Transcript Global Services: Moving to a level playing field

‘Dr Richard Sykes’
BCS Globalisation Masterclasses
Global Services:
Moving to a level playing field
Dr. Richard Sykes
Chairman, Intellect’s Outsourcing & Offshore Group
Sole Partner, ‘Dr Richard Sykes’
Mark Kobayashi-Hillary
Board Director, National Outsourcing Association
BCS Offices, Covent Garden London,
5th September 2006
www.dr.richard-sykes.com
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Outsourcing/Offshoring
Post-Millennium – Rapidly Changing Contexts
The New Globalisation
Consumerisation of the ICT ‘offer’
Emergence of the Services Model
Emergence of Loosely Coupled Technologies
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A Decade’s Revolution to 2005
“Calling in the New World to Redress the Balance of
the Old” [Canning]
Four new Indian global players in the $1-2.5 bn band:
revenue growth 25-40%+ p.a. (TCS, Infosys, Wipro,
Satyam)
Combined with relatively open global markets,
involvement of the Diaspora & a determined focus
on quality & technical professionalism
Broad service mix: Application development &
management; package implementation; systems
integration; consulting; BPO; KPO; infrastructure
management - and onsite/offshore blending
Source – Anthony Miller Arete Research,
@ 2006 Regent Conference
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Entrepreneurialism and Arbitrage
The Millennial turn has seen offshore, near shore,
smart shore, blended shore develop as a norm
Euro-American majors globalising into India.
Top 8 have >70,000 delivery staff in India
Top 6 Indian majors forecast to employ
> 50,000 staff in Europe by 2008
Professional labour arbitrage!
TCS, Infosys, Wipro 2005 EBIT* margins of 2530%: Tier 2 players ~20%
McKinsey (2005/6) forecast a $380bn ITO/BPO
opportunity by 2010: 35% offshored, and India
potentially placed to maintain its #1 position
*Source – Anthony Miller Arete Research,
@ 2006 Regent Conference; McKinseys
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The Fundamental Market Shift Geographic GDP 2010-2050
2010
Forecast GDP in $ Trillion
China
China
USA
USA
India
India
Japan
Japan
Brazil
Brazil
Russia
Russia
UK
UK
Germany
Germany
France
France
Italy
Italy
0
5
10
15
0
10
20
2050
30
40
Source – McKinsey Estimates.
Courtesy of Regent Associates
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50
But the whole story?
“Calling in the Consumers’ World to Redress the
Balance of Old Enterprise IT” [With apologies to
Canning]
1995 onward - new companies move to create &
exploit the consumer opportunity
New paradigms:
The user shapes the game, sets the pace
A kit sale ?(fancy mobile ‘phones!) but really a
service sale (& whoever heard of outsourcing?)
The Internet as a significant delivery vehicle
Advertising as the new earnings stream
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A Decade’s Triple Revolution to 2005
The Second Globalisation
Software and services follow hardware
Consumerisation
An even more radical breaking of the
industry mould
Rise of Application Professionalism
Rapid expansion of practice boundaries
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The Ever Widening Spectrum of
Contemporary Professionalism
C om
p e te n
c ie s/
T ra in
A b il
in g &
itie s
S k ill
Expe
s
rie n t
ia l D
e p th
A pplication
P rofession alism
T ech n ical
P rofession alism
Acknowledgement to CSC Leading Edge Forum
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What is the performance of the UK industry?
Computer Services and Information/Data Services
Exports
Imports
Trade
Surplus
2003
2004 – 1H
£4.3 bn
£2.3 bn
£1.8 bn
£1.1 bn
£2.5 bn
£1.2 bn
Business Services – ‘Professionally Rich’ & ‘Technology Rich’
2003
2004 – 1H
Exports
£31.7 bn
£15.9 bn
Imports
£14.1 bn
£7.0 bn
Trade Surplus
£17.6 bn
£8.9 bn
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Global Trade in Services
World trade in services (~$1.8 trillion in 2003) is only
~ 1/5th of trade in manufacturing
 Only 10% of services enter international trade
vs. 50% in manufacturing
 ‘Top two’ in exports of computer services are
Ireland and India: in business services are US and
UK (who are both in trade surplus in services –
both in trade deficit in manufacturing)
Courtesy of Prof. Mari Sako, SAID Business School, Oxford.
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And not only Business Services………
‘Within the M25 is found the highest concentration of
non-national professionals in the world’
 The City (Banking, Financial Services, Insurance)
 (2004): Trade surplus $25.3 bn; Employs > 1.0
million; Financial Services account for ~5.5.% GDP,
rising to ~ 9% GDP when associated business
services are included;
 The Creative Industries (Media, Design, Education)
 (2001): Revenues ~£112.5 bn; Employs ~1.3
million; Exports ~£10.3 bn; accounts for >5% GDP
Major elaborators of ICT capabilities
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Foundations for the Next Decade’s Revolution?
The Five Virtualisations/Architectures
•
Virtualisation of computing power
•
Virtualisation of business process management
(BPM)
•
Systems/Services-Oriented Architecture (SOA)
•
Virtualisation of the network (‘Over IP’)
•
Architecture for Software as a Service/Web
Services
From the tightly coupled to the loosely coupled
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From Tightly Coupled to Loosely Coupled
Classic Outsourcing models are based on ‘Enterprise
IT’/ Facilities Management model (tightly coupled)
Emergent shift to the Sourcing model (loosely coupled)
The Assembly of Service/Value Chains
Exploitation of global networks & the Internet
potentially enables global service sourcing strategies
BUT Geography only one factor in an increasingly rich
decision mix (fit for purpose, fit for use test)
Business Assurance of Service/Value Chains a major
new challenge
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The Global Delivery Model:
Direction Setters in this Wider Context - 1
The Services Model
‘Technology rich/professionally rich’
Focus on technology productivity?
Focus on application effectiveness?
‘Innovation & development’
Focus on technology productivity?
Focus on application effectiveness?
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The Global Delivery Model:
Direction Setters in this Wider Context - 2
Maturity brings potential for commoditisation
IT Organisations & IT Services firms
– Labour intensive
– One-to-one
High Human/Technology Ratio
Transactional
Cost
High Technology/Human Ratio
– Capital intensive
– One-to-many
Commoditised Services
Acknowledgement to CSC Leading Edge Forum
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Volume
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The Global Delivery Model:
Direction Setters in this Wider Context - 3
‘Best of Breed’/’Competitively Fit for Purpose’
Focus in making the technology ‘sweat the assets’ (high
utilisation/reliability/flexibility):
commoditised infrastructural services
commoditised transactional services
Vs.
Focus in delivering high application specificity:
Specialty end-application-aligned services
Highly tuned to end-market requirements
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The Global Delivery Model:
Direction Setters in this Wider Context - 3
F o cu s in m a k in g th e tech n o lo g y ‘sw ea t th e
a ssets’ (h ig h u tilisa tio n / relia b ility / flex ib ility ):
co m m o d itised in fra stru ctu ra l serv ices
co m m o d itised tra n sa ctio n a l serv ices
V s.
F o cu s in d eliv erin g h ig h a p p lica tio n sp ecificity :
S p ecia lty en d -a p p lica tio n a lig n ed serv ices
H ig h ly tu n ed to en d -m a rk et req u irem en ts
And ne’er the twain shall (sustainably) meet!
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The New Globalisation Model:
Four Fundamentals to Address
 Clarity of business objectives in a genuinely global
market place [what makes for sustainable edge?]
 Back office, infrastructure as commoditised services
[from outsourcing to sourcing]
 Sharp end/front end requires partners with deep
experience of the business [from domain
knowledge to end-market intimacy]
 Ascendance of relationship structuring over
adversarial procurement
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Global Services:
Moving to a level playing field
Thank You!
Book to be published by the BCS in Feb 2007
‘Dr Richard Sykes’
www.dr.richard-sykes.com
+44 (0)20 7917 1715 (office)
+44 (0)20 7354 0848 (fax)
Mark Kobayashi-Hillary
[email protected]
www.markhillary.com
07952 267 074
[email protected]
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