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Global Delivery Of IT Services Is Here To Stay Implications and Possibilities for Microsoft and Our Customers.

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Presentation on theme: "Global Delivery Of IT Services Is Here To Stay Implications and Possibilities for Microsoft and Our Customers."— Presentation transcript:

1 Global Delivery Of IT Services Is Here To Stay Implications and Possibilities for Microsoft and Our Customers

2 Our Customers Face Business Upheaval They Must: 1. Do More with Less Optimize use of internal resources Reduce and/or control operating costs Re-allocate capital to strategic projects 2. Improve Business Efficiencies Reduce business cycle times Bring products to market more effectively Competitive pricing with strong value 3. Become People Ready Drive innovation Build partner connections Improve operations Develop deep customer relationships What is a key cause of this upheaval?

3 …Its A Flat World And Getting Flatter 2000: Round 2005: Flat 2010: Virtual Dynamic global market place Varied customer response Geography no longer matters Price Flexibility (e.g. ease of integration) User Alignment Speed of Delivery High Low By organization Protracted Lowest possible High By user On-Demand Building Blocks for Global Delivery Source: Internal Microsoft study by IDC Our customers have adapted and turned to the strategic use of IT to drive business transformation

4 Global Delivery…Drives Customer Value Today Customers Realize Savings Driven by Operational Efficiencies Source: Offshore 2005 Research, Preliminary Findings and Conclusions, © Ventoro I Cost, Quality, and Time-to-Market are Key Customer Drivers Source: Offshore 2005 Research, Preliminary Findings and Conclusions. © Ventoro I Achieve Cost Savings Improve Quality Improve Time to Market Gain Technical Skillsets Forced Strategy Cost Predictability Penetrate Market Gain Industry Expertise Recent Customer Wins ABN Ambro: Infrastructure outsourcing and maintenance; $1.0+B won by Infosys, TCS, and IBM Citi Group: BPO, Application Development and Maintenance; $800M won by TCS Dixons Specialty Group: BPO and Infrastructure; $300M won by HCL Percent Global Delivery is Leveraged for: Full array of project-based IT services Business process outsourcing –Horizontal services (e.g. HR, customer care) –Finance and accounting, procurement –R&D / Engineering services Emerging technologies (e.g. VoIP, search) Transformational strategic outsourcingTransformational strategic outsourcing Customers see value and adoption is increasing

5 …Embraced By 95% Of The Fortune 1000 Fortune 1000 Firms Currently With Global Delivery Strategy Trends Favoring Global Delivery 68% of the Fortune 1000 expect to increase spending with Global Delivery Partners 39% of the Fortune 1000 will increase spending with Global Delivery Partners by more than 20% 11% of the Fortune 1000 will increase spending with Global Delivery Partners by more than 50% 20% of the Fortune 1000 expect to accelerate their global delivery strategy due to pressure from Shareholders and Boards Source: Offshore 2005 Research, Preliminary Findings and Conclusions, © Ventoro I Why? Cost savings or cost avoidance from labor and time arbitrage Quicker entry into new markets by shortening product development cycles Business transformation through new service models 72% the Fortune 1000 Expected to Increase Spending on Global Delivery Source: Offshore 2005 Research, Preliminary Findings and Conclusions, © Ventoro I Microsoft has the opportunity to increase customer penetration through Global Delivery Partners

6 30% Demand Growth Sustainable Over Next 2 to 3 Years … A $430 Billion * Market Today And Growing Trends Driving Growth Increased demand for application management services Broader offshore adoption in market segments Unbundling of large IT outsourcing contracts Prospects for a comeback in custom software development Increased access to global talent pool Investments in global development centers Quality procedures and proven disciplines on the rise Current Spending Estimated at $43 Billion i.e. Backoffice Workflow i.e. IT Strategy, Architecture, Development or Process Engineering i.e. Custom Application Development i.e. Taking Over IT Infrastructure Normal Growth of Current Mega and Large Heavy Adopters Growth of Other Current Mega Users Growth of Other Current Large Users Growth of Other Current and New Users Total U.S. Demand Source: Bernstein Research, January 2006 Only 10% of current market is tapped! * Source: IDC

7 …Partners Growing Dramatically Today Pure play global delivery players expected to add significant on-shore and off-shore resources in 2007 Top 6 players projected to add 100,000 head count over next 12 months including 10,000+ on-shore Total Headcount – 2003 to , , , , , ,000 50, Offshore Onshore Double-digit percentage revenue increases year-over-year Some of the highest margins in the industry Traditional SIs trending toward to adding global delivery to capitalize IBM: ~ 38,000+ Accenture: ~ 22,000+ HP: ~ 10,000+ GSI Compounded Quarterly Revenue Growth Rates – June 2003 to June 2005 Source: IDC internal study for Microsoft Offshore Headcount Mix Across Major IT Service Companies CognizantHCLInfosysSatyamTCSWipro $800 $700 $600 $500 $400 $300 $200 $100 $0 Millions of USD June 05 June CAGR 11.69% CAGR 9.33% CAGR 9.22% CAGR 8.53% CAGR 9.37% Source: Corporate Reports, Bernstein Research, January 2006 Note: Includes total headcount (i.e. IT Services plus BPO Source: Company Corporate Reports Bernstein Research, January 2006 On-site Offshore Total Headcount Traditional Players Aggressive Adopters Pure Plays Bearing Point CapgeminiEDSCSCIBM GSAccenturePerotACSSapientSatyamCognizantinfosysWiproHCLTCS Pure play global delivery growth due primarily to rapid headcount increase

8 Servers and Tools Business (STB) Information Worker (IW) Microsoft Business Solutions (MBS) Mobility and Embedded Division (MED) Windows Client (WC) Unaligned …Headcount-driven Growth Not Sustainable SMB O/S (Volume server) Client Technologies SOA Wireless (RFID) Middleware Virtualization Grid Embedded Systems (R&D) Emerging Market Hosting O/S (Midrange High) Enterprise DB Enterprise Apps BPO Low High Low High Global Delivery Providers must migrate up the value chain

9 …The Migration Has Already Started Source: McKinsey Global Institute Labor cost arbitrage Skills arbitrage Automation Centralization Re-engineering Leakage prevention Capital cost avoidance Opportunity loss (time or information) Service extensions Data mining Price elasticity Below the waterline products for existing markets New markets Skills-limited services Leading Financial Institution Lowered support costs significantly by moving to India and Malaysia High-performance Industrial Conglomerate Has 25% of internal development team in China, India, Hungary, and other global sites Leading Airline Savings driven by revenue audits Avoided U.S. $20+M HRIS capital outlay by outsourcing HR Leading Financial Institution Extended services to range of credit card customers (e.g. fraud detection for US $15 per transaction) Top Software Provider Live customer support for U.S. $40 per application Evolving Value Creation from Global Delivery Providers

10 Nortel Networks Northwest Airlines Novartis Ohio Casualty Group Philips Electronics NV Proctor & Gamble Prudential Insurance Qwest Rockwell SAP AG Sony St. Paul Insurance Standard Life Assurance State Bank of India Target Corporation TATA Texas Instruments The Gap Toyota Motors UBS Unilever plc Unocal US Department of Defense ABN Ambro American Express American International Group (AIG) Amoco Petroleum Company AT&T AXA Insurance Bank of America Best Buy Boeing British Airways British Petroleum British Telecom Cadbury Schweppes Canadian Depository for Securities ChevronTexaco Citibank Commonwealth of Pennsylvania Credit Suisse First Boston Cummins Company Dell Computer Corp Dresdner Kleinwort Benson Deutsche Bank Eaton Corporation Eli Lilly EMC Fidelity Investment Ford Motor Company General Electric Hewlett Packard Home Depot HSBC IBM ING America JC Penney JP Morgan Chase Kelloggs Lehman Brothers Lifescan Lucent Technologies McGraw- Hill Merrill Lynch Morgan Stanley Nike Nokia Nortel Networks Northwest Airlines Novartis Ohio Casualty Group Philips Electronics NV Proctor & Gamble Prudential Insurance Qwest Rockwell SAP AG Sony St. Paul Insurance Standard Life Assurance State Bank of India Target Corporation TATA Texas Instruments The Gap Toyota Motors UBS Unilever plc Unocal US Department of Defense …In Your Accounts Today Microsoft Global Accounts Selected Accounts Dresdner Kleinwort Benson Deutsche Bank Eaton Corporation Eli Lilly EMC Fidelity Investment Ford Motor Company General Electric Hewlett Packard Home Depot HSBC IBM ING America JC Penney JP Morgan Chase Kelloggs Lehman Brothers Lifescan Lucent Technologies McGraw- Hill Merrill Lynch Morgan Stanley Nike Nokia ABN Ambro American Express American International Group (AIG) Amoco Petroleum Company AT&T AXA Insurance Bank of America Best Buy Boeing British Airways British Petroleum British Telecom Cadbury Schweppes Canadian Depository for Securities ChevronTexaco Citibank Commonwealth of Pennsylvania Credit Suisse First Boston Cummins Company Dell Computer CorpNovartis Philips Electronics NV Proctor & Gamble SonyTATA Toyota Motors UBS Unilever plc Proctor & Gamble SonyTATA Toyota Motors UBS Unilever plc Ford Motor Company General Electric Hewlett Packard HSBC ING America General Electric Hewlett Packard HSBC ING America Novartis Philips Electronics NV AXA Insurance British Petroleum Citibank Credit Suisse First Boston AXA Insurance British Petroleum Citibank Credit Suisse First Boston Ford Motor Company

11 …Can Drive Significant Revenues For Microsoft MS Revenue Potential Ability to Influence Platform Low Partner Services Breakup (FY05) Application Dev. and Maintenance Enterprise Consulting Infrastructure Services Product Engineering OthersBPO Total Services Revenue Examples Custom app. dev., Apps maint., Porting, Integration, Testing ERP, CRM, EPM, Content mgmt., etc. Security, Net Ops, Data Center mgmt, Legacy migration H/W S/W testing, Engineering, Life cycle mgmt. ISV packages and Business Consulting Call center and Backoffice processing Reference Cognizant75%25%0%`0%0% $1 B HCL34%17%11%24%0%14%$0.927 B Infosys53.5%16.1%12.1%5.1%8.8%4%$2.6 B Satyam52%37%4%5%1% $1.096 M TCS72%22%1% 2% $2.97 B Wipro38%2%9%34%11%6%$2.7 B High LowHigh Microsoft Campaigns Core IOI Core IW App. Platform Compli- ance BIMBSSearchCollabMobility Cognizant HCL Infosys Satyam TCS Wipro Significant Impact on MS Platform Adoption

12 ….With Local BDM Capacity In Key Geographies Microsoft Regions USCanadaLATAMUKEMEAChinaAPACIndiaTotal Cognizant HCL Infosys Satyam TCS Wipro Strong Today, Stronger Tomorrow Wide global footprint Deep established relationships with the Fortune 1000 (some spanning several decades) Embedded in IT organizations with operational and fiduciary responsibilities Own the application stack including maintenance and new development Business model supports rapid cost-effective execution Moving up the value chain and becoming trusted advisors Strong opportunity for MS account teams to drive revenues through platform deployment and application migration

13 Expand MS Footprint By Engaging Proactively Global Development Partners Growing faster than traditional Global SIs – Year-over- year double-digit percentage growth Have deep MS capabilities – Top 6 Global Delivery Partners have combined capacity of 25,000+ skilled professionals on MS stack Have Global capacity – Top 6 Global Delivery Partners expect to add 100,000+ professionals in 2007 Have wide and deep established business relationships – Embedded in virtually all of the Fortune 1000 Have comprehensive solutions and assets – Aligned with MS People-Ready vision and are transformational in nature Make Global Delivery Partners Your Advocates

14 Next Steps Global BDMs Cognizant & Wipro – Kristian Gyorkos – HCL & Satyam – Ganesh Ramamoorthy – Infosys – Wendy Corley – TCS – Ram Dixit – Identify FY07 focus areas for your accounts Identify Global Delivery Partners to engage with for your accounts Connect with BDMs to engage

15 ©2006 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.


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