Innovative Deal Structures in Global Sourcing

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Innovative Deal Structures in Global Sourcing

• David TapperResearch Director IT Outsourcing,
  Utility and Offshore Services

February 16, 2006
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Agenda

• Optimal Business Performance
• Role of Global Sourcing
• Key Customer Requirements and Expectations
• Global Sourcing as Disruption
• Key Market Lessons and Messages
• Essential Guidance

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Customer Need for Optimal Business Performance
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Aligning with Customer Need
Customer Priorities for Global Sourcing
Note Data presented is from a 2005 IDC survey of
U.S. buyers and users of offshore services (BPO
and IT) N 1062
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Optimizing Customer Investments
27 of savings will be re-invested in offshore
Re-Investment Strategy From Cost Savings
Expected Cost Savings Using Offshore
Note Data presented is from a 2005 IDC survey of
U.S. buyers and users of offshore services (BPO
and IT) N 1062
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Business Knowledge Requirement
84 rank having vertical expertise from important
to critically important

• Customer Requirements
• Industry expertise needed to support customer
  business
• Support regulatory and compliance needs

Note Data presented is from a 2005 IDC survey of
U.S. buyers and users of offshore services (BPO
and IT) N 1062
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IT and Business Process Service Opportunities
Applications
Emerging Technologies
Top 5
Business Processes
Current Usage
Future Usage

• 2005 Offshore Services Survey of U.S. buyers and
  users of offshore services IT Services N 764
  BPO N298

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Need for a Global Footprint Ensuring Delivery
Requirements
Global Sourcing Provider Model Preference

• 77 of respondents prefer procuring offshore
  services discretely
• 63 of respondents prefer providers with local
  capabilities

• Customer requirements
• Procurement process centered around discrete
  usage
• Need providers with strong local capabilities

Note Data presented is from a 2005 IDC survey of
U.S. buyers and users of offshore services (BPO
and IT) N 1062
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Emergence of Disruptive Global Sourcing
Delivery Options

• Delivering large-scale IT outsourcing on a
  cost-effective, global delivery model
• Integration of global sourcing (offshore) with a
  hosted onshore infrastructure (e.g. data
  centers) enables offshore providers to offer
  cost-effective, scalable service options
• Leverage partnerships for hosting
• Enabling new service options SaaS
  (Software-as-a-Service)
• Providing systems integration via global sourcing
  to SaaS providers to support customer need in
  accessing new service models
• Partnering with SaaS providers
• Supporting transformation
• Leveraging global sourcing as an offshore
  factory to building new technology environments
  (e.g. SOA, grid computing) and service models
  (e.g. utility computing, SaaS)

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Developing Road Maps for Enabling, Measuring and
Managing Transformation
Technology Delivery Infrastructure
Service Relationship
Sourcing Location
Business Model
Objective
Delivery Location
Onshore
Insourced
Maintain existing architecture
Offshore
Application or Business Process
Traditional
Managed service
Offshore
Outsourced
Customer site
Utility- based
Managed private utility
Offshore
Outsourced
Transform to on-demand
Hosted
Public utility
Onshore
Insourced
SaaS
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Key Market Lessons and Messages

• Business knowledge Have a deep knowledge of
  customers business requirements and industry
  factors
• Clarity in responsibilities Increased
  complexity of engagements and shift of
  management requires increased clarity of
  responsibility
• Hybrid delivery Increased complexity of
  engagements and shift of management also
  requires hybrid delivery
• Not just cost Need to show value and quality to
  increase opportunity
• Evolutionary road maps Supporting customer
  transformation requires detailed road maps

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Essential Guidance

• Center service offerings on core industry
  capabilities
• Invest in a global footprint that supports
  hybrid delivery, particularly for
  outsourced/managed service opportunities
• Focus on quality that enables key business
  benefits ranging from entering new markets,
  improving product and service quality, accessing
  innovative capabilities
• Provide integrated transformational
  capabilities across IT and business processes
  that enable shift to new technologies and service
  delivery models
• Leverage new service delivery models to support
  need for optimal service delivery and alignment
  with business requirements

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Questions?
Please send email to dtapper_at_idc.com