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OOA&D - 2 © Minder Chen, 1995-2003
http://i.i.com.com/cnwk.1d/i/z/1203/meta_1209_figure1.gifhttp://techupdate.zdnet.com/techupdate/stories/main/Top_10_Risks_Offshore_Outsourcing_print.html
OOA&D - 3 © Minder Chen, 1995-2003
Reference
• http://www.cxoeurope.com/documents.asp
OOA&D - 4 © Minder Chen, 1995-2003
http://www.cxoeurope.com/images/figs/zoom/top03e18f1.gif
Source: Feeny, D. and Willcocks, L. (1998). Core IS Capabilities For Exploiting Information Technology. Sloan Management Review, 39, 3, 9-21.
OOA&D - 5 © Minder Chen, 1995-2003
Source: http://www.cio.com/archive/090103/money.html
OOA&D - 6 © Minder Chen, 1995-2003http://www.cio.com/archive/071506/2006_global_outsourcing_guide.pdf
OOA&D - 7 © Minder Chen, 1995-2003
Gartner, 2002.
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IBM Research http://www.almaden.ibm.com/asr/SSME/esi/slides/Jim-Spohrer-NAS-Education-for-Service-Innovation-20060418.pdf
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Japan59%
Europe and USA20%
Asia Countries (excluding Japan)
15%
Others6%
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IT Services Market??
Source: http://www.cio.com/archive/091505/nypro_sidebar_one.html
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Best Practices: Management Of Offshore Outsourcing
Geopolitical concernDoes vendor offer:
Does contract address:Type of management needed
Labor pool: Availability, suitability, language, visas, education
Best-of-breed vs. general-contractor comparisons
Force majeure (French for
"greater force") conditions
Constant surveillance and management
Political stability and risk Security Impact of failure on other services; potential for multiple failures
Monitoring
Proximity to domestic operations; time zones
Multiple onshore and offshore resources
Flexibility to allocate onshore and offshore resources; impact on costs; pricing transparency
Load balancing
Cost-benefit factors, including local tax credits, employment incentives, employee-or contract-termination costs
Customer evaluation of vendor's choice of location for offshore centers
Identifying and managing the risk of force majeure; state and governmental intervention in contract rights and operations
Government relations in host country; process improvement; global innovation
DATA: Bierce & Kenerson PC
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Global Outsourcing Index (GOI)
• Cost: Few companies would outsource at all if doing so didn’t save them money. The cost factor, which includes compensation and wages, infrastructure cost, and tax and regulatory cost, makes up 30 percent of the GOI.
• Risk: Every country possesses its own strengths and weaknesses, risks and rewards. The Overall Risk Rating, which makes up 54 percent of the GOI, aggregates a variety of risks every potential outsourcer must take into account:
– Geopolitical risk (10% of GOI) Includes stability of government, corruption, geopolitics, security.
– Human capital risk (10%) Includes quality of educational system, labor pool, number of new IT graduates.
– IT competency risk (10%) Includes project management skills, high-end skills and competence (custom code writing, system writing, R&D, business process experience).
– Economic risk (6%) Includes currency volatility, GDP growth.– Legal risk (6%) Includes overall legislation, tax, intellectual property.– Cultural risk (6%) Includes language compatibility, cultural affinities, innovation,
adaptability.– IT infrastructure risk (6%) Includes IT expenditure, quality of key access infrastructure.
• Market Opportunity Rating: This number, which makes up 16 percent of the GOI, includes expert third-party analysis of each country, its global competitiveness and IT market share. The rating serves as a check on any imbalances elsewhere in the report.
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Tasks/Job Types
• New products development
• Testing
• Maintenance
• Research
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Ownership/Partnership
• Captive
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China's strength
• Large IT labor pool
• Relative stable workforce
• Some returning people with international experiences
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China and India
• Similarity and difference
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Software Park
1. Beijing2. Shanghai3. Tianjin4. Dalian (Liao-ning Province)5. Nanjing (Jiang-zu Province)6. Hangzhou (Zhe-jiang Province)7. Guanzhou / Shenzhen (Guang-dong province)8. Chengdu (Si-chuan province)9. Xian (Shan-xi province)10. Jinan or Changsha
OOA&D - 21 © Minder Chen, 1995-2003
Cities
• The 1st-tier: Beijing, Shanghai, and Shenzhen.
• The 2nd-tier : Dalian, Nanjing, Hangzhou, Guangzhou, Tianjin.
• The 3rd-tier: Chengdu, Xi'an, Wuhan, Changsha.
• The 4th-tier: Qingdao, Zhuhai, Xiamen, Ningbo.
• The5th-tier: Jinan, Harbin, Shenyang.
Source: http://www.alwayson-network.com/comments.php?id=10436_0_1_0_C
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Challenges to Service Providers
• IP Protection
• Process Maturity
• Recruitment & training
• Hidden cost
• English language skills
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Intellection Property Protection
• Challenge: – Ensure that IP is safeguarded
• Solution: – US corporate entity, US Laws and regulation
– All projects are insured by comprehensive Professional Liability insurance, also known as Errors and Omissions E&O insurance.
– Extensive security procedures: Physical, individual, and electronic.
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English Language capabilities
• All project team members are bilingual– Written and verbal
– Language skills jet criteria in career development methodology
– Project leaders and managers have high proficiency with English, with many educated in the US
• Utilization of state-of-the-art communication tools
• Standardized communication protocols
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Formalize Communication Protocol
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Strategic Sourcing Lifecycle
• Sourcing Strategy: Take a good look at your enterprise and analyze the risks and benefits of sourcing.
• Evaluation & Selection: Define your requirements and identify partners that can meet your business needs.
• Contract Development: Structure a flexible partnership with defined service levels and payment models.
• Sourcing Management: Monitor your relationship and react to change effectively.
OOA&D - 44 © Minder Chen, 1995-2003
http://www.darwinmag.com/read/060103/risk.html
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The World Is Flat
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