Fs Ict Noa Seminar - Js - 07.09
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Transcript of Fs Ict Noa Seminar - Js - 07.09
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Enabling Successful Offshoring
September 7th 2010
London
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Contents
1. Introduction
2. The Offshoring Paradigm
3. Impact From The Current Economic Climate
4. Barriers to Successful Offshoring
5. Critical Success Factors For Offshoring
6. Conclusion & Recommendations
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1.) Introduction
Services are being moved abroad increasingly by an outsourcer
Cap
tive
Ou
tsourced
OWNER
SHIP
LOCATIONOnshore Offshore
Outsourced Offshoring
Captive Offshoring
Outsourced Onshore
Captive Onshore
2008 2013
2008 2013
$3,000BN 3% $3,090BN
$664BN
18% $784BN
2008
$164BN
$225BN
37%
2013
2008
$182BN
$220BN
21%
2013
Outsourced offshoring is an integral partof our strategy, but I do think seriousconsideration have to be made to ensurequality
Customer Service Manager, IT serviceprovider
This is not about labour cost. If you donot do it you will not surviveMD, Bank
I do not see public sector organisationsmaking the cost saving without starting toconsider offshoringCIO, Central Government Organisation
Increasingly all companies must have anoffshoring and outsourcing strategyCIO, Telecom Vendor
We first embarked on outsourcing andoffshoring for cost reasons but we realisethat the benefit really lies in the additionalvalue and flexibility we are gettingCOO, Retail Chain
Outsourced offshoring is an integral partof our strategy, but I do think seriousconsideration have to be made to ensurequality
Customer Service Manager, IT service
provider
This is not about labour cost. If you donot do it you will not surviveMD, Bank
I do not see public sector organisationsmaking the cost saving without starting toconsider offshoringCIO, Central Government Organisation
Increasingly all companies must have anoffshoring and outsourcing strategyCIO, Telecom Vendor
We first embarked on outsourcing andoffshoring for cost reasons but we realisethat the benefit really lies in the additionalvalue and flexibility we are gettingCOO, Retail Chain
Sources: Business Week, 2006, Gartner, 2009 andFrost & Sullivan, 2010
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2.) The Offshoring Paradigm
Back to the Future: It is becoming all about costs again
Source: Frost & Sullivan, 2010
Key Drivers for Offshoring Over TimeKey Drivers for Offshoring Over Time
Reduce CostReduce Cost
Core BusinessCore Business
Access to SkillsAccess to Skills
Knowledge BaseKnowledge Base
Strength of Driver in 2005
Core BusinessCore Business
FlexibilityFlexibility
Reduce CostReduce Cost
Access to SkillsAccess to Skills
Strength of Driver in 2008
Reduce CostReduce Cost
FlexibilityFlexibility
CapacityCapacity
Access to SkillsAccess to Skills
Strength of Driver Beyond 2010
From Cost to Competency and back to Cost and Revenue
Drivers have been and are Cost, Revenue and Competency relatedDrivers have been and are Cost, Revenue and Competency related
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3.) Impact of the Current Economic Climate
End users expect more business value add but have no extra money to spend
Sources: Frost & Sullivan, 2010 and Computer Economics, 2010
Impact: HigherExpectations
Impact: HigherExpectations
Expect business value add Processes must have further cost and/or revenue benefits. Expect greater ability for close collaboration with offshoree and offshorers staff
Expect no change in service and quality levels
Expect business value add Processes must have further cost and/or revenue benefits. Expect greater ability for close collaboration with offshoree and offshorers staff
Expect no change in service and quality levels
4.1%
5.0%
4.0%
0.0% 0.0%0%
1%
2%
3%
4%
5%
6%
2006 2007 2008 2009 2010
IT Budget % Change: Previous YearIT Budget % Change: Previous Year
42%: Decrease spending
13%: Spend the same
45%: Increase spending
Spending per user decreased by 13.7% 2006/10
42%: Decrease spending
13%: Spend the same
45%: Increase spending
Spending per user decreased by 13.7% 2006/10
Computer Economics Survey, 2010Computer Economics Survey, 2010
StagnatingIT Budgets
DecreasedSpending
StagnatingIT Budgets
DecreasedSpending
Revenue generating whilecutting costs
Revenue generating whilecutting costs
CostCostDriverDriver Cost & FlexibilityCost & Flexibility FlexibilityFlexibility
Forced into it
Tier 2 countries
Forced into it
Tier 2 countries
Offshoring more processes Multi-sourcing
Offshoring more processes Multi-sourcing
Value forMoney:Cost and
Revenue
Value forMoney:Cost andRevenue
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4.) Barriers to Successful Offshoring
Successful offshoring is about people attention to culture, communication and change
Sources: Frost & Sullivan, 2010
Lack of Cultural AwarenessLack of Cultural Awareness
Key Barriers to Successful OffshoringKey Barriers to Successful Offshoring
Lack of Efficient CommunicationLack of Efficient Communication
Lack of Partnership MentalityLack of Partnership Mentality
Lack of Common ExpectationsLack of Common Expectations
Key Actions to Achieve Successful OffshoringKey Actions to Achieve Successful Offshoring
Prepare to Tackle Cultural DifferencesPrepare to Tackle Cultural Differences
Ensure Appropriate Structure, Communication Toolsand Processes
Ensure Appropriate Structure, Communication Toolsand Processes
Ensure Structure and Foundation for Collaborationand Several Visits to OffshorerEnsure Structure and Foundation for Collaborationand Several Visits to Offshorer
Ensure Common ExpectationsEnsure Involvement of Key Stakeholders
Ensure Common ExpectationsEnsure Involvement of Key Stakeholders
CASE STUDY: UK Service Provider
We had the expectation that as soon as we offshored, we would cut costs. It turned out to be a disaster, and quality really suffered.It has taken a lot of work to efficiently work with people half way around the world. We should have put a lot more effort into tackling, especially,cultural differences and communication from the beginning.We have now invested in video conferencing to enable closer collaboration between our UK and Indian staff, which has helped.We have reduced costs, but it has happened over time.
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5.) Critical Success Factors for Offshoring
By following these 10 steps organisations can successfully offshore
Checklist for Successful Offshoring
Identify and Analyse What to Outsource and Offshore
Ensure an Experienced Partner
Manage Change
Enable partnership Know the Key Stakeholders and Their Expectations
Manage Cultural Differences
Sign a Complete Contract and Involve Senior Management
Be Flexible Consider Alternative Approaches to Risk
Establish a Sustainable Relationship and Structure
By following thischecklist webelieve users are a
step closer toenablingsuccessfuloffshoring
Remember That Reaping the Full Benefits Take Time
1
2
4
5
6
7
8
9
10
Ensure a Common Goal and Be Specific About Benefits3
We have later realised,that the highest value wasthe partner approach thatallowed us access to bestpractices and knowledge.
Head of IT, CentralGovernment Department
We have later realised,that the highest value wasthe partner approach thatallowed us access to bestpractices and knowledge.
Head of IT, CentralGovernment Department
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6.) Conclusion & Recommendations
Remember that check points for end users are selling points for vendors
Offshoring increasesOffshoring increases Outsourcing IncreasesOutsourcing Increases Outsourced Offshoring IncreasesOutsourced Offshoring Increases
Offshoring is about Cost again, but there must be business value add- Cut Costs and Increase Revenue
Offshoring is about Cost again, but there must be business value add
- Cut Costs and Increase Revenue
Key Step To Successful OffshoringKey Step To Successful Offshoring
Systematically Choose Offshore ProcessesSystematically Choose Offshore Processes
11 Manage Cultural DifferencesManage Cultural Differences
66
Sign a Complete Contract & InvolveManagement
Sign a Complete Contract & InvolveManagement77
Be Flexible Alternative Approach to RiskBe Flexible Alternative Approach to Risk88
Establish Sustainable Relationships andStructure
Establish Sustainable Relationships andStructure99
Remember It Takes Time To Reap BenefitsRemember It Takes Time To Reap Benefits1010
Ensure an Experienced PartnerEnsure an Experienced Partner22
Ensure Common Goal and Specific BenefitsEnsure Common Goal and Specific Benefits33
Manage ChangeManage Change44
Enable Partnerships Involve StakeholdersEnable Partnerships Involve Stakeholders55
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If you have any queries, please do not hesitate to contact us
Jon Stephansen
Senior ConsultantICT Practice, Europe, Israel & Africa
Tel. +44 207 343 8336Mob. +44 787 216 6975
Fax +44 207 730 3343
E-mail: [email protected]
Sille Gavnholt Jygert
ConsultantICT Practice, Europe, Israel & Africa
Tel. +44 207 343 8312Mob. +44 777 190 2474
Fax +44 20 7730 3343
E-mail: [email protected]