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OUTSOURCING INFORMATION TECHNOLOGY BY AMANDA MORNEAULT ELVIS NORIEGA DANIEL MORALES 04/16/2007 •Trend Outline -History of outsourcing -What is being outsourced -Growth trend -CMM -The future of outsourcing •Location •Risk -Offshore -Onshore -Reversal -Myths -Risks of Outsourcing -Others History of Outsourcing • The idea of outsourcing has its roots in the 'competitive advantage' theory propagated by Adam Smith in his book 'The Wealth of Nations' which was published in 1776. • Outsourcing' is the process through which one company hands over part of its work to another company, making it responsible for the design and implementation of the business process under strict guidelines regarding requirements and specifications from the outsourcing company. • The business movement in off-shoring really took off in the late 1990’s after major telecommunication expansions. What is it being outsourced? • Financial Services • Information Technology • Health Care • Software Development Growth Trends • 2 million financial services industry jobs will move from Europe and the United States to cheaper labor markets in the next few years. (http://www.bizjournals.com/cincinnati/stories/2006/06/12/focus4.html) • IBM will increase its workforce in India at a rate of 20% to 25% annually for the next four to five years. (http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName= outsourcing&articleId=9015589&taxonomyId=60) • TCS has 83,500 employees offshore, Infosys is at 69,500, and Wipro has 66,200. Other large firms offshore firms in India include HCL Technologies Ltd. with 38,317 workers, and Satyam Computer Services Ltd., which has 34,400 employees (http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName= outsourcing&articleId=9015589&taxonomyId=60) CMM Future of outsourcing • within three decades India should have vaulted over Germany as the world's third-biggest economy. By mid-century, China should have overtaken the U.S. as No. 1. biggest economy and by then, China and India could account for half of global output (http://www.msnbc.msn.com/id/8998389/page/2/%20) • "This isn't about labor cost," "The issue is that if you don't do it, you won't survive.“ (http://www.businessweek.com/magazine/content/06_05/b3969401.htm) • half of all new P&G products to come from outside by 2010, vs. 20% now. (http://www.businessweek.com/magazine/content/06_05/b3969401.htm) IT OUTSOURCING LOCATION • • • When you think of Outsourcing, what countries come to mind? India – $18 billion (Software/ IT Services) China – $3.6 billion IT OUTSOURCING LOCATION • • • • • • • What is Offshore Outsourcing Is Offshore outsourcing in India becoming old news? Companies are increasingly sending IT work outside India 12 to 14% increase in salaries High Turnovers Labor Shortage – The supply of India’s famed “skilled, low-cost, English speaking” work force may not quite match the sizzling demand ( by. Saritha Rai) Other Countries are becoming more attractive-Shifts in Location IT OUTSOURCING LOCATION By: Associated content.com •What is Onshore Outsourcing •Domestic firms realized that they could dramatically reduce the costs of their information technology needs while avoiding many of the problems prevalent in off-shoring. •-Advantages–Example An independent …McKinsey & Company, did a study on the topic and found that outsourcing to rural America( the Mid-west) actually saved more money than outsourcing information technology work to overseas – costs can be decreased by 50%…as compared to 15% to 13% when off-shoring to overseas firms IT OUTSOURCING LOCATION How About the United States? A Reversal Process •India outsourcing to the U.S.A. –IBM and a Real Estate Company, DLF in India signed a $29 million dollar contract to Outsource IT to IBM. –Will assist in PC support for DLF employers in India The 7 Myths of Offshore IT Outsourcing by Satnam Gambhir, Global Access • • • • Myth 1: Offshore outsourcing is costing U.S. jobs. Myth 2: There’s a stigma to offshore outsourcing. Myth 3: The cost benefits of outsourcing are overstated. Myth 4: It’s a buyer’s market for IT workers right now anyway. • Myth 5: There are huge cultural barriers. • Myth 6: What about other risks of outsourcing? • Myth 7: The ROI of outsourcing hasn’t been proved. The Seven Deadly Sins of Outsourcing These are the transgressions that can doom you to outsourcing hell. Here's how to avoid them. by Judy Artunian • • • • • • • Feeble governance Overblown expectations Blindly banishing projects Dumbly disowning projects Bad assumptions Sloppy service levels End-game myopia Others • Foreign exchange risk – Contracts • Regulation (Domestic and Foreign) – Security – Quality • How is this done anyway? – Process ease • Vendor knowledge – Costs • Purely economic view vs. the true bottom line