 THE TELEPHONE GAME 33 17

18 ADDITIONAL OFFSHORING CONSIDERATIONS Challenges Language / Colloquialisms Time Zones Familiarity with the Business Enablers of Offshoring Labor Rates Telecom Collaboration Technologies 34 OFFSHORING DISTRIBUTION Applications Development and Maintenance are sent offshore more often than other IT services % of Orgs Offshoring % of Work Sent Offshore Apps Dev 27% Apps Dev 20% Apps Maint 16% Apps Maint 16% Database Admin 8% Database Admin 12% DC Ops 5% DC Ops 14% Web 5% Web 5% Help Desk 4% Help Desk 14% NW Ops 4% NW Ops 11% Apps hosting 3% Apps hosting 1% Desktop Support 3% Desktop Support 7% DR 2% DR 3% Security 1% Security 3% Source: Computer Economics 35 18

19 QUESTIONS 36 BACK COVER Barron W. Green Alvarez & Marsal Business Consulting 2100 Ross Avenue, 21 st Floor Dallas, TX