1. MPIII Outsourcing

2. Outsourcing & the Strategic Relevance & Impact Grid Factory Support Strategic Turn-Around Strat. impact of existing systems Strat. impact of applications development portfolio lowhigh low Outsourcing Candidates Caveat: it’s best to consider outsourcing according to function or project vs. entire IS dept.

3. When Outsourcing is Attractive IS Function –commodity services are more easily outsourced (networking, operations, PC maintenance, training) Project Structure –structured projects are most appropriate Profit / M&A Concerns –outsourcing generates cash, liquefies assets, and may make some firms (e.g. banks) more attractive to suitors (no IS org. to integrate)

4. MPIII Going Global with IS

5. Key Issues/Difficulties Language Culture Laws Currency Time & Holidays Political issues Infrastructure Staffing & Support

6. European Data Protection Directive the right to access one’s own data the right to know where the data originated from the right to have inaccurate data rectified the right of recourse in the event of unlawful processing the right to withhold permission to use one’s data for direct marketing

8. Necessity is the Mother of Invention Smart Cards –W. Europe and Russia lead the US, motivated by high cost telecom Cervecerìa y Malteria Quilmes –Beer manufacturer deployed first Argentinean Extranet, reducing communications costs w/distributors from $2,600 to $140/month LEO - Low Earth Orbit Satellites –reliable, low-latency, wireless global infrastructure

9. Satellite Schemes Major Players –Teledesic (2002, 2 to 64 Mbps) –Iridium (1998, 2400 baud)

10. Global Outsourcing Drivers –staffing limitations (shortages, turnover, skills) –cost reduction –time (round the clock development/testing) Leaders –India –Ireland –Canada –China, Russia, Brazil, Philippines

11. Talent Shortage source: InformationWeek 1997

12. Project Characteristics Ideal projects - high structure, little change, well defined, minimal interaction with end- users –Y2K: year 2000 problems –porting existing systems to new environments (e.g. a point-of-sale system from mainframe to UNIX) –systems testing > $50,000 (overhead threshold) –avg. $200K/proj.

13. Selecting a Partner Quality & reliability –ISO 9000 certification or Software Engineering Institute scale –experience, financial stability Infrastructure –communication, equipment, software, conferencing Technical expertise –familiarity with systems being used, staff size Language skills –between both parties

14. Some Global Outsourcing Examples SAP –Bangalore dev. ctr. will be firm’s largest by 2005 IBM –Java Beans for VisualAge in Beijing, Belarus, India, and Latvia Sun –Elvis+ developed strong encryption for Intl. export Liberty Mutual –Opened a $5 million, 125 person dev. ctr. near Belfast AT&T, Chase, Citicorp, GE, Reebok, Sabre

15. Localization –to modify an application so that it can be used in a different market.

16. Cultural Variance Language –text, font, object coordinates, orientation –single byte vs. double byte format (entry, filters) Numbers –currency symbol & location, separators –measurement system –date & time: format and calendar –phone formats & postal codes Images