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Assessing the Viability of Offshore
     Outsourcing for Telcos

    Cablevision’s Investigation into
 Offshore/Near-shore IT Engagements


                      Presented by:
                        John Blanco
         Vice President, Strategic Communications
Our Discussion for Today

⇒ An Introduction to Cablevision and its
 Corporate Information Systems group

⇒ Our Offshore Investigation Roadmap

⇒ Should You Go Offshore/Near-shore

⇒ Assessing Risks and Benefits

⇒ Final Thoughts

⇒ Q&A
(JOHN’S VIDEO INSERTED HERE)
Telcom Offshoring
A total media and telecommunications
              company
• More than 22,000 employees
• Service Offerings Provided:
   • Cable Television
   • Digital Satellite (Q4, 2003)
   • Entertainment and Sports Programming
   • News and Information
   • Internet Service Provider
   • Telephone Service Provider
   • Live Venues
   • Advertising
A solid customer base

• 3 million cable television customers in the
  New York Metropolitan Area
• More than 400,000 Digital Video subscribers
• More than 850,000 High-speed Data
  (Internet) customers
• More than 16,000 residential and commercial
  telephone customers

• $4 billion in total annual revenue, YE 2002
Corporate Information Systems
 (Responsible for all Cablevision IT Needs)
• Preeminent provider of state of the art, reliable,
  efficient Information Systems and Production
  Support Services for all Cablevision Businesses
• “Federated yet Centralized” Organizational
  Structure
      • Several business-focused groups led by Business
        Information Officers (BIOs) report to Company CIO
      • Each BIO commands dedicated technology staff
        aligned to each of Company’s several business units
Corporate IS supports…
• 150 business applications
  • Business-critical apps include:
     • DST Innovis (CableData)
     • Kenan Billing Systems
     • MetaSolv
     • Remedy
• 680 UNIX and Intel servers
• 120 Terabytes of Raw Data Storage
• More than 10,000 e-mail users
• 1,500 Network Components
A quick look back at 2002…

• Two major re-organizations/downsizings:
   • March, 2002
   • August, 2002
  Combined for 3,000 layoffs across company

• Total Cablevision Corporate IS Staff now:
  • 421 employees
Current IS Staff As Compared
                       to Years Past
      3 0 ,0 0 0
                      702                   913
      2 5,0 0 0
                                                                       421                     421
      2 0 ,0 0 0                          24,000
                     22,300                                         21,080                   21,080
FTE




      15,0 0 0
      10 ,0 0 0
        5,0 0 0
           -

                   2000                    2001                       2002                      2003
                                                        Year


                          Cablevision Staff*                          IS Staff**
          * Cablevision Staff represents all non-Corporate IS employees.

          ** IS Staff represents budgeted FTE’s for years indicated. Associated consultant
Reduction-in-Force Did Not Mean
        Reduction-in Work!
• Current economic and business trends
  require Cablevision to expand technology
  needs for customers

  • Customer Self-Provisioning
  • Digital Cable Offering (iO)
  • Optimum Online
Reduction-in-Force Did Not Mean
        Reduction-in Work!
• Corporate IS must keep pace internally
  with business unit’s strategic need for
  innovative Information Technology

  • Upgrade existing applications
  • New Application Rollouts
Let’s Not Forget Ongoing IT Support


       250,000                  231,569       221,664   221,664
       225,000        203,115
       200,000
       17 5 , 0 0 0
       15 0 , 0 0 0
 Qty




       12 5 , 0 0 0
       10 0 , 0 0 0
        75,000
        50,000
        25,000
              -
                      2000      2001          2002      2003

                                       Year

                             Help Desk Tickets
Let’s Not Forget Ongoing IT Support


       15 , 0 0 0              14,435        14,264   14,264
       12 , 5 0 0    11,000
       10 , 0 0 0
 Qty




        7,500
        5,000
        2,500
            -
                    2000      2001          2002      2003

                                     Year


                                 Desktops
Past Options Used to Handle the Workload
Option One: Handled by Cablevision’s Internal IS Staff
• Add project/activity to current workload
• Low cost to internal user
• Questionable timeline for completion
• Changing requirements during engagement
• Quality could be questionable

Option Two: Handled by traditional outsourcing company
• High cost to internal user
• Solid timeline established to guarantee completion
• Changing requirements during engagement possible, raising cost to complete

Option Three: Just Say No…
• Delay project until next fiscal year or do in place of one already scheduled
• Could impact the development of business-critical app
Consider a New Option
2003
                      Reduce IT Spending in face
                      of current economic climate
   Cost Savings/
   Containment                                             Focus
                      “Monetize” the Company’s
                              IT Assets


                           Gain IT Agility and
                              Scalability
                              Outsourcing
   Skills Shortage              Drivers                    Quality

                           Speed of Delivery



                        Accelerate the software
                     acquisition integration process
   Specialist
   Requirements                                        Time to Market
                          Hand off the “busy”
                          (low value-add) work
Consider a New Option
2003


   Cost Savings/
   Containment                                 Focus




                     Offshore/Near-shore
                         Engagement
   Skills Shortage                             Quality




   Specialist
   Requirements                            Time to Market
Our Offshore Investigation
        Roadmap
Cablevision Offshore/Near-shore Investigation Roadmap

                                                          Go/No Go?                                                     Go/No Go?
Activities
    • Fact-finding              • BIO Meeting(s)*                • Exec Meetings (CEO, etc.)   • Review potential
    • Set basic parameters      • EA Meeting                     • Develop RFI/RFP                vendor capabilities               • Create GDO-centric
    • Attend seminars           • CIO Briefing                     and determine               • Create vendor                         teams
    • Vendor talks*             • Business Planning                evaluation criteria            long/short lists                  • Establish Metrics
    • Expert talks*               Meeting                        • Tweak RFI with Experts      • Assess internal                    • Choose vendor/sign
    • Reference talks                                            • Discuss contract               process readiness                   contracts
    • Collect and assess                                           parameter w) Legal, HR) ,   • Assess staff
      sample templates                                           • Begin development of          readiness
                                                                   the GDO** concept           • Develop training
                                                                 •Share results of Pilot         curriculum
                                                                   Engagement process          • Site visits
1                                                                                                                                                          2

                                  Socialization                                                Operationalize
    Initial Analysis                  And                              Strategy                 Educate and                         Engage
                                Idea Sponsorship                                                  Prepare
• Offshore/Near-shore           • IT Pilot Project Feasibility   • Executive mandate           • All IS staff trained on
  White Paper                     White Paper developed            from CEO to proceed           improved Internal                  • Approved contracts with
• Identified group of IS          after interviews with BIOs     • RFI/RFP                       Processes to handle                  vendor and Cablevision
  “friendlies” championing      • IT pilot project chosen for    • Approved Strategy             engagement                         • Established GDO
  initiative to business unit     engagement                       Roadmap                     • Rollout of IS                      • Formalized documentation
  and IS staff                                                   • Published                     Offshore/Near-shore                  (SOWs, etc.)
                                                                   mission/goals of              Awareness Campaign                 • Release Pilot project
                                                                   proposed GDO
Results

                 Communication                                    Education                                 Relationship Mgt.

* Begin discussing potential savings areas
** Global Delivery Office concept
Cablevision Offshore/Near-shore Investigation Roadmap

                                                          Go/No Go?                                                     Go/No Go?
Activities
    • Fact-finding              • BIO Meeting(s)*                • Exec Meetings (CEO, etc.)   • Review potential
    • Set basic parameters      • EA Meeting                     • Develop RFI/RFP                vendor capabilities               • Create GDO-centric
    • Attend seminars           • CIO Briefing                     and determine               • Create vendor                         teams
    • Vendor talks*             • Business Planning                evaluation criteria            long/short lists                  • Establish Metrics
    • Expert talks*               Meeting                        • Tweak RFI with Experts      • Assess internal                    • Choose vendor/sign
    • Reference talks                                            • Discuss contract               process readiness                   contracts
    • Collect and assess                                           parameter w) Legal, HR) ,   • Assess staff
      sample templates                                           • Begin development of          readiness
                                                                   the GDO** concept           • Develop training
                                                                 •Share results of Pilot         curriculum
                                                                   Engagement process          • Site visits
1                                                                                                                                                          2

                                  Socialization                                                Operationalize
    Initial Analysis                  And                              Strategy                 Educate and                         Engage
                                Idea Sponsorship                                                  Prepare
• Offshore/Near-shore           • IT Pilot Project Feasibility   • Executive mandate           • All IS staff trained on
  White Paper                     White Paper developed            from CEO to proceed           improved Internal                  • Approved contracts with
• Identified group of IS          after interviews with BIOs     • RFI/RFP                       Processes to handle                  vendor and Cablevision
  “friendlies” championing      • IT pilot project chosen for    • Approved Strategy             engagement                         • Established GDO
  initiative to business unit     engagement                       Roadmap                     • Rollout of IS                      • Formalized documentation
  and IS staff                                                   • Published                     Offshore/Near-shore                  (SOWs, etc.)
                                                                   mission/goals of              Awareness Campaign                 • Release Pilot project
                                                                   proposed GDO
Results

                 Communication                                    Education                                 Relationship Mgt.

* Begin discussing potential savings areas
** Global Delivery Office concept
Initial Analysis (Fact Finding)
• 4-month process
  • September to December 2002
• More than 30 Offshore/Near-shore
   IT Vendors interviewed
• “Boot Camp” Meetings with Experts
  • Gartner, META, Giga
• Participation in IT Offshore User Group
  to share experiences
  • Merck
  • Avis
We interviewed the Leaders
      Vendor                                         Revenue
                                                        (Millions)

      Tata Consultancy Services (TCS)                    $698

      Wipro                                              $687
      Infosys                                            $464
      Covansys                                           $421
      HTMT, Inc.                                         $269
      Satyam                                             $261
      HCL Technologies                                   $205
      IBS Group (Luxoft) – Russia                        $200
      Syntel                                             $165
      Silverline                                         $155
      Cognizant                                          $137

                * Information provided by META Group, Inc., 2002
Principal Locations of Offshore/Near-shore
           Vendors Interviewed




      Offshore: India, Russia, Argentina, Brazil

      Near Shore: Canada, Mexico
Initial Analysis (Fact Finding)
• Offshore vendors asked to answer 41
  Questions about its engagement process
• Questions categorized by:
  • Business Strategy    • Resource Pool
  • Benefits             • Security
  • Process Management   • Location
  • Scope                • Start-up/Transition
  • Development Cycle    • End Case
  • Trends               • Support
• Offshore vendor “One-on-One” meetings
  provided additional insight
• Data published in Offshore/Near-shore
  IT Strategy White Paper
What We Learned…
No Surprise: Every Global IT
Provider Says They’re a “Perfect Fit”
• Offshore/Near-shore IT Providers cite growing
  Telecom client base:
       • Satyam (SONY, Cable and Wireless)
       • Cognizant (Nielson Media Research, CBS)
       • HTMT, Inc. (Time Warner, parent MSO)
       • TCS (Major MSO)
       • InfoSys (Verizon, Telenet)
• Others have vertical market familiarity with
  popular applications
       • PeopleSoft
       • SAP
       • Oracle
Most Offshore/Near-shore IT Providers
have strong development background

     Legacy Integration
  (Older, more static systems)

   Core Business Apps
  (Oracle Financials, HRMS)

  Maint./Modernization
  (Enhancements, Upgrades)


     New Development
  (Project or new Project
  Development)
        e-Business/Web
  (Java, Site Hosting)


         App Integration
  (APIs, middleware,
  customizations)
                                 0     5      10      15      20      25      30      35      40      45        50

                                     Percentage of IT Applications Cited for Offshore Development Outsourcing



      * Information provided by The Offshore Development Group Benchmark Report, 2002
Cost savings are evident…
       $100/hr.*
    (minimum rate)

                       $68.50/hr.
                     (current rate)               $45/hr.*
                                              (minimum rate )




    U.S. Senior      Corporate IS           Offshore Senior
    Programmer          Senior               Programmer
                     Programmer
                             * Information provided by A. T. Kearney, Inc., 2002
How Do You Determine Whether
Offshore/Near-shore Works for You?
• Gauge Your Organization’s Maturity to
  handle Offshore
   • Does your company make ongoing changes to project
     specifications and deliverables after kick-off?
   • Does your company follow process?
   • Does management need to be “hands-on” throughout
     project’s lifecycle?
   • Are supportive project managers in place to oversee
     offshore engagement?
How Do You Determine Whether
Offshore/Near-shore Works for You?
• Ready to perform the Due Diligence?
   • Offshore IT Providers will talk to you because
     they want your business
   • Put them on the spot
   • Ask for credentials and references
   • Probe their operations
            • What is the employee turnaround?
            • What is the average years of experience?
            • Do professionals work exclusively on your account?
   • Visit the Offshore Development Center when
    it’s time
            • See the working environment first hand
How Do You Determine Whether
Offshore/Near-shore Works for You
• Do you have the right projects for consideration?
   • Don’t off-load business-critical IT projects
       • Eliminate ones where a unique understanding is needed for
         application development
   • Consider non-business-critical, legacy projects
       • Sharply defined and specified
   • Develop a feasibility approach to gauge project viability

• Are you ready to handle the media?
   • Offshore/Near-shore IT engagements receiving more press
       • NY Daily News, Time, New York Times, CBS
       • Offshore/Near-shore proponents acknowledge situation but
         don’t promote a successful response
   • May be a tough sell both outside and internally
       • Why can’t IT staff be re-hired?
Challenges that can arise…
• Offshore/Near-shore is a Philosophical Change
   •Transition to an offshore model will cause some initial
    disruption to business
       • Business executives and sponsors must “buy-in”
         to concept
       • Internal IT customers must “adjust” to model
• The Communications Gap
   • Poor communication is fatal flaw in global IT engagements
   • Communication also crucial within IT organization itself
       • IT staff will see engagements as threat to their position
       • IT management must provide as much info as possible
       • Legal/Human Resources must beon board from the “get-go”
Challenges that can arise…
• Regional/Cultural Differences
   • Language issues must be recognized
       • Turn into a positive: forces more diligence to ensure
         requirements are correctly understood – on both sides
   • Cultural differences may be a larger issue
       • What is understood as a business action here may not be
         understood the same by your offshore counterpart
• Operational issues
   • Gaps in quality middle management offshore
       • Address issue immediately with your vendor
   • Rising salaries of Offshore IT resources
       • Use as a “bargaining chip” with the vendors to ensure
         rising costs still provide competitive advantage
   • Establishing a detailed Master Agreement
       • Negotiate everything – even possible changes to your
         business model
Weighing the Benefits…

• Ease for your IT organization to concentrate
  Business Critical Projects
• Long Term Cost Savings
• Added Emphasis on Quality
• Improved Time to Market
• Scalability
• Clear Communications Strategy and Reporting
• Well Defined Requirements and Deliverables
Keep in Mind…
• Successful engagements happen when an offshore
  IT provider is considered a seamless, transparent
  extension of your own IT organization
   • Looking at Offshore as another “body-shop” opportunity
     dooms it to failure
   • Active mutual management of the relationship is crucial
• Offshore/near-shore IT engagements are a long-term
  investment in money, time and resources
   • Initial “ramp-up” costs are involved with initial preparation
     by offshore IT vendor
   • It takes approximately 6 months to 2 years for Global IT
     engagements to get traction
Keep in Mind…
• Communicate, Communicate, Communicate!
  • Ensure all internal staff, senior executives, and
    business customers understand the strategy and benefits
  • Prepare Human Resources, Legal and PR teams for
    possible challenges
  • Establish strong metrics and communication tools with
    your Global IT vendors
Q &A

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Telcom Offshoring

  • 1. Assessing the Viability of Offshore Outsourcing for Telcos Cablevision’s Investigation into Offshore/Near-shore IT Engagements Presented by: John Blanco Vice President, Strategic Communications
  • 2. Our Discussion for Today ⇒ An Introduction to Cablevision and its Corporate Information Systems group ⇒ Our Offshore Investigation Roadmap ⇒ Should You Go Offshore/Near-shore ⇒ Assessing Risks and Benefits ⇒ Final Thoughts ⇒ Q&A
  • 5. A total media and telecommunications company • More than 22,000 employees • Service Offerings Provided: • Cable Television • Digital Satellite (Q4, 2003) • Entertainment and Sports Programming • News and Information • Internet Service Provider • Telephone Service Provider • Live Venues • Advertising
  • 6. A solid customer base • 3 million cable television customers in the New York Metropolitan Area • More than 400,000 Digital Video subscribers • More than 850,000 High-speed Data (Internet) customers • More than 16,000 residential and commercial telephone customers • $4 billion in total annual revenue, YE 2002
  • 7. Corporate Information Systems (Responsible for all Cablevision IT Needs) • Preeminent provider of state of the art, reliable, efficient Information Systems and Production Support Services for all Cablevision Businesses • “Federated yet Centralized” Organizational Structure • Several business-focused groups led by Business Information Officers (BIOs) report to Company CIO • Each BIO commands dedicated technology staff aligned to each of Company’s several business units
  • 8. Corporate IS supports… • 150 business applications • Business-critical apps include: • DST Innovis (CableData) • Kenan Billing Systems • MetaSolv • Remedy • 680 UNIX and Intel servers • 120 Terabytes of Raw Data Storage • More than 10,000 e-mail users • 1,500 Network Components
  • 9. A quick look back at 2002… • Two major re-organizations/downsizings: • March, 2002 • August, 2002 Combined for 3,000 layoffs across company • Total Cablevision Corporate IS Staff now: • 421 employees
  • 10. Current IS Staff As Compared to Years Past 3 0 ,0 0 0 702 913 2 5,0 0 0 421 421 2 0 ,0 0 0 24,000 22,300 21,080 21,080 FTE 15,0 0 0 10 ,0 0 0 5,0 0 0 - 2000 2001 2002 2003 Year Cablevision Staff* IS Staff** * Cablevision Staff represents all non-Corporate IS employees. ** IS Staff represents budgeted FTE’s for years indicated. Associated consultant
  • 11. Reduction-in-Force Did Not Mean Reduction-in Work! • Current economic and business trends require Cablevision to expand technology needs for customers • Customer Self-Provisioning • Digital Cable Offering (iO) • Optimum Online
  • 12. Reduction-in-Force Did Not Mean Reduction-in Work! • Corporate IS must keep pace internally with business unit’s strategic need for innovative Information Technology • Upgrade existing applications • New Application Rollouts
  • 13. Let’s Not Forget Ongoing IT Support 250,000 231,569 221,664 221,664 225,000 203,115 200,000 17 5 , 0 0 0 15 0 , 0 0 0 Qty 12 5 , 0 0 0 10 0 , 0 0 0 75,000 50,000 25,000 - 2000 2001 2002 2003 Year Help Desk Tickets
  • 14. Let’s Not Forget Ongoing IT Support 15 , 0 0 0 14,435 14,264 14,264 12 , 5 0 0 11,000 10 , 0 0 0 Qty 7,500 5,000 2,500 - 2000 2001 2002 2003 Year Desktops
  • 15. Past Options Used to Handle the Workload Option One: Handled by Cablevision’s Internal IS Staff • Add project/activity to current workload • Low cost to internal user • Questionable timeline for completion • Changing requirements during engagement • Quality could be questionable Option Two: Handled by traditional outsourcing company • High cost to internal user • Solid timeline established to guarantee completion • Changing requirements during engagement possible, raising cost to complete Option Three: Just Say No… • Delay project until next fiscal year or do in place of one already scheduled • Could impact the development of business-critical app
  • 16. Consider a New Option 2003 Reduce IT Spending in face of current economic climate Cost Savings/ Containment Focus “Monetize” the Company’s IT Assets Gain IT Agility and Scalability Outsourcing Skills Shortage Drivers Quality Speed of Delivery Accelerate the software acquisition integration process Specialist Requirements Time to Market Hand off the “busy” (low value-add) work
  • 17. Consider a New Option 2003 Cost Savings/ Containment Focus Offshore/Near-shore Engagement Skills Shortage Quality Specialist Requirements Time to Market
  • 19. Cablevision Offshore/Near-shore Investigation Roadmap Go/No Go? Go/No Go? Activities • Fact-finding • BIO Meeting(s)* • Exec Meetings (CEO, etc.) • Review potential • Set basic parameters • EA Meeting • Develop RFI/RFP vendor capabilities • Create GDO-centric • Attend seminars • CIO Briefing and determine • Create vendor teams • Vendor talks* • Business Planning evaluation criteria long/short lists • Establish Metrics • Expert talks* Meeting • Tweak RFI with Experts • Assess internal • Choose vendor/sign • Reference talks • Discuss contract process readiness contracts • Collect and assess parameter w) Legal, HR) , • Assess staff sample templates • Begin development of readiness the GDO** concept • Develop training •Share results of Pilot curriculum Engagement process • Site visits 1 2 Socialization Operationalize Initial Analysis And Strategy Educate and Engage Idea Sponsorship Prepare • Offshore/Near-shore • IT Pilot Project Feasibility • Executive mandate • All IS staff trained on White Paper White Paper developed from CEO to proceed improved Internal • Approved contracts with • Identified group of IS after interviews with BIOs • RFI/RFP Processes to handle vendor and Cablevision “friendlies” championing • IT pilot project chosen for • Approved Strategy engagement • Established GDO initiative to business unit engagement Roadmap • Rollout of IS • Formalized documentation and IS staff • Published Offshore/Near-shore (SOWs, etc.) mission/goals of Awareness Campaign • Release Pilot project proposed GDO Results Communication Education Relationship Mgt. * Begin discussing potential savings areas ** Global Delivery Office concept
  • 20. Cablevision Offshore/Near-shore Investigation Roadmap Go/No Go? Go/No Go? Activities • Fact-finding • BIO Meeting(s)* • Exec Meetings (CEO, etc.) • Review potential • Set basic parameters • EA Meeting • Develop RFI/RFP vendor capabilities • Create GDO-centric • Attend seminars • CIO Briefing and determine • Create vendor teams • Vendor talks* • Business Planning evaluation criteria long/short lists • Establish Metrics • Expert talks* Meeting • Tweak RFI with Experts • Assess internal • Choose vendor/sign • Reference talks • Discuss contract process readiness contracts • Collect and assess parameter w) Legal, HR) , • Assess staff sample templates • Begin development of readiness the GDO** concept • Develop training •Share results of Pilot curriculum Engagement process • Site visits 1 2 Socialization Operationalize Initial Analysis And Strategy Educate and Engage Idea Sponsorship Prepare • Offshore/Near-shore • IT Pilot Project Feasibility • Executive mandate • All IS staff trained on White Paper White Paper developed from CEO to proceed improved Internal • Approved contracts with • Identified group of IS after interviews with BIOs • RFI/RFP Processes to handle vendor and Cablevision “friendlies” championing • IT pilot project chosen for • Approved Strategy engagement • Established GDO initiative to business unit engagement Roadmap • Rollout of IS • Formalized documentation and IS staff • Published Offshore/Near-shore (SOWs, etc.) mission/goals of Awareness Campaign • Release Pilot project proposed GDO Results Communication Education Relationship Mgt. * Begin discussing potential savings areas ** Global Delivery Office concept
  • 21. Initial Analysis (Fact Finding) • 4-month process • September to December 2002 • More than 30 Offshore/Near-shore IT Vendors interviewed • “Boot Camp” Meetings with Experts • Gartner, META, Giga • Participation in IT Offshore User Group to share experiences • Merck • Avis
  • 22. We interviewed the Leaders Vendor Revenue (Millions) Tata Consultancy Services (TCS) $698 Wipro $687 Infosys $464 Covansys $421 HTMT, Inc. $269 Satyam $261 HCL Technologies $205 IBS Group (Luxoft) – Russia $200 Syntel $165 Silverline $155 Cognizant $137 * Information provided by META Group, Inc., 2002
  • 23. Principal Locations of Offshore/Near-shore Vendors Interviewed Offshore: India, Russia, Argentina, Brazil Near Shore: Canada, Mexico
  • 24. Initial Analysis (Fact Finding) • Offshore vendors asked to answer 41 Questions about its engagement process • Questions categorized by: • Business Strategy • Resource Pool • Benefits • Security • Process Management • Location • Scope • Start-up/Transition • Development Cycle • End Case • Trends • Support • Offshore vendor “One-on-One” meetings provided additional insight • Data published in Offshore/Near-shore IT Strategy White Paper
  • 26. No Surprise: Every Global IT Provider Says They’re a “Perfect Fit” • Offshore/Near-shore IT Providers cite growing Telecom client base: • Satyam (SONY, Cable and Wireless) • Cognizant (Nielson Media Research, CBS) • HTMT, Inc. (Time Warner, parent MSO) • TCS (Major MSO) • InfoSys (Verizon, Telenet) • Others have vertical market familiarity with popular applications • PeopleSoft • SAP • Oracle
  • 27. Most Offshore/Near-shore IT Providers have strong development background Legacy Integration (Older, more static systems) Core Business Apps (Oracle Financials, HRMS) Maint./Modernization (Enhancements, Upgrades) New Development (Project or new Project Development) e-Business/Web (Java, Site Hosting) App Integration (APIs, middleware, customizations) 0 5 10 15 20 25 30 35 40 45 50 Percentage of IT Applications Cited for Offshore Development Outsourcing * Information provided by The Offshore Development Group Benchmark Report, 2002
  • 28. Cost savings are evident… $100/hr.* (minimum rate) $68.50/hr. (current rate) $45/hr.* (minimum rate ) U.S. Senior Corporate IS Offshore Senior Programmer Senior Programmer Programmer * Information provided by A. T. Kearney, Inc., 2002
  • 29. How Do You Determine Whether Offshore/Near-shore Works for You? • Gauge Your Organization’s Maturity to handle Offshore • Does your company make ongoing changes to project specifications and deliverables after kick-off? • Does your company follow process? • Does management need to be “hands-on” throughout project’s lifecycle? • Are supportive project managers in place to oversee offshore engagement?
  • 30. How Do You Determine Whether Offshore/Near-shore Works for You? • Ready to perform the Due Diligence? • Offshore IT Providers will talk to you because they want your business • Put them on the spot • Ask for credentials and references • Probe their operations • What is the employee turnaround? • What is the average years of experience? • Do professionals work exclusively on your account? • Visit the Offshore Development Center when it’s time • See the working environment first hand
  • 31. How Do You Determine Whether Offshore/Near-shore Works for You • Do you have the right projects for consideration? • Don’t off-load business-critical IT projects • Eliminate ones where a unique understanding is needed for application development • Consider non-business-critical, legacy projects • Sharply defined and specified • Develop a feasibility approach to gauge project viability • Are you ready to handle the media? • Offshore/Near-shore IT engagements receiving more press • NY Daily News, Time, New York Times, CBS • Offshore/Near-shore proponents acknowledge situation but don’t promote a successful response • May be a tough sell both outside and internally • Why can’t IT staff be re-hired?
  • 32. Challenges that can arise… • Offshore/Near-shore is a Philosophical Change •Transition to an offshore model will cause some initial disruption to business • Business executives and sponsors must “buy-in” to concept • Internal IT customers must “adjust” to model • The Communications Gap • Poor communication is fatal flaw in global IT engagements • Communication also crucial within IT organization itself • IT staff will see engagements as threat to their position • IT management must provide as much info as possible • Legal/Human Resources must beon board from the “get-go”
  • 33. Challenges that can arise… • Regional/Cultural Differences • Language issues must be recognized • Turn into a positive: forces more diligence to ensure requirements are correctly understood – on both sides • Cultural differences may be a larger issue • What is understood as a business action here may not be understood the same by your offshore counterpart • Operational issues • Gaps in quality middle management offshore • Address issue immediately with your vendor • Rising salaries of Offshore IT resources • Use as a “bargaining chip” with the vendors to ensure rising costs still provide competitive advantage • Establishing a detailed Master Agreement • Negotiate everything – even possible changes to your business model
  • 34. Weighing the Benefits… • Ease for your IT organization to concentrate Business Critical Projects • Long Term Cost Savings • Added Emphasis on Quality • Improved Time to Market • Scalability • Clear Communications Strategy and Reporting • Well Defined Requirements and Deliverables
  • 35. Keep in Mind… • Successful engagements happen when an offshore IT provider is considered a seamless, transparent extension of your own IT organization • Looking at Offshore as another “body-shop” opportunity dooms it to failure • Active mutual management of the relationship is crucial • Offshore/near-shore IT engagements are a long-term investment in money, time and resources • Initial “ramp-up” costs are involved with initial preparation by offshore IT vendor • It takes approximately 6 months to 2 years for Global IT engagements to get traction
  • 36. Keep in Mind… • Communicate, Communicate, Communicate! • Ensure all internal staff, senior executives, and business customers understand the strategy and benefits • Prepare Human Resources, Legal and PR teams for possible challenges • Establish strong metrics and communication tools with your Global IT vendors
  • 37. Q &A