1. Global Outsourcing Strategy, Execution and Top 5 Trends Suresh Sharma CEO JS 3 Global Consulting Executive Director India China and America Institute 1549 Clairmont Road, Suite 200 Atlanta 30033 www.icainstitute.org

2. Typical Project … What the end customers want

3. As Proposed by the Onsite Lead As Specified in the Product Request What the Project Management Interpreted ?

4. As Designed by the Senior Offshore Designer As Produced by the Offshore Programming Unit Partial Understanding of Customer Needs

5. Offshore Project Final Delivery As Used by the Customer

6. Doing it Right the First Time … Strategy Must Tie it to Sustainable Business Growth Strategy Long-term (R&D - Intellectual Capital /$$) Near-term (Capacity enhancements, New markets) Short-term (Labor arbitrage, volume fluctuations) Factor Compliance, Intellectual Property, Culture, Productivity & Competition People … and their global mind-set ? Cultural Challenges Project Management skills are vastly different Operational excellence is key differentiator Process … is maturity measured ? Hand-offs and Touch points One business language … and consistent environments Metrics … drives behavior Tools

7. Structural Transformation in Global Business Unspoken Law of Economics: A labor cost differential of 5-10x means that the movement of work ‘offshore’ is inevitable

8. Global 3000 Market Segment is Priority #1 Market Leaders – Software, Financial Services and Retail Structural Transformation global Outsourcing – Who is Doing It? Small-Business Customer Revenues < USD 50m High-End Fortune 500 Customer Revenues > USD 5 Bln Large Firms Customer Revenues USD 750 – 5 Bln Mid-Market Customer Revenues USD 50 - 750m Global 3000 Customer Revenues < USD 5 Bln

9. High Low High Singapore Hong Kong Czech Canada Australia China Philippines Mexico Ireland India Capabilities of Workforce Wages Education Qualifications/Capabilities Quality of work/Work ethic Attrition Rates Middle Management Talent Location Attractiveness Cultural Compatibility Infrastructure –Communication –Basic infrastructure Country risks Time zone attractiveness Tax Incentives Brazil Russia The Evolving Country Decision -- ROI & Economics Vary Considerably by Process and Location South Africa Hungary Source: McKinsey, E-Business Strategies IT Map Costa Rica

10. First Generation Business Models Source: Offshore Outsourcing: Business Models, ROI and Best Practices Contracting Staff Augmentation Pure Outsourcing Offshore Outsourcing N/ACosourcing Offshore Development Centers Internal Delivery Shared Services Captive Shared Services ThirdParty Vendor Joint Venture (Collaborative) Completely Owned Subsidiary Relationship Structure Onsite Offsite in Same Country Offshore in Foreign Country Geographic Location

11. Second Generation Business Models Source: Offshore Outsourcing: Business Models, ROI and Best Practices Pure Contract Outsourcing Global Delivery Model Global Shared Services Model OnsiteOffshore Hybrid Model Multi-sourcing Model Joint Venture (Collaborative) Completely Owned Subsidiary Relationship Structure Onsite Onshore Offsite in Same Country Offshore in Foreign Country Geographic Location Build Operate Transfer

12. Sourcing Evaluation Process

13. The Offshore “S’ Curve and Tipping Point GrowthMaturity Life Cycle of Technology Driven Innovation Birth Tipping Point 2004 - Offshore adoption is at a tipping point. It is becoming a “must-do” management practice. ITO BPO

14. 14 Supply-side Economics  Telecom costs down by 90% in the last 3 years  Increasing Infrastructure reliability  Over 3 million low-cost talented workers  Emergence of a branded vendor community 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 199219931994 1995 19961997 199819992000200120022003  Encouraging track record of early movers  Successful track record of IT outsourcing  Early ROI are fueling more investments Demand-Side Economics 2004 $ Billion 3.0 India’s BPO Acceleration … maturity levels Source: McKinsey, E-Business Strategies

15. Time Inside the “S” Curve: The General Model of Innovation – The Vendor Side Expectations / Investment Tipping Point Slope of Profit Slope of Despair Slope of Hype Consolidation Boom Bust Hype Peak # of Vendors Offshore vendor space will go through a boom-bust cycle … So its important to pick your partners carefully.

16. Prediction: Offshore adoption will take longer than most analysts are predicting. Significant Business Process Changes are required! '93…‘03‘04‘05'06'07'08‘09‘10‘11‘12‘13'14'15 Time Demand / Visibility Offshore Hype Curve Offshore Adoption Curve Innovators Early Adopter Early Majority Late Majority Laggards Demand Side Timing and Market Diffusion: Consider the following Pattern …

17. Rise of Major Innovation 199020052020 Business Model Innovation Business Process Innovation Focus on Labor Arbitrage Focus on Process Integration Adapted from Utterback-Abernathy Model Offshore Outsourcing Process Trends: Return on Investment (ROI) Going forward ROI will be derived less from simple labor arbitrage and more from creative process improvement and integration

18. India and China Sourcing … Some Insights from first-hand experience … Services Sector Game is labor arbitrage … it’s the intellectual capital IT … embedded Systems … and managed services BPO Legal Financial services Creative Processes Medical business processes HR Manufacturing Hardware Infrastructure … what does it mean really ? Some myths and data interesting points Culture Language is a big barrier in China … really ? Maturity of your own processes plays a big role Cost Dalian Vs. Shanghai Bangalore Vs. Chennai Vs. Jaipur

19. Top 5 Trends … seeing beyond the obvious Distributed Outsourcing will be a norm Competition will come from homes …Future Factory Nodes Positioning of new cost structure is vital for growth Ability to globally project manage is essential Domain Knowledge goes global Utilities, Banks, Financial Services, Healthcare, Legal, Entertainment, … Opening Markets and Access to Information make the domain global and all pervasive Product Innovations not sustainable Commoditization of Industrial Era Technologies Design and Engineering can be done any where Engineering Services will be big … Product Development must be global Case of Innovative Drug Development Programs Purchasing Power Parity Drives future ability to grow Globalization of baseline education An era of interdependence … will drive competitiveness Its NOT … We vs. They … it may be … We & They Creativity and Competitiveness will sustain your growth

20. Q&A Thank You Please feel free to contact suresh1.sharma@gmail.com +1-404-321-5986 Atlanta U.S.A.