Success through Offshore Outsourcing Kartik Jayaraman Director Enterprise Relationships (Strategic Accounts)
Offshore Outsourcing Today Outsourcing Viewed as Strategic Value Target set Higher Multi-year View of Partners Multiple Partners Management Framework Required Decision Making has Moved Higher Maturity Level of Companies Political Scrutiny
Why Offshore Outsourcing? Strategic Nature of Initiative Tactical Buyer Buyer Industry Industry Competitiveness Cost Cost Savings Savings Cost Cost Savings Savings Fixed Fixed vs. vs. Variable Variable Expenses Expenses Quick Quick ramp-up ramp-up and and down down Increase Increase Competitiveness Productivity // Turnaround Time Time Quality Quality & Process Process Improvement Risk Risk Sharing Sharing Accountability Discipline Discipline Largely Largely Cost Cost Savings Savings Low Offshore Outsourcing Industry Maturity Increasing
Evolution Trends Outsourcing viewed as strategic Decision making has moved higher Value target set higher Multi-year view of partners Management framework required Today and beyond ebusiness Wireless Applications Business Process Outsourcing Information Architecture and Design Application Maintenance Outsourcing Call Centers ODC Industry-Specific Applications/ Services 1980 s 1990 s Y2K Application Development Operations Support/ Outsourcing Programming Application Migrations Implementation Services
Evolution of the Syntel-Client Partnership Each of the partnership arrangement types may be considered as phases in the evolution of our relationship As scale of relationship and operations grow over time, these commercial arrangements can be brought into play Provides Client and Syntel with a minimal risk approach while at the same time creates the opportunity for significant value creation Client out-tasks applications management functions for multiple applications across multiple development centers to Syntel. Client out-tasks applications management functions for a set of discrete applications within a particular development center region to Syntel. Client out-tasks applications management functions for multiple applications representing business/functional lines across multiple development centers to Syntel (e.g., all of Travel, Card Member Services, Merchant Services, etc.) Client out-tasks applications management functions for the enterprise (strategic and major provider) to Syntel. Also at this stage, both Client and Syntel jointly offer the applications management Service to their extended customers. The applications management Center of Excellence has evolved into a new company that has an independent goto-market strategy with the ability to attract G1000 customers. Inception Service Contract Strategic Alliance Equity Partnership Joint Venture NewCo
Ingredients for Success? Offshoring Model Successful Offshore Outsourcing! Partner Selection Governance
Offshore Outsourcing Models Model Pros Cons Captive - Build & Operate Subcontract - Single Provider Subcontract - Multiple Providers Security / IP Protection Alignment Lower cost (?) Low mgmt. overhead Low cycle time Cultural alignment (with time) Low service risk Low rates (?) High depth & breadth Remote management Slow to change Complacency Service quality Complacency High rates (?) Limited depth & breadth High service risk High mgmt. overhead Increased cycle time Poorer cultural alignment Adoption Meter
Offshore Outsourcing Models Model Pros Cons Build & Operate Subcontract - Single Provider Subcontract - Multiple Providers Security / IP Protection Alignment Lower cost (?) Low mgmt. overhead Low cycle time Cultural alignment (with time) Low service risk Low rates (?) High depth & breadth Remote management Slow to change Complacency Service quality Complacency High rates (?) Limited depth & breadth High service risk High mgmt. overhead Increased cycle time Poorer cultural alignment Adoption Meter Best of of both worlds by by limiting number of of partners (e.g. (e.g. 2-4) 2-4)
Delivery Model Comparisons Aggressive cost structure (30-50% savings) Track record of offshore delivery to Global 2000 Access to global talent - offshore resource pool Speed of service delivery & scalability High quality - SEI CMM and ISO 9001 Transparent offshore delivery Strong R&D function, staff rotation to build new tech skills Large resource base and talent in the US Large pool of Engagement & Project Managers in the US Local decision making & delivery accountability Low management overhead to customers Customer proximity & US development centers Key onsite project staff available long term Top management in the US- issue escalation No culture Issues - local company/local people US company - governed by US laws US-based Global System Integrators Conventional Offshore Vendor Global Delivery
Partner Selection Criticality to Buyer Increasing Skill Skill Base Base Partner Partner Process Maturity & Methodologies External References Financial Stability Size Size US US Presence Cultural Alignment Program Management Capabilities Low Buyer Buyer Comfort Scale of Offshore Outsourcing Initiative Increasing Complexity High
Governance - How to Ensure Success? Strategic/Tactical Partnership Partnership Mgmt. Mgmt. commitment commitment Offshoring Offshoring roadmap roadmap Incentive Incentive to to use use offshore offshore Risk-Reward Risk-Reward Establish Establish PMO PMO Goal Goal setting setting Communication Communication plan plan Planning Planning // Review Review --Info. Info. security security --Software Software license license Senior Senior Mgmt. Mgmt. program program review review Best Best practices practices sharing sharing // workshop workshop Buyer Buyer --> --> CMM CMM 5 level level Resource Resource planning planning and and availability availability Disaster Disaster mgmt. mgmt. plan plan Operational Strong Strong internal internal IT IT team team Internal Internal communication communication Clear Clear scope scope Metrics Metrics // SLA SLA Standards Standards & Procedures Procedures Short-term Short-term planning planning Cultural Cultural events events Software Software license license planning planning Project Project metrics metrics Significant Significant onsite onsite presence presence Push Push back back Cultural Cultural alignment alignment Best Best resources resources Documentation Documentation Buyer Joint Provider
Results What to Expect High High Service Delivery Satisfaction Scale Low Immediate Short-term Medium-term Long-term Low Cost Savings Process Maturity Quality Risk
Best Practices
CSFs of Global Sourcing Model Internal Readiness Governance Models Performance Management Internal Change Management
Best Practices Stage I Define Critical Success Factors Internal change management program Communication plan Risk management plan Pre-defined metrics Knowledge retention Value tracking Monthly scorecards
Best Practices Stage I Conduct readiness evaluation Develop messaging plan Define inside promotion strategy Standardize across company Process Reporting Metrics
Internal Readiness Adoption of sourcing strategy Ability to manage service levels Maturity to accept the cultural mix Confidence in the model Conflict in management styles Internal Readiness
Range of Challenges Fear of the Unknown Different models New method of service delivery Internal people issues Remote resources Different cultures Various contract types How and what to manage How and what to measure Determining how much to outsource The single largest barrier facing organizations as they pursue outsourcing is the challenge of managing internal organizational change.
Behavioral Change Management: Why? How Holding On That will never work here. Scenario: 5 Blind Men and an Elephant Syndrome Even well-intentioned messaging creates confusion Letting Go How might it work here? Downside of not Implementing Behavioral Change Management: Delays in your projects Productivity loss associated with low employee morale Excessive turnover and loss of valued employees Higher costs to implement the change Moving Forward How do we get this going?
Internal Customer Dynamics Change Implement sourcing management Interface between business and technology groups Manage partner relationship Preserve subject matter expertise Establish core domain knowledge index and tracking tools Redefine tasks and responsibilities Change in internal customer dynamics 2003 Syntel, Inc.
Best Practices Stage II Balance Risk-Reward Knowledge Index Dependency assessment Pushing the offshore envelope Redefining roles and responsibilities Alignment of partner and business goals
Resourcing Strategy Office Operating Operating Committee Committee Resource Resource Strategy Strategy Team Team Technical Technical Standards Standards Partner Sourcing Multi-partner Coordination Service Evaluation Community of Interest
Best Practices Stage III Leveraging your partners CMM advancement Technology R/D Solution alternatives Proof of concepts X-Partner Comparison Analysis Managing Results (not resources)
Partnership Management Framework Manage Manage Project Project Lifecycle Lifecycle Service/ Service/ Account Account Management Management Contract Contract Management Management Strategic/ Strategic/ Relationship Relationship Management Management
Best Practices Stage IV Risk/Reward Statements of Work Re-organizing for Success IT organization evolution structure to manage the COE structure to manage results not resources PMO evolution defining business impact improving time to market strategic initiatives
Performance Management: Elements Objective Measurement Cost and savings Productivity Overall Service Levels Partner Performance Quantitative SLAs Head Count, and Financial Information Productivity Qualitative Ease of working Skills and Methodologies Teamwork Value Add Partner Comparison Formal service level management program Audit 360 reviews Executive dashboard SLA standardization Customer satisfaction surveys
Best Practices in Outsourcing Processes Outsourcing to Indian vendors is much more than offshoring and staff augmentation Adopt a partnership based approach to IT outsourcing and move towards a competency based vendor selection Best Practices Follow a staged approach for transition to an offshore partner with a careful selection of projects Prepare detailed transition plans for each project, especially maintenance projects Establish strong governance and management oversight to manage relationship and performance Ensure that outsourcing processes are tailored to business requirements
Conclusion Global sourcing is becoming a key competitive necessity for major organizations - not what but how much The challenge is not technical but is about culture and people To succeed needs a different approach to service delivery management There are many different sourcing models invest in choosing the one that is right for you