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© 2003 IBM Corporation IBM Global Services 1 Offshoring Trends Arash Shahideh
IBM Global Services © 2003 IBM Corporation 2 Offshore becoming mainstream -- 25%+ growth India continues to dominate, but country diversification imminent New entrants, new competition New decision makers -- business buyers and consultants Big names, preferred vendors Most of the work is still project work NOT outsourcing Concerns about risk, distance and no “cookbook” Longer decision-making cycles; Increasing interest in other segments -- ITO, BPO, Network Tendency to build relationship and then leverage across services Way too much focus on rates Some backlash globally as a result of IT jobs flowing offshore Offshore Trends in
IBM Global Services © 2003 IBM Corporation 3 “Offshore” is becoming Mainstream Number of Enterprises Using Offshore Sourcing For The First Time 1995 to to 2003 Type A: Early Adopters Type C: Laggards Type B: Pragmatists Largest segment of enterprise buyers comprise this category; thus, there will be a large volume of activity All types of enterprise such as healthcare, retail and energy companies are piloting or outsourcing Global delivery moves to the main stream Early adopters of sourcing programming in India include: Financial service High-Tech manufacturing
IBM Global Services © 2003 IBM Corporation 4 Offshore: Lower costs Round the clock Resources Quality Mexico Canada Ireland India Russia China Current Priorities Longer-Term Prospects Philippines Eastern Europe/ Baltic States Nearshore Easier travel Cultural similarities Time zone Team integration 90% of enterprises source from here Regions of Supply for Offshore IT Services South America
IBM Global Services © 2003 IBM Corporation 5 A Simple Value Proposition…. Lower costs –For example, UK based SAP consultants cost £600 and up, where SAP consultants in India cost $22 - $35 an hour –The savings in labor is enough to pay for the incremental overhead remote management incurs and still save 30% – 50% Flexibility of Resources –India, China and the Phillipines supply 90% of the market –Other low cost geographies quickly gaining in popularity (Canada, South America, Ireland) Quality/Stability of Service –High quality infrastructure –Highly educated staff Time zone difference –Faster turnaround of tasks
IBM Global Services © 2003 IBM Corporation 6 Loss of communication richness Loss of teamness Cultural differences Loss of Collaboration Coordination breakdown Service architecture Managerial techniques Development methodology Telecom infrastructure Collaborative technologies Constructive Responses Disruptive Issues Team building … But a very complex execution
IBM Global Services © 2003 IBM Corporation 7 Delivery team on-site Charged hourly, maybe milestone fees Risk shared between client and vendor Dedicated offshore facilities Committed long-term revenue Typically connected to client site by direct leased telecom link Project manage- ment and client services in the UK; delivery team offshore Quasi- captive offshore facilities Value commitment Processes & technology infrastructure common between client and center Complexity of Service Delivery Low High SimpleComplex Stage 1 On-site Contract Work Stage 2 On-site Project Team Stage 3 On-site/ Offshore Projects Stage 4 Offshore Development Centers Stage 5 Transformational Outsourcing Persistence of Services Evolutionary Stages in Offshore Sourcing Relationships
IBM Global Services © 2003 IBM Corporation 8 High level approach to off-shoring Scoping Supplier Selection Portfolio Assessment & Migration Strategy Application Specific Migration Plans Knowledge Transfer Parallel Perform Application Cutover IBM’s Story Fit with wider initiatives Transform retained organisation (IS and business) Change Leadership, Communications and Stakeholder Management 6 weeks6 months2-3 months1-2 months 1 monthOn-going Support IBM can either consult on the approach and/or provide off-shore services Transition
© 2003 IBM Corporation IBM Global Services 9 Remote Delivery Models Adopted by Our Clients
IBM Global Services © 2003 IBM Corporation 10 Delivery Models
IBM Global Services © 2003 IBM Corporation 11 Application Migration Criteria
IBM Global Services © 2003 IBM Corporation 12 Migration /Transition Process Overview Contract EngagementTransitionOperation Phase 1: Transition Planning Phase 4: Parallel Perform Phase 5: Application Cutover = Quality Gate/Review Phase 2: Guided Perform Phase 3: Assisted Perform Detailed transition planning First phase of knowledge transfer – Customer Team to mentor suppl. staff Second phase of knowledge transfer – suppl. staff to deliver 75% of support calls Assurance checkpoint for knowledge transfer - new team now ready support independently Formal milestone for completion of knowledge transfer. Suppl. team is ready to take on project management of new services Application supported by in steady state Application skill level
IBM Global Services © 2003 IBM Corporation 13 Typical Application Support Structure at Steady State Client SiteGlobal Delivery Center Business Help Desk (L1) Incident/Problem Manager - assigns PT to appropriate support queue Owns the issue till it is closed Application Support Desk (L2) Functional consultants Owns the PT till the fix is tested and approves the code. Reassigns the PT to the L1 queue for closure with the comments Technical Support Desk(L3) Tech Consultants, DBAs, Queue,Interface monitoring 24x7 for sev 1 calls emergency fix, unit testing Tools (SDMS, PELICAN) Quality Processes WW SAP ICM Database
IBM Global Services © 2003 IBM Corporation 14 Production Maintenance Call Management Onsite Team Level 2 Support Problem Reporting database Global Delivery CenterOn-Site Controlled Access PT Updates Telephone Cell phone Pagers Travel On-line chat Updates PT with Resolves data related problems & working Customer personnel assign severity levels Customer Global Delivery Team Level 2 Support Global Delivery Team Level 3, Emergency Fix Business Help Desk Level1 Support PT Updates e-Meeting Status Reports PR Flexible 24 x 7 support services based on severity levels The teams are equipped with Pagers and cellphones Laptops to connect from home Central repository of all key contacts in the production support team Roster charts Backup contact details Daily status update conference calls across all the support teams Monthly reporting on performance based on the agreed SLA’s Based on criticality (sev 1), hourly management calls on status
IBM Global Services © 2003 IBM Corporation 15 Key Performance Indicators : At Steady State Key Performance Indicators : At Steady State
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