Offshore outsourcing

1
Offshore outsourcing

• Vincent CAYEUX

2
Index

1. History
2. The worldwide market
3. In the World
4. In France
5. The main actors
6. Before going offshore the right questions to be
   answered
7. What?
8. Why?
9. Where?
10. How?
11. The Impacts for the companies
12. The Risks,
13. The Key success factors
14. The hidden costs
15. Savings

3
History

• The origin
• Mi-90 the ERPs
• Y2K bug
• After 2000The e-commerce
• The maturity (2001-2005)
• Software activity
• SW Maintenance
• SW development
• IT production
• IT administration outsourcing
• Data centers backup
• The processes
• The call centers
• The Business Process Outsourcing (BPO)

4
Offshore is going up the value chain
5
Worldwide market

• Intentions to use offshore services
• More than 50 of the big companies in the USA (
  5000 employees)
• More than 40 in Europe
• 12 to 15 KMUSD in 2005 (2,8 of the IT services
  in the World)
• USA 80 of the offshore World services demand
• UK 70 of the European demand
• India 80 of the total offshore services
  revenues
• The most important fields of activities are
• The SW activities (maintenance, development)
• The BPO
• The IT infrastructure outsourcing

6
The market in France

• France - 2 of the total amount of IT services
• Growth in France 20 per year

7
French characteristic

• A majority of Time and material contracts
• Rigid Social protective laws
• Importance of the language and culture
• Preference of Nearshore (North Africa/Eastern
  Europe)
• Local IT services leaders have developed
   Factories  in regional towns
• Unitary price reduction
• split of the resources between several
  projects/costumers
• industrialization of processes
• -gt Effective cost reduction and productivity
  improvement

8
The countries
(80 to 90)
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The leading countries
10
Suppliers competition
11

• Before going offshore, the right questions
• to be answered What? Why? Where? How?

12
What?

• SW development?
• Which SW?
• Which technology?
• SW maintenance?
• TMA?
• SW Integration?
• IT infrastructure?
• Business Process?

13
Why?

• Reduce the costs (20-40, 19 in average)
• Increase the flexibility
• Reduce the delivery time
• Improve the service availability (24h/24, 7d/7)
• Improve the quality (CMM,)
• Look for specific talents
• Increase the production capacity
• Global sourcing approach (more suppliers in more
  countries)

14
Why?
15
Where?
16
Where?

• Offshore
• India (lt-gt USA, UK)
• Pro very experienced (CMM, strong processes,
  references), large capacity
• Cons cultural and language differences, time
  zone, distance
• Canada (lt-gt USA)
• China (lt-gt Japan)
• Nearshore
• Morocco, Tunisia, Senegal, Mauritius
• Pro French speaking, same time zone, close, low
  prices
• Cons small qualified population, less
  experienced
• Tcheky, Slovakia
• Pro cost, Time zone, distance
• Cons less experience, language
• Spain

17
How?

• Pure Offshore
• On-site / offshore
• Pivotal provider
• Offshore ressources

18
How? Front office/Back office
Client
Front Office Analyze the clients
requirements Write the detailed
specifications Transfer the spec to the
B.O Follow the realization Validate the
developments Deliver to the Client
Back Office Perform the developments Update
the documentation Test Deliver to the Front Office
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Impacts

• Organization (OPMO, external advice)
• Processes (Industrialization)
• HR aspects preparation
• Jobs losses, jobs evolution-gt heavy training
• External/Internal image
• External/Internal communication
• customers, employees, shareholders, partners
• Costs control
• Hidden costs

20
Key factors for success

• The pre-requisite
• Process industrialization
• Local outsourcing experimentation
• International experience
• Telecom and IT infrastructure preparation
• Clearly define the targets
• Why and what offshoring?
• Quantify the expected gains (cost, quality,
  flexibility, skills)
• Have a strong support from the management
• Work hard the How? And Where? aspects
• Consider the transfer phase as an investment
• Start small and grow up smoothly in projects size
  and complexity
• Perform a contingency planning
• Build specific indicators for management dashboard

21
Risks

• Hidden costs
• Communication problem
• Cultural and language misunderstanding
• Distance, Time zone
• Loss of productivity
• Telecommunication, infrastructure
• Country risk
• Geopolitics (Political or Economic instability,
  War, Natural risks)
• Laws
• Taxes
• Data security
• Intellectual property risk
• Image
• Change management
• HR risks
• Contractual issues
• Loss of control of the outsourced activity
• Loss of competence

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Hidden costs

• Due diligence
• Contract
• Transfer costs
• Project management
• Loss of productivity
• Real Menxdays costs
• Telecommunication,
• Travels
• Telecom and IT infrastructure
• Data security
• External Advices
• Reorganization,
• Process review,
• Training
• Job losses
• Contractual Reversibility clause

23
Savings
Average of savings 19