1. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Dr. Richard Sykes Chairman, Intellects Outsourcing & Offshore Group Sole Partner, Dr Richard Sykes BCS Offices, Covent Garden London, 5 th September 2006 BCS Globalisation Masterclasses Global Services: Moving to a level playing field Dr Richard Sykes Mark Kobayashi-Hillary Board Director, National Outsourcing Association

2. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Outsourcing/Offshoring Post-Millennium – Rapidly Changing Contexts The New Globalisation Consumerisation of the ICT offer Emergence of the Services Model Emergence of Loosely Coupled Technologies

3. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved A Decades Revolution to 2005 Calling in the New World to Redress the Balance of the Old [Canning] Four new Indian global players in the $1-2.5 bn band: revenue growth 25-40%+ p.a. (TCS, Infosys, Wipro, Satyam) Combined with relatively open global markets, involvement of the Diaspora & a determined focus on quality & technical professionalism Broad service mix: Application development & management; package implementation; systems integration; consulting; BPO; KPO; infrastructure management - and onsite/offshore blending Source – Anthony Miller Arete Research, @ 2006 Regent Conference

4. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Entrepreneurialism and Arbitrage The Millennial turn has seen offshore, near shore, smart shore, blended shore develop as a norm Euro-American majors globalising into India. Top 8 have >70,000 delivery staff in India Top 6 Indian majors forecast to employ > 50,000 staff in Europe by 2008 Professional labour arbitrage! TCS, Infosys, Wipro 2005 EBIT* margins of 25- 30%: Tier 2 players ~20% McKinsey (2005/6) forecast a $380bn ITO/BPO opportunity by 2010: 35% offshored, and India potentially placed to maintain its #1 position *Source – Anthony Miller Arete Research, @ 2006 Regent Conference; McKinseys

5. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Forecast GDP in $ Trillion Source – McKinsey Estimates. Courtesy of Regent Associates The Fundamental Market Shift - Geographic GDP 2010-2050

6. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved But the whole story? Calling in the Consumers World to Redress the Balance of Old Enterprise IT [With apologies to Canning] 1995 onward - new companies move to create & exploit the consumer opportunity New paradigms: The user shapes the game, sets the pace A kit sale ?(fancy mobile phones!) but really a service sale (& whoever heard of outsourcing?) The Internet as a significant delivery vehicle Advertising as the new earnings stream

7. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved A Decades Triple Revolution to 2005 The Second Globalisation Software and services follow hardware Consumerisation An even more radical breaking of the industry mould Rise of Application Professionalism Rapid expansion of practice boundaries

8. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved The Ever Widening Spectrum of Contemporary Professionalism Acknowledgement to CSC Leading Edge Forum

9. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Computer Services and Information/Data Services Exports Imports Trade Surplus 2003 £4.3 bn £1.8 bn £2.5 bn 2004 – 1H £2.3 bn £1.1 bn £1.2 bn Business Services – Professionally Rich & Technology Rich Exports Imports Trade Surplus 2003 £31.7 bn £14.1 bn £17.6 bn 2004 – 1H £15.9 bn £7.0 bn £8.9 bn What is the performance of the UK industry?

10. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved World trade in services (~$1.8 trillion in 2003) is only ~ 1/5 th of trade in manufacturing Only 10% of services enter international trade vs. 50% in manufacturing Top two in exports of computer services are Ireland and India: in business services are US and UK (who are both in trade surplus in services – both in trade deficit in manufacturing) Courtesy of Prof. Mari Sako, SAID Business School, Oxford. Global Trade in Services

11. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Within the M25 is found the highest concentration of non-national professionals in the world The City (Banking, Financial Services, Insurance) (2004): Trade surplus $25.3 bn; Employs > 1.0 million; Financial Services account for ~5.5.% GDP, rising to ~ 9% GDP when associated business services are included; The Creative Industries (Media, Design, Education) (2001): Revenues ~£112.5 bn; Employs ~1.3 million; Exports ~£10.3 bn; accounts for >5% GDP Major elaborators of ICT capabilities And not only Business Services………

12. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved The Five Virtualisations/Architectures Virtualisation of computing power Virtualisation of business process management (BPM) Systems/Services-Oriented Architecture (SOA) Virtualisation of the network (Over IP) Architecture for Software as a Service/Web Services From the tightly coupled to the loosely coupled Foundations for the Next Decades Revolution?

13. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved From Tightly Coupled to Loosely Coupled Classic Outsourcing models are based on Enterprise IT/ Facilities Management model (tightly coupled) Emergent shift to the Sourcing model (loosely coupled) The Assembly of Service/Value Chains Exploitation of global networks & the Internet potentially enables global service sourcing strategies BUT Geography only one factor in an increasingly rich decision mix ( fit for purpose, fit for use test) Business Assurance of Service/Value Chains a major new challenge

14. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved The Global Delivery Model: Direction Setters in this Wider Context - 1 The Services Model Technology rich/professionally rich Focus on technology productivity? Focus on application effectiveness? Innovation & development Focus on technology productivity? Focus on application effectiveness?

15. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Volume IT Organisations & IT Services firms Commoditised Services – Labour intensive – One-to-one High Human/Technology Ratio High Technology/Human Ratio Transactional Cost – Capital intensive – One-to-many Maturity brings potential for commoditisation Acknowledgement to CSC Leading Edge Forum The Global Delivery Model: Direction Setters in this Wider Context - 2

16. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Best of Breed/Competitively Fit for Purpose Focus in making the technology sweat the assets (high utilisation/reliability/flexibility): commoditised infrastructural services commoditised transactional services Vs. Focus in delivering high application specificity: Specialty end-application-aligned services Highly tuned to end-market requirements The Global Delivery Model: Direction Setters in this Wider Context - 3

17. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved And neer the twain shall (sustainably) meet! The Global Delivery Model: Direction Setters in this Wider Context - 3

18. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved The New Globalisation Model: Four Fundamentals to Address Clarity of business objectives in a genuinely global market place [what makes for sustainable edge ?] Back office, infrastructure as commoditised services [from outsourcing to sourcing] Sharp end/front end requires partners with deep experience of the business [from domain knowledge to end-market intimacy] Ascendance of relationship structuring over adversarial procurement

19. www.dr.richard-sykes.com Copyright © 2006 Dr Richard Sykes and all rights reserved Dr Richard Sykes www.dr.richard-sykes.com +44 (0)20 7917 1715 (office) +44 (0)20 7354 0848 (fax) r.j.sykes@btinternet.com Global Services: Moving to a level playing field Thank You! Book to be published by the BCS in Feb 2007 Mark Kobayashi-Hillary mail@markhillary.com www.markhillary.com 07952 267 074