1 Outsourcing and OffShoring January 2004 Sandy Senti

2 The Stages: From Bystander to Fully Committed 0% Bystanders None to initial investigation of offshore's potential None 50% to 60% of Fortune 1,000 companies Experimenters Small 10- to 20- person projects for conversion of older apps or isolated new development Uncoordinated project-by-project management 1% to 5% 25% to 30% of Fortune 1,000 companies Committed 30- to 50-person mission critical development and maintenance programs Centralized and dedicated program management 10% to 30% 5% to 10% of Fortune 1,000 companies Full exploiters Large scale apps development and management, remote monitoring and administration, implementation and upgrades of packaged apps, and BPO Global sourcing is a core competence with documented best practices 40% to 50% 3% to 5% of Fortune 1,000 companies Stage characteristics Focus of efforts Level of program management skills Percentage of IT services budget going offshore Size of segment today

3 Which IT Functions Are Going Offshore?

4 Risks that Require Mitigation  Cultural issues and/or clash  Communication challenges  Language barriers  Distance to vendor  Time zone differences (can be a plus as well as a minus)  Political instability  General infrastructure of the country  Management challenges  Security

5 Critical Success Factors  Governance  Senior executive sponsorship  Internal and external communications  Vendor selection process  Project selection process  Disciplined requirements definitions  Active relationship management  Contingency planning  Significant onshore presence in early stages  Understand and focus on cultural issues  Measure performance, success  Focus on the value rather than just the cost savings  Know the market!!

6 What Did Our Stakeholders Say? The Concerns  Stanford will lose control by giving away its institutional knowledge. Core competency vs. Commodity  Maintenance is much different than development projects. Has Stanford established a process or considered the differences?  Stanford needs to improve skills (esp. writing specifications and documenting requirements)  Stanford staff will resist required behavior change to make this successful (for instance, responding to vendor in timely manner)

7  Wipro staff is excellent, Stanford will be able to learn from them to improve service and quality levels  Specification writing and requirements communication is not a problem when business analysts are skilled and trained  Wipro has been able to accommodate Stanford feedback to improve the specification writing and business requirements development process  Outsourcing will be worth it if we can do IT better, faster and cheaper What Did Our Stakeholders Say? The Positives

8 What did our staff say? The positives  Excellent client service  Refined system development methodology  Rigor and discipline in interactions  Excellent communication mechanism  Professional  Effort to partner is clear  Use of metrics key to operation

9 What did our staff say? The concerns  Challenging contract negotiations  Decentralized business processes make requirements and spec writing difficult  Fast turnaround requirements for docs and sign-off  Unfamiliar with Stanford business processes  Business analysis not as thorough because they don’t have the big picture  Lack of experience with student administration modules

10 Best Bets: What to Outsource/OffShore  Projects with well defined requirements  Development projects with complete specifications  Be sure to bound scope of work and manage scope creep  Stable applications  Back-room applications, those with insignificant end-user interaction  Applications that do not require real-time collaboration with offshore team

11 Currently Under Consideration OFFSHORE CANDIDATES  DBA Services  Application Administration  Middleware Administration  Development and Coding  Junior System Development  Application Maintenance  Reporting Services  Technical Documentation OUTSOURCE CANDIDATES  Storage  Hosting  Desktop Management  System Administration  Web Services  Monitoring  Network Administration  Pager Services  User Training

12 Governance Roles and Relationships Steering Committee  Define overall strategy  Establish IT, business, HR, legal, audit, and compliance support  Charter program office Program office  Vendor management  Reporting/metrics  Best practices database  IT staff competency plan  Communications Stages in offshore life cycle  Due diligence  Negotiations  Transition  Project management

13 Human Resources and Communication Considerations  Keep internal staff informed through one clear and consistent message  Work with HR on strategies to retain and/or develop staff for new roles, as needed  Communication plans for end-users and for staff members are essential

14 Final Words  Do not be an absentee landlord!!!! Outsourcing does not mean abdicating responsibility  Do not lose control: knowledge is the key  Establish communication processes and communicate; including road shows  You’re never going to master the offshore game unless you realize that mastering it means relentless adjustment and continuous learning  Manage expectations