1. IT Offshore Outsourcing Offshore outsourcing is not generating the expected cost savings promised nor is it pursued for cost savings.

3. McKinsey Global Survey

5. USA is still the leading region for product designs & new product intro.

6. Changing World Collapse of the Berlin wall Leadership change in China The European Union Technology Bubble Year 2000 Telecommunication –Voice –Data

7. CEO /CFO View of Supplier $1,000,000Cost savings 468,000Number of shares $2.137Cost savings stated in earnings per share (EPS) $1,000,000Cost savings 20%Operating Profit % $5,000,000Additional sales needed to generate the same operating income as the cost savings $1,000,000Cost savings 468,000Number of shares $2.137Cost savings stated in earnings per share (EPS) Source: SDS network software M.L. Emilliani

9. India: Attractive IT Outsource Location High Low Workers Capability Location attraction English, Education, Qualification, Cost Infrastructure Geopolitical Risk Incentives

10. Criteria: South East Asia Attraction Geopolitical Risk English Proficiency Average Programme r Salary Pro’s & Con’s IndiaModerateGood$4-12KIT Outsourcing heaven ChinaLowPoor$4-12KStrong government support. Weak IP protection., Bureaucratic ThailandLowPoor$4-12KWeak education MalaysiaLowFair$4-12KShortage of skilled IT SingaporeLowGood>$12KExcellent infrastructure, stable PhilippinesLowGood$4-12KMfg outsourcing heaven VietnamModeratePoor$4-12KSmall Mfg outsourcing New ZealandLowGood>$12KVery stable political & Economic

11. Foreign direct investment in: Commercial-services exports from: United States: $82.0 B India: $ 4.7 B China: $53.5 B United States: $282.5 billion India: $ 24.9 billion China: $ 44.5 billion Sources: Organization for International Investment, The Economist, U.S. Federal Reserve, World Trade Organization

12. United StatesIndiaChina Total population 0.29 billion1.07 billion1.30 billion Civilian labor force 147 million470 million744 million Percent of population under age 25 35%53%41% Number of college graduates / year 1.3 million3.1 million2.8 million Number of computer-science graduates / year53,00075,00050,000 As percentage of population 0.02%0.007%0.0004% Cost of a cup of coffee (gourmet) $1.68$0.50$1 Percent of country with electricity 100%60%98% Percent of population living below the "poverty line"* 12%25%10% Illiteracy rate 5%35%15% * Definition of "poverty line" varies substantially by country. Sources: U.S. Census Bureau, U.S. Bureau of Labor Statistics, U.S. DoE, The Economist, Economic Times of India, Software Outsourcing Research, CNBC, the National Center for Education Statistics, the International Energy Agency, and CFO research

13. Hourly Wages U.S.India Telephone operator$13Less than $1 Medical transcriptions$13$2 Payroll clerk$15$2 Legal assistant/paralegal$18$7 Data-entry clerk$20$2 Accountant$23$11 Financial researcher/analyst$34$11 Software developer$60$6 Engineer$120$18 Note: Numbers are rounded. Where ranges were given, the average is given above Sources: University of California, Berkeley; and McKinsey Global Institute

14. India moving up the value-chain in IT services India started by providing Cobol programmers in early 1990s Moved to porting from Fortran and Cobol onto C and Pascal Moved to converting legacy systems into simple client- server based systems Solution provider to Y2K glitch Moved up the technology chain to Java and XML programming Attempting to break into R&D in software & services.

15. IT Services –Steel –Chemicals –Ship building –Utilities –Car manufacturers –Banking & financial institutions –Insurance –Energy equipment –Electronics –Airlines –Pharmaceuticals –Retailing –Packaged goods –Computer manufacturers –Telecom –Aerospace –Entertainment –Real estate brokerage –Hotels –E-commerce –SW-producer HighMedium Low Medium High Low Global cost base industry Relative share of remote serviceable processes

16. Multinational IT companies with R&D center in India Motorola India Electronics Ltd. Novell India Software Dev. Center Oracle India Development Center Philips Research Center Samsung India Software R&D Center SAP Labs India Sasken Technologies STMicroelectronics Sun Microsystems, India Engineering Center Texas Instruments Zilog R&D Center Many others in Biotech and Pharmaceutical Industries

17. Prior to Outsourcing Evaluate Fit between product and where they are mfg.? How Supply Chain will work overseas? Do lower labor costs really offset shipping fees? Who do you want to manage your vendor relationships? Compete not on PRICE, but on SPEED & FLEXIBILITY

19. Offshore Outsourcing dilemma Will be decided in 2015… US aging population growth + Shortfall in domestic labor supply