IBM Global Services Offshoring Trends Arash Shahideh 1
IBM Global Services Offshoring Trends § Arash Shahideh 1 © 2003 IBM Corporation
IBM Global Services Offshore Trends in 2004 -2005 n n n Offshore becoming mainstream -- 25%+ growth India continues to dominate, but country diversification imminent New entrants, new competition New decision makers -- business buyers and consultants Big names, preferred vendors Most of the work is still project work NOT outsourcing Concerns about risk, distance and no “cookbook” Longer decision-making cycles; Increasing interest in other segments -- ITO, BPO, Network Tendency to build relationship and then leverage across services Way too much focus on rates Some backlash globally as a result of IT jobs flowing offshore 2 © 2003 IBM Corporation
IBM Global Services “Offshore” is becoming Mainstream Number of Enterprises Using Offshore Sourcing For The First Time Early adopters of sourcing programming in India include: • Financial service • High-Tech manufacturing Type A: Early Adopters 1995 to 2001 Global delivery moves to the main stream Type B: Pragmatists Largest segment of enterprise buyers comprise this category; thus, there will be a large volume of activity 2002 to 2003 3 All types of enterprise such as healthcare, retail and energy companies are piloting or outsourcing Type C: Laggards 2004 + © 2003 IBM Corporation
IBM Global Services Regions of Supply for Offshore IT Services Eastern Europe/ Baltic States Canada Russia 90% of enterprises source from here Ireland China Philippines Mexico India Nearshore g Easier travel g Cultural similarities g Time zone g Team integration South America Offshore: Longer-Term Prospects Current Priorities 4 g Lower costs g Round the clock g Resources g Quality © 2003 IBM Corporation
IBM Global Services A Simple Value Proposition…. § Lower costs – For example, UK based SAP consultants cost £ 600 and up, where SAP consultants in India cost $22 - $35 an hour – The savings in labor is enough to pay for the incremental overhead remote management incurs and still save 30% – 50% § Flexibility of Resources – India, China and the Phillipines supply 90% of the market – Other low cost geographies quickly gaining in popularity (Canada, South America, Ireland) § Quality/Stability of Service – High quality infrastructure – Highly educated staff § Time zone difference – Faster turnaround of tasks 5 © 2003 IBM Corporation
IBM Global Services … But a very complex execution Loss of communication richness Constructive Responses Loss of Collaboration Coordination breakdown Service architecture Cultural differences Managerial techniques Development methodology Loss of teamness Disruptive Issues Collaborative technologies Telecom infrastructure Team building 6 © 2003 IBM Corporation
IBM Global Services Evolutionary Stages in Offshore Sourcing Relationships Stage 4 Persistence of Services High Stage 3 Stage 2 Stage 1 On-site Contract Work g Delivery team on-site Low Simple On-site Project Team g Charged On-site/ Offshore Projects g Project management and client services in the UK; delivery team offshore Offshore Development Centers Transformational Outsourcing g Quasi- captive g Dedicated offshore facilities g Value g Committed commitment long-term g Processes revenue & technology g Typically infrastructure connected common to client site between by direct client and leased center telecom link hourly, maybe milestone fees g Risk shared between client and vendor Complexity of Service Delivery 7 Stage 5 Complex © 2003 IBM Corporation
IBM Global Services High level approach to off-shoring IBM can either consult on the approach and/or provide off-shore services 6 weeks 6 months Supplier Selection Scoping 2 -3 months Portfolio Assessment & Migration Strategy 1 -2 months Application Specific Migration Plans 1 -2 months Knowledge Transfer 1 month Parallel Perform On-going Support Application Cutover Transition IBM’s Story Fit with wider initiatives Transform retained organisation (IS and business) Change Leadership, Communications and Stakeholder Management 8 © 2003 IBM Corporation
IBM Global Services Remote Delivery Models Adopted by Our Clients 9 © 2003 IBM Corporation
IBM Global Services Delivery Models 10 © 2003 IBM Corporation
IBM Global Services Application Migration Criteria 11 © 2003 IBM Corporation
IBM Global Services Migration /Transition Process Overview Application skill level Contract Engagement Phase 1: Transition Planning Detailed transition planning Phase 2: Guided Perform First phase of knowledge transfer – Customer Team to mentor suppl. staff Transition Operation Phase 4: Parallel Perform Phase 3: Assisted Perform Second phase of knowledge transfer – suppl. staff to deliver 75% of support calls Assurance checkpoint for knowledge transfer - new team now ready support independently Phase 5: Application Cutover Application supported by in steady state Formal milestone for completion of knowledge transfer. Suppl. team is ready to take on project management of new services = Quality Gate/Review 12 © 2003 IBM Corporation
IBM Global Services Typical Application Support Structure at Steady State Client Site Global Delivery Center Business Help Desk (L 1) § Incident/Problem Manager - assigns PT to appropriate support queue § Owns the issue till it is closed Application Support Desk (L 2) § Functional consultants § Owns the PT till the fix is tested and approves the code. § Reassigns the PT to the L 1 queue for closure with the comments Technical Support Desk(L 3) § Tools (SDMS, PELICAN) § Quality Processes § WW SAP ICM Database § Tech Consultants, DBAs, Queue, Interface monitoring § 24 x 7 for sev 1 calls § emergency fix, unit testing 13 © 2003 IBM Corporation
IBM Global Services Production Maintenance Call Management § Flexible 24 x 7 support services based on severity levels § The teams are equipped with § Pagers and cellphones Customer PT Status Reports § Laptops to connect from home Business Help Desk Level 1 Support Updates PT Resolves data related problems & working with Customer personnel assign severity levels Problem Reporting database Controlled Access Updates PT § Central repository of all key contacts in the production support team § Roster charts § Backup contact details § Daily status update conference calls across all the support teams § Monthly reporting on performance based on the agreed SLA’s § Based on criticality (sev 1), hourly management calls on status Updates PT PR Onsite Team Level 2 Support On-Site Global Delivery Team Level 2 Support E-mail Telephone Cell phone Pagers Travel On-line chat e-Meeting Global Delivery Team Level 3, Emergency Fix Global Delivery Center 14 © 2003 IBM Corporation
IBM Global Services Key Performance Indicators : At Steady State 15 © 2003 IBM Corporation
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