Offshoring to Create Business Value
Sanjiv Puri
Structure of Presentation
Evolution of Information Technology Outsourcing and Offshoring
Evolution of Information Technology
“Track” Business
Systems Department: Managing computers and hardware Dot-com bust
“Drive” Business
Rationalization of technology adaptation
Dot-com boom IT Dept:
Business Value
MIS Department:
Managing Accounting & Reporting Systems
Managing IT Projects outsourced to service providers
Outsourcing to offshore IT Service Providers
IT Dept becomes strategic division
Emergence of IT Service Providers
Offshore Captives set up
Business alignment of technology Proliferation of global business Internet Wave Crash in incubation period for new technologies
Advent of Enterprise Software
Globalization
Cost Reduction & Increased Efficiency Technology Case, Technical Engineers
Y 2000
Increased Business Value & Greater Effectiveness
Business Case, Business Stakeholders
Three Dimensions of Leverage
Global business leaders continuously look for ways to break into the “Transform” dimension to set new benchmarks in the industry and stay ahead of competition
Business performance
Business Impact
improvement
Operations improvement
Cost improvement
Rewards
Offshoring
“Moving business processes to a lower cost location, usually overseas”
Increasing Long-term Value with Offshore Services
Tactical Cost Driven Strategic Business Driven
Offshore Fulfillment
Integrated Offshore Services
Integrated Offshore Strategy
Factory Approach for IT
Best sourcing
Increased innovation Refined business
delivery Cost reduction for implementation services Increased flexibility by sourcing strategy
alternatives Shared risk for offshore challenge
Offshoring Benefits
Sustainable Cost Savings, especially on labor intensive activities Equal or even better quality and service levels
Access to readily available and highly skilled resources
Access to massive and growing pool of skills and capabilities – allows scalability, leveraging global talent pool Enables focus on core Night-Shift & Follow-the-Sun models impact Speed of Delivery Geographic Risk Mitigation
The REAL Economics of Offshoring
Number of Workers Millions,2000-2015
$1.45-$1.47
$1.00 0.45 0.47 0.67
0.33 $1 previously spent in US, now offshored to India… …delivers value to India.. …brings savings and returns to US… …creates new value from reemploying US Labor…
…and makes the global pie that much bigger
Source : McKinsey Global Institute
India is the preferred outsourcing destination
Great quality at a good price
On time and on budget Passion and commitment Technical skills Process strength
Three Types of Sourcing Relationships
Shared business problem / solution Incentive Payment Models
Transformation
Partner
Trusted Advisor Enhancement
Trusted client
Solution Provider
Problem Definer
Credible Source Efficiency Supplier
Valued Customer
Buyer
Commodity Transaction
Penalty Schemes
Source : Gartner
Critical Success Factors: Partnership
Transparency and Governance Cultural fit and values
Talent Management Processes
Knowledge of Industry
Process Knowledge
Offshore capabilities fit
Corporate/Financial stability
Offshore Lines of Service Penetration, Maturity and Potential
Source: Gartner Research
Case Studies
IT Infrastructure Support
Global HQ
Global standards, processes, and policies
ITC Infotech Global Delivery Center Bangalore
Support KPI Dashboard
Month : October KPI
SLA – P1 & P2 SLA SLA – P3, P4 & P5 Responsiveness RT Response Time
Remote Managed Services • 35,000 Desktops and Laptops • 1,200 Servers • Blackberry, Handhelds, PDA • Internal & External Mailing (Lotus Notes) • Corporate Portal Unit
Percentage Percentage Percentage
Target
95.00 90.00 95% within 15 minutes P1 P2 P3
Achieved
100.00 100.00 98.40 51 35 82
YTD 2006
100.00 100.00 99.35 40 33 59
AHT by Priority Average Handling Time Efficiency
Minutes
P4 P5
FTR First Time Resolution Percentage 95%
115 119
98.79
95 84
98.90
Sustained Value Creation Savings for Fortune 100 Company
GBP
Estimated Savings on Offshoring
5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Actual Billings
Estimated Savings
Cost Savings of 44% in 6 years
Enrich: TM&D Solution (Fortune 500 CPG Company)
Product engineering, management, implementation and roll-out for Trade Marketing and Distribution system Multi-country TM&D system rollout and product management
Speed to market (48 weeks – 30 weeks)
Estimated savings of 44% over 3 years
Innovation; Introduction of handhelds enhanced outlet & Sales Force productivity
Transform: e-enabling Rural India
World's most ambitious & unique eprocurement portal
Transforming 3.5 million rural Indian farmers’ lives across 31,000 villages Providing real-time local language transformational value Harvard Business School case study, case in C.K.Prahlad’s “Fortune at the Bottom of the Pyramid”
Inbound logistics Display & inspection Bagging & Weighing Outbound logistics
Winner of Development Gateway Award 2005
(Chosen from a group of 135 nominees worldwide for its most exemplary contribution in the field ICT for development purposes during the last 10 years)
Auction
Payment
Winner of World Business Award 2004
(ICC, UNDP and the Prince of Wales International Business Leaders Forum)
Summary
Leverage
offshoring to move from “Low Cost
– High Efficiency” to “High Value – High Effectiveness”
Business
alignment is a “must” to generate
maximum value from IT
IT
& Offshoring is no longer just a tool for
better operations, it is a driver for business transformation
Thank You