Subba Iyer Director – ICT Practice IT Outsourcing Partnering Clients To Create Innovative Growth Strategies Subba Iyer Director – ICT Practice

The philosopher and the pragmatist Being the leanest and meanest and lowest cost Better efficiency Strategic execution (70:70:70) Greatly improve the quality of people who still work for you! Better effectiveness Organization’s philosophy

The key models on which outsourcing is based Operations focused Cost driven From fixed assets into variable costs Clear operational parameters Managing the relationship Knowledge focused Skills driven Ability to infuse new processes Migration to new environments Manage the learning and re-learning Advantage focused Specific business advantage Shared risk and reward mechanism Harness the collaborative space Re-invent the organization

Costs remain the primary motive for Outsourcing Source: CIO study 2005

Outsourcing relationship models Trust based Balanced sourcing May allow supplier the advantage Visible metrics takes a backseat Difficulty in the governance mechanisms Fully leverages vendor capabilities Clear locus of decision making Requires specific and competent relationship managers Key factors The primary purpose The organizational approach The intended benefits The governance mechanism Traditional approach Focuses on price rather than total cost Leaves a lot of money on the table Lack of a long term focus Maximize gain Maximize the purchasing power Create the Win-Lose game Drive down costs and surrender the future value

The Outsourcing maturity roadmap Currently most Outsourcing relationships are at Level 2 and 3

The IT sourcing in perspective > 550 billion > 110 billion

Cost advantage drives the off shoring wave In India alone Top 5 vendors only

The top 25 vendors share $ 111 B $ 116 B The global IT Outsourcing business is worth USD 116 Billion in 2006. Revenues of Top 25 vendors grew from $ 41 B in 2005 to $ 44 B in 2006.

The global players dominate Constitute 26% share amongst the top 25 vendors Global IT outsourcing market = $116 billion Top 25 companies = 37% market share

IT From ITO to KPO Knowledge Process Business Process Animation / Design Investment Research Biotech Legal Services Patent Research Knowledge Process Outsourcing Global Size: USD$17 Billion Niche Focus Skill Sets Captive Units Larger Sales Cycle Industry Dynamics Customer Care Claims Processing Content Development Payment Services Outsourcing Business Process Global Size: USD$150 Billion Industry Dynamics The new Big 5 Competition from other countries Consolidation Staff Attrition Infrastructure Issues Industry Dynamics Global Delivery Model Battle of Business Models India – the Undisputed Leader Infrastructure Management Application Support Application Development IT Outsourcing Global Size: USD$150 Billion

Our predictions for Next generation Outsourcing Deal sizes and deal tenure could get lower From one single vendor to a set of 3-5 vendors Increased focus on BPO activities (FAO, Customer mgmt, HR) ADM space will increasingly be dominated by Indian vendors Global delivery model will be the standard Increased off shore activity Productivity and customer satisfaction feedback is cause for concern. M&A activities between ITO and BPO companies will accelerate Customers would look beyond labor arbitrage to actual efficiency improvements Managing outsourcing relationships will become more complex