1. 1 1 Dr. Joseph W. Rottman November 06, 2006 Presented to BA5800 The Global IT Market: Helping students understand offshore outsourcing and its impacts

2. 2 Agenda Explain research base Explore global trends Explore impacts to US students workers Create dialogue

3. 3 1989-2001: Outsourcing: n = 72 organizations: British Aerospace DuPont Inland Revenue Enron IRS South Australia 1989-1996: Insourcing/Backsourcing: n = 18 organizations: Westchester County Occidental Petroleum Ralston Purina Vista Chemicals 1999-2001: Application Service Provision: n =10 organizations: Corio EDS Host Analytics mySAP Zland 2001-2004: Business Process Outsourcing: n = 4 organizations: BAE Systems Lloyd’s of London 2004-2006: Offshore Outsourcing: n = 41 organizations: Anonymous Case Studies: Primarily Fortune 500 companies & their offshore suppliers 2006: Global IT Workforce Development: Team of 20 researchers In - Progress: Corporate members of the Society for Information Management Sourcing Research

4. 4 Salient Research Articles Rottman, J., and Lacity, M., "Proven Practices for Effectively Offshoring IT Work," Sloan Management Review, Vol. 47, 3, Spring, 2006, pp. 56-63. Rottman, Joseph W., “Successfully Outsourcing Embedded Software Development” IEEE Computer, Vol 39, 1 pp. 55 – 61, 2006. Zwieg, P., Kaiser, K. M., Beath, C., Bullen, C., Gallagher, K., Goles, T., Howland, J., Simon, J. Abbott, P., Abraham, T., Carmel, E., Evaristo, R., Hawk, S., Lacity, M., Gallivan, M., Kelly, S., Mooney, J., Ranganathan, C., Rottman, J., Ryan, T., Wion, R., “ The Information Technology Workforce Trends and Implications 2005- 2008,” MIS Quarterly Executive Vol. 5, 2, 2006, pp. 47-54. Rottman, J., and Lacity, M., "Twenty Practices for Offshore Sourcing," MIS Quarterly Executive, Vol. 3, 3, 2004, pp. 117-130.

5. 5 Global IT Sourcing Market Trends DEMAND TRENDS: Global IT spend is increasing U.S. IT spend is increasing U.S. IT spend as a percentage of global IT spend is decreasing U.S. organizations will significantly seek to hire IT workers over next 7 years SUPPLY TRENDS: U.S. IT unemployment rate is decreasing U.S. Computer Science & MIS enrollments down 25% since 2002 U.S. use of foreign IT workers is a small percentage of overall IT workforce, but growing Many foreign countries are creating viable IT service industries U.S. Executives must manage a global network of IT employees and suppliers U.S. universities must educate the current and future IT workforce to compete in the global IT market.

6. 6 Demand Trend: Total US vs. Global ICT Spending 2000- 2007 Source: Digital Planet/Global Insight as downloaded from www.itaa.org

7. 7 Total U.S. ICT Spending as % of Global ICT Spending DEMAND TREND: Forecast Source: Digital Planet/Global Insight as downloaded from www.itaa.org

8. 8 Forecast U.S. ICT Spending as % of Gross Domestic Product DEMAND TREND: Source: Digital Planet/Global Insight as downloaded from www.itaa.org

9. 9 DEMAND TREND: Of 30 fastest growing jobs between 2002 and 2012, 7 are in IT Source: U.S. Department of Labor, Bureau of Labor Statistics Occupation20022012Percent Growth Rank Network systems & data communication analysts 186,000292,00057%2 Computer software engineers/applications 394,000573,00046%7 Computer software engineers/systems software 281,000409,00045%9 Database Administrators110,000159,00044%12 Computer systems analysts468,000653,00039%20 Network and computer system administrators 251,000345,00037%24 Computer & information systems managers 284,000387,00036%27

10. 10 Supply Trend: National Unemployment (non-adjusted Rate) Source: Pfannenstein, L. and Tsai, R., “Offshore Outsourcing: Current & Future Effects on American IT Industry,” Information Systems Management, 2004,Vol. 21, p. 72-81

11. 11 Supply Trend: U.S. use of offshoring is small In 2004, total number of reported US IT workers varies by source from 10.3 million IT workers reported by ITAA to 3.38 million by BLS in 2004. In 2004, about 90,000 U.S. IT jobs lost offshore Percentage of U.S. lost IT jobs fall between and.9% and 2.7% Sources: Pfannenstein, L. and Tsai, R., “Offshore Outsourcing: Current & Future Effects on American IT Industry,” Information Systems Management, 2004,Vol. 21, p. 72-81; NASSCOM, U.S. of Labor, Bureau of Labor Statistics; Chabrow, “IT Employment On Upswing,” Information Week, April 4, 2005.

12. 12 Supply Trend: Number of U.S. Jobs Moving Offshore Category2000200520102015 Computer27,171108,991276,954472,632 Business10,78761,252161,722348,028 Management037,477117,835288,281 Other Services Total102,674587,5921,591,1013,320,213 Sources: U.S. Department of Labor & Forrester Research $136 billion in wages

13. 13 The Information Technology Workforce Trends and Implications 2005-2008 Zwieg, P., Kaiser, K. M., Beath, C., Bullen, C., Gallagher, K., Goles, T., Howland, J., Simon, J. Abbott, P., Abraham, T., Carmel, E., Evaristo, R., Hawk, S., Lacity, M., Gallivan, M., Kelly, S., Mooney, J., Ranganathan, C., Rottman, J., Ryan, T., Wion, R., The Information Technology Workforce Trends and Implications 2005-2008, MIS Quarterly Executive Vol. 5, 2, 2006, pp. 47-54.

14. 14 Research Method 20 Academic researchers working in U.S. and Europe 96 interviews of 81 IT leaders in 77 departments 82% of respondents are IT top management

15. 15 Training Methods Used Within the First Year Entry Level HiresMid Level Hires Training classes customized for our organization Self-tutorialsAssign a mentor Self-tutorials Generic Training classes offered by third parties Job rotation OTJ

16. 16 Plans for Obtaining Needed Skills Hire experienced people Formal training in house Formal training through outside programs On-the-Job-Training Support tuition reimbursement College hire-entry-level Mentor programs Convert contractors to employees Learn from contractors/3PP

17. 17 Skills to keep in house 2005

18. 18 Top Skills Sourced 2005

19. 19 Top Desired Entry Level Skills

20. 20 Skills and Capabilities Critical to Keep In House Now (05 - 06) Project Planning/Budgeting/Scheduling Functional Area Process Knowledge Company Specific Knowledge Systems Analysis Industry Knowledge Business Process Design/Re-engineering Systems Design Project Leadership Project Risk Management IT Architecture/Standards Change Management/Organizational Readiness

21. 21 Skills and Capabilities Newly Important and Critical to Keep In House by 2008 Functional Area Process Knowledge Industry Knowledge Business Process Design/Re-engineering Company Specific Knowledge IT Architecture/Standards Communication Project Leadership User Relationship Management Change Management/Organizational Readiness Managing Stakeholder Expectations Managing 3rd party providers

22. 22 Canada MexicoIndia Brazil EU Russia IsraelChinaJapan Philippines Singapore Australia Supply Trend: 95% of US Offshore IT sourcing activity is taking place in these nations: Carmel, E., and Agarwal, R., “The Maturation of Offshore Sourcing of Information Technology,” MIS Quarterly Executive, Vol. 1, 2, pp. 65-77.

23. 23 Supply Trend: The Global Outsourcing Report Overall rankings based on cost and risk (geopolitical, human capital, IT competency, economic, legal, cultural, IT infrastructure: CountryGOICountyGOI India2.02Romania2.46 China2.16Ireland2.50 Costa Rica2.24Singapore2.50 Czech Republic 2.26Philippines2.56 Hungary2.28Poland2.56 Canada2.40Armenia2.58 Latvia2.40Brazil2.58 Russia2.40Ukraine2.74 Chile2.42Israel2.76 Source: “The Global Outsourcing Report,” CIO Insight, March 2005.

24. http://commonziffdavisintern et.com/download/0/2216

25. 25 Offshore Learning Curve Phase 1: Hype & Fear Phase 2: Early Adopters Best & Worst Practices Emerge Focus on Costs Phase 3: Market Matures Richer Practices Emerge Focus on Quality Phase 4: Institutionalized Focus on Value-added Size of Market Customer Learning Time

26. 26 What does it look like? Engagement Model 1: Onsite Supplier Engagement Manager Offshore Supplier Delivery Team Local Business Units Architects/ DBAs/etc. Project Managers Offshore Supplier Delivery Team Offshore Supplier Delivery Team PMO

27. 27 Onsite Supplier Project Managers Offshore Supplier Delivery Team Offshore Supplier Delivery Team Offshore Supplier Delivery Team Onsite Supplier Project Managers Offshore Supplier Delivery Team Offshore Supplier Delivery Team Offshore Supplier Delivery Team Architects/ DBAs/etc. Project Managers PMO Local Business Units What does it look like? Engagement Model 2:

28. 28 Offshore training models Industrial Equipment Manufacturing Content Product, technology, project specific Audience New hires for customer (developer/architect/team lead) New assignments from supplier organizations Project Leads Delivery Onsite Training sessions of new customer employees and supplier employees. Sessions are taped and placed on customer’s intranet Approved vendors are given access through secure data circuits One-to-to for Project Leads Charges For large offshore supplier: Customer pays supplier onshore rates if training is onshore Customer pays supplier offshore rates if training via Intranet For small specialized offshore supplier: Customer pays supplier offshore rates for onshore training

29. 29 Case Study: Industrial Equipment Manufacturer Fortune 100 / Six Sigma 75,000 employees in 20 countries –Software Center of Excellence –150 IT employees / $32 Million

30. 30 Training Model Customer Project Leads and Architects Supplier Project Lead 1 Train On Shore - On Site Off Shore On Site Overlap 3 – 6 Months Supplier Project Lead 2 Trains Supplier Project Lead 3 On Site Overlap Trains Offshore Delivery Team Trains Industrial Equipment Manufacturing Project Duration

31. 31 Talent Pipeline Issues Entry Level Programmers Analysts Project Manager

32. 32 Conclusion Research Base Career Implications and Trends Case Study