Workforce Preparation in an Outsourcing World

Workforce Preparation in an Outsourcing World THE INFORMATION COMPANY TM Thomas J. Kadelbach Director

Offshore Outsourcing Offshore Outsourcing Overview & Impact CTE in an Information Age

How much will you pay? Accountant $28,000 $75/hour $1,600 $37,000 $2,500 $20/hour

What is offshore outsourcing? The migration of part or all of the value chain to a low-cost location outside the US Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

Criteria: Successful Offshoring High level of information content that can be standardized and digitized Job processes that can be separated and documented step by step No face-to-face customer service requirements Source: International Trade: Current Government Data Provide Limited Insight into Offshoring of Services GAO-04-932

Job Categories Impacted Software programming and design Call center operations Software research and testing Architecture Engineering Business and financial operations Office and administrative support Medical transcriptionists Paralegals and legal assistants

Customer Care Example Offshore Customer Care Chain Support Marketing Sales Technical Support Customer Analytics Customer service Outbound e-mail In-bound sales Data verification Profitability analysis Billing query resolution Telemarketing Outbound Sales Application support Quality auditing Order taking Surveys & polling Web chat and web callback Address update Reporting Account activation Inbound e-mail Co-browsing Help desk Complaint analysis New customer registration Campaign management Problem resolution Complaints Customer win-back Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

Customer Care Example Offshore Customer Care Chain Support Marketing Sales Technical Support Customer Analytics Customer service Billing query resolution Order taking Account activation New customer registration Complaints Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

Finance & Accounting Example Offshore Finance & Accounting Chain Transaction Processing General Accounting Financial Management Financial Reporting Tax Processing Accounts Receivable Fixed asset Acct. Financial analysis Financial statements Internal audit Accounts payable General ledger Management Acct. Variance analysis Unemployment Travel & expense reimbursement Account reconcilliations Budget & forecasts Consolidations/ eliminations Quarterly tax Payroll Bookkeeping Cost Acct. Statutory/external reporting Federal tax returns Credit Management Capitol Planning External audit support Foreign exchange Cash Management Quarterly/year-end reporting Payroll tax Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

Finance & Accounting Example Offshore Finance & Accounting Chain Transaction Processing General Accounting Financial Management Financial Reporting Tax Processing Accounts Receivable Accounts payable Travel & expense reimbursement Payroll Credit Management Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

Offshore Drivers Cost pressures on US/European Companies and expansion into global markets Rapid decline in communication and computing costs Dramatic improvements in Internet reliability and functionality Access to low-cost, highly skilled employees, especially for labor intensive tasks Quality suppliers for offshore services A proven business model i.e. GE, American Express Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

The Value Proposition Onshore 100% 30% Offshore 20% 20% 30% US/Europe Costs Labor Costs Added Transaction Costs Added Monitoring Costs Overall Savings Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

2003 Salary Comparisons US $ in Thousands 100 90 80 70 60 50 40 30 20 10 0 45K 48K 6.5K Graduate from top-tier university 75K 96K 26K IT Professional 5 years exp. US UK India

1 st Generation Business Models Relationship structure Third-party vendor Joint venture (collaborative) Completely Owned subsidiary Contracting Staff Augmentation N/A Internal Delivery Pure Outsourcing Cosourcing Shared Services Offshore Outsourcing Offshore Development Centers Captive Shared Services Onsite Offsite same country Offshore foreign country Geographic location Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

2 nd Generation Business Models Relationship structure Third-party vendor Joint venture (collaborative) Completely Owned subsidiary Global Delivery Model Build-Operate-Transfer Model Global Shared Services Onsite Offsite same country Offshore foreign country Geographic location Source: Offshore Outsourcing: Business Models, ROI, and Best Practices by Marcia Robinson and Ravi Kalakota 2004

Offshoring Gets Noticed Growth of Outsourcing Impact on jobs

US Gross Domestic Product 2002 Goods 22% Services 78% Total GDP = $9.2 Trillion Source: International Trade: Current Government Data Provide Limited Insight into Offshoring of Services GAO-04-932

US Imports & Exports 2002 US exports US imports Goods 30% Services 30% Goods 84% Services 16% Total exports = $974 billion Total imports = $1.4 trillion Source: International Trade: Current Government Data Provide Limited Insight into Offshoring of Services GAO-04-932

Increased Imports of BPT Business, Professional, and Technical services Accounting, auditing, bookkeeping Architectural, engineering and other technical Computer and data processing Database and other information Legal Management, consulting, and public relations Research, development and testing 40 30 20 10 0 $21.2 $37.5 Import of services in billions 1997 2002 Source: International Trade: Current Government Data Provide Limited Insight into Offshoring of Services GAO-04-932

Employment Environment Annual average percentage change in private sector employment in selected industries, from March 2001-June 2004-7.9-7.2-7.2-6.1-5.7-4.5-2.9-1.2 0.2 0.5 1.8 2.5 Accounting and Bookkeeping (760) Telecommunications (1,048) ISPs, Search eng & data proc. (408) Payroll (132) Computer sys design & related (1,122) Software publishers (241) Telephone Call Centers (367) Business Support (753) Total nonfarm (132,325) Architectural and engineering (1,281) -10-8 -6-4 -2 0 2 4 Percent Scientific R & D (562) Legal (1,162) Source: GAO-04-932 Notes: June 2004 employment level is given in thousands in parenthesis.

CTE in an Infomation Age Macro Level - Becoming airport builders Micro Level Rigor, Relationships, and Relevance

Becoming Airport Builders Move away from being Air Traffic Controllers Areas to make stronger and more accessible Education & skills Infrastructure Social & Legal Research & Development

Rigor, Relationships, Relevance Source: www.careerclusters.org

IT Outsourcing Strategic High IT Strategy Governance Project Office Training Field Services Customer Requrements Application hosting Prototype development Documentation development Send Offshore No Yes Low Help desk support Application testing Remote diagnostics Application maintenance Application Development Application Customization

What should students be learning? Teach these concepts in a real-world context with increasing sophistication Translation Collaboration Highest quality thinking Global and Local World View Boldness - Fortune favors the Bold What version of software? It doesn t matter

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