Achtergrondmateriaal IT-outsourcing en -offshoring Luc Bongaerts

2 Overzicht Offshoring en offshore outsourcing Offshore werk in de IT-sector Pro’s & Contra’s Pragmatische aanpak Aandachtpunten Risico’s Investeringsanalyse Besluit

3 Offshoring en off-shore outsourcing Offshoring diensten uitgevoerd in off-shore lokaties, maar in je eigen bedrijf Offshore outsourcing diensten uitgevoerd in off-shore lokaties, door een service provider Waarnaartoe? China India Centraal/Oost-Europa Welke diensten? productie, distributie medische dienstverlening, R&D IT

4 Offshore werk in de IT-sector Grootte: M$/jaar Waarnaartoe? India (9500 M$): Infosys, Wipro, Tata Centraal/Oost-Europa (1000 M$) Rusland (415 M$), Roemenië (124M$), Hongarije (80 M$ - HSA) Welke IT diensten: Programmatie, software testing Onderhoud, call-centers, technical support Data mining Content management Onderzoek Implementation services BPO (Business Process Outsourcing)

5 Pro’s en Contra’s Contra: Emo-factoren: Onze werkzekerheid Gevoelens rond werkzekerheid data security, code security "Project design is a tennis game played between developer and customer: " "Offshoring : assuming all IT people are interchangeable. Correct ? Long lasting projects?" "patent and copyright issues : protecting their intellectual property. Different legal system? " outsource: Can you hire your own staff? "what to outsource? Prg only, or also testing. How about QA, reliability, etc…" experience of the off-shore team? "mgmt of long-distance devt. Proj mgmt not easy.“ Killed by their own success: “Will you be able to keep your good people?” Long term : political effect?

6 Pro’s en Contra’s Pro: Global outsourcing creates and expands new markets, it effectively and efficiently promotes global citizenship, it recognizes the benefits of a global economy, and it enhances technological creativity and diversity. Last but not least: You can’t stop it anyway. Properly planned offshore outsourcing not only works, but it can be a key factor in corporate innovation and expansion.

7 Pragmatische aanpak: een aantal ervaringen… "accelerate product delivery : foreign programmers (24h/day): cost savings? only until costly change management and export compliance requirements got in the way. Although ongoing operations weren't cost justified, the team learned lessons that shortened our subsequent development cycles. " "A company considering offshore outsourcing must first be positioned to operate in a global environment, both culturally and financially. Without global focus and an economic understanding, offshore efforts will fail." Consider the obstacles Hidden costs can rapidly consume any calculated savings. Costs of social and educational development: product design and delivery cost Communications costs Cost of connectivity Consider all risks involved (see also slide 5) Not only related to direct costing but also for customer satisfaction, project delays, project failures, legal issues (patents, copyrights, personnel), local personnel change management, knowledge management.

8 Pragmatische aanpak: Aandachtpunten Risico’s / Aandachtpunten Communications and technology Cultural differences Language Time zones Long-distance relationships Costs of support Control

9 Pragmatische aanpak Communications and technology Communications and technology Voice communications (telephone connections/Voice-over-IP): reliability, quality Data communications (intranet/internet): reliability and performance compatibility of data availability of technological “details” Especially consider possible impact to customer satisfaction. Guidelines: Consider impact of possible issues Request references for similar offshore work Audit the communications and technology readiness Foresee contingency plans

10 Pragmatische aanpak Cultural differences Programming: “ I'm sorry for this error. We are still working on this bug. “ Business processes: Interacting with people: internal and external customers (call centers, angry customers, humor, expectations). Management differences Explicitness, management style, initiative, work ethics, best practice concept Guidelines: Formalize your processes: Programming: be specific in requirements Business processes: scripted responses, refrain from editorial comments You will need to change how you manage people Plan for the time and cost Work (also) with local people Invest in cross-cultural staff training & customer education

11 Pragmatische aanpak Language Adds a difficulty in communication Even between different locales of English Word choice, Vocabulary Guidelines Hire staff with excellent language skills Serious Language Problems is a reason not to hire! Listen to customer calls Include coaching Consider hybrid approach Local and off-shore teams

12 Pragmatische aanpak Time zones Time differences can range from 1 hour till 12 h Finding real time meetings difficult: e.g. bottlenecks morning and evening World-wide meetings even more challenging Jet lag affects meeting effectiveness for on-site meetings Can include also minor effects: lunch time unavailability, lunch time “background noise” at 9:00 in the morning, etc… Guidelines Schedule meetings as far ahead as possible Explicitly plan for time zone issues Set up a hot-line during your business hours. Working in shifts affects the ability to find high quality local staff Formalize your processes Consider other communication methods: web sites, s, voice mail Positive aspect: ability to work around the clock

13 Pragmatische aanpak Long-distance relationships Regular face-to-face contact Talk to your major customers before outsourcing a key function overseas. Some customers may cancel their contracts if service is outsourced offshore. Guidelines Plan for on-site visits. Have people meet face-to-face. Off-shore team to visit you and your customers Your team to visit off-shore team Rule of fist: at least one visit per month Other tools: video-conferencing, etc. For external customers, provide a local neck to choke: Customer relationship managers

14 Pragmatische aanpak Costs of support Even if offshorings works, there still are costs involved to offshore work: Communication Traveling Collaboration Guidelines Telephone costs: Consider alternate tools: voice over IP (VoIP), instant messaging, and IP-based video conferencing solutions Build travel expenses into your budget Include the overall cost of outsourcing Multiple team, coordination efforts, process reengineering, efficiency loss, change management, relocation costs Don't be surprised by these expenses-anticipate them realistically. Fair estimates Monitor the costs There may be synergy Consider marginal costs

15 Pragmatische aanpak Control It feels as if you have less control, when a business function is outsourced? Impact on hiring? Continuity? Experience level? Staff turnover? Guidelines You can actually get more control: Importance of agreed upon operational measures Service level agreements Foresee penalties if necessary Financial penalties and rewards fair for both parties

16 Pragmatische aanpak Voorbeelden: I2 Technologies Dell Capital-One (US Bank) …

17 Besluit Geniet, maar drink met mate Doe het, Maar begin met kleine projecten Leer wat je kan offshore doen, en wat niet Doe een behoorlijke investeringsanalyse