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OSU BA 471 - IT Outsourcing

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IT OutsourcingTopics CoveredDefinitionsOnshore OutsourcingNearshore OutsourcingOffshore OutsourcingMinimizing RiskMajor Players: IndiaMajor Players: PhilippinesMajor Players: RussiaMajor Players: ChinaMajor Players: CanadaMajor Players: MexicoMajor Players: IrelandLeader of the PackGrowing Popularity of OutsourcingContinued…Slide 18Why So Big?Which Jobs Can Be Outsourced?Why Companies Outsource:Which Sectors are Being Outsourced?Trends in OutsourcingProcess For OutsourcingProcess Cont.What is the Future?SourcesIT OutsourcingKyle Wilson Andy Vu Ian McCulley BA4711/13/06Topics CoveredDefinitions and types of outsourcing.Pros & Cons.Which countries are the major players?How big is this outsourcing and why?Is it growing?Which jobs are being outsourced?Companies & process involved and why?Trends and future outlook.DefinitionsOutsourcing: an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Onshore: (also called domestic outsourcing) is the obtaining of services from outside a company but within the same countryNearshore: is the practice of getting work done or services performed in neighboring countries. Offshore: the exporting of IT-related work from the home country to other countries. Offshore simply means "any country other than your own. BPO: Business Process Outsourcing, the long-term contracting out of non-core business processes to an outside provider to help achieve increased shareholder value.(http://searchcio.techtarget.com/)Onshore OutsourcingProsTravel and communications are easy and less expensive Same country and culture Speak the same language Small differences in time zonesLess risk of security issuesConsNot as large of talent poolNot as many optionsPrice may be much higher because of same currency and standard of livingNearshore OutsourcingProsTravel and communications are easier and not very expensive Likely to be at least some commonalities between the cultures More likely to speak the same language Similar time zonesConsPossibility of higher pricesSecurity risksLoss of domestic jobs (for the country outsourcing)Offshore OutsourcingProsLower labor costs or tax savingsCompanies able to be more price competitive A wide variety of outsourcing companies to choose fromConsHome-grown IT talent might dry upLanguage barriers/cultural differencesSecurity problemsDifferent time zonesLoss of domestic jobs (for the country outsourcing)Minimizing RiskISO 9000The International Organization for Standards (ISO 9000 series). International set of documents on quality assurance. Written by members of a worldwide delegation. SEI-CMM ModelSEI (Software Engineering Institute) established in 1984. The CMM (Capability Maturity Model) of SEI is a framework that describes the key elements of an effective software development process. CMM - composed of 5 maturity levels. Each level facilitates a layer in the foundation for continuous process improvement. Achieving each level of the model institutionalizes a different component in the software process, resulting in an overall increase in the process capability of the organization. Three out of every four SEI-CMM companies that have reached level5 worldwide are located in India. (http://www.offshorexperts.com/index.cfm/fa/articles.ISO9000-and-SEI-CMM-processes-and-standards-for-outsourcing)Major Players: IndiaLabor Pool: India has many prestigious technical universities, but the Indian Institute of Technology stands apart as one of the world's best. India produces 75,000 IT graduates and 2 million English-speaking graduates annually. Costs: Labor costs have crept upward over the years but have been offset by falling telecom rates. Typical salaries range from $5,000 to $12,000 for technical staff, while back-office salaries range from $3,500 to $7,500. Government: Outsourcing is so ingrained in the fabric here that the Indian government has a national minister specifically for IT. The government favors IT foreign ownership and imposes no export taxes. Infrastructure: With redundant telecom and utility infrastructure, there is very good reliability within India's special IT parks. Reliability can be spotty outside the parks or in more remote areas. Expertise: Application development, maintenance, call centers, financial processing. Experts see India becoming a hotbed for more critical analytical jobs. Major U.S. Customers: Citigroup, GE Capital and American Express have a very large presence and have set up their own centers here.Major Players: PhilippinesLabor Pool: The Philippines turns out 380,000 graduates annually, but only 15,000 of them are focused on technology. The country has cultural affinities with the U.S., is well-versed in U.S. accounting and customer service standards and has low employee turnover. Costs: Lower labor costs than India; technical salaries range from $5,000 to $10,000 annually and back office from $3,000 to $8,000. Government: Government exempts companies from export taxes, fees, dues and licenses if they open in one of the country's IT parks. Government's task force charged with development of IT and business process outsourcing (BPO) services.Infrastructure: IT parks that have sprung up over the past 13 years fuel the export industry. Abandoned U.S. military bases left behind dependable telecom infrastructure. Expertise: Accounting, finance, call centers, animation, human resources. Major U.S. Customers: Procter & Gamble, American International Group, Citigroup.Major Players: RussiaLabor Pool: The good news: Russia can claim the third largest population of engineers and scientists per capita. The bad news: Not many of them speak English. Costs: IT salaries range from $6,000 to $10,000. The country hasn't yet developed back-office competence. Telecom infrastructure costs are higher than average. Government: Government is erratic and, for now, sticking by old tax laws and structures that don't benefit business. But a treaty with the U.S. could change things down the road.Infrastructure: Infrastructure quality and quantity decrease when outside of Russia's few IT parks. Expertise: Web design, complex software development, aerospace engineering. Major U.S. Customer: Boeing.Major Players: ChinaLabor Pool: China's technical schools


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OSU BA 471 - IT Outsourcing

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