Risks Associated with Offshoring - GARP€¦ · Risks Associated with Offshoring Malcom Frank Executive Vice President, Strategy and Marketing Cognizant Technology Solutions Michael

Risks Associated with Offshoring

Malcom Frank

Executive Vice President, Strategy and

Marketing

Cognizant Technology Solutions

Michael Pahlke

Managing Director, Head of Private

Banking and Wealth Management Products

Technology

Credit Suisse

November 2014

2

The views expressed in the following material are the

author’s and do not necessarily represent the views of

the Global Association of Risk Professionals (GARP),

its Membership or its Management.

Managing risks related to offshoring

of services

Zurich, ACCA/GARP/CAIA Chapter Meeting

November 18, 2014

Michael Pahlke - Global Head PB&WM Products IT

Global Footprint of CS Information TechnologyWhere do we stand today?

New York

Main Business:

Investment Banking

London

Main Business:

Investment Banking

Zurich

Main Business:

Private Banking,

Corporate & Institutional

Clients,

Investment Banking

Raleigh (2005)

Near-shore

development

center, primarily

supporting NY Wroclaw (2010)

Near-shore center,

primarily supporting

EMEA and Switzerland

India (2002)

Outsourced and

co-managed Off-shore

center in different locations

Singapore

Hub mainly serving fast

growing markets of APAC

region

2November 18, 2014Michael Pahlke - Global Head PB&WM Products IT

The Credit-Suisse Offshoring ModelDefining and following a strategic operating model along design

principles…

November 18, 2014Michael Pahlke - Global Head PB&WM Products IT 3

Some intentions of the CS strategy:

Relying on the competences of our offshore partners

Working with a limited number of strategic vendors

Concentrating vendors around «Capabilities» and few selected locations

Moving towards «Managed Service engagements»

House Team Size

Vendor Size

CS Peer Group

Example: Captive vs. non-captive footprint in offshore locations

Optimization and Risk MitigationWhat are the potential road blocks? Selected examples …


Finding the Right BalanceHow do we define success or what does it take to stay on course?


Quantitative

Factors

Certified in Right

Technologies

Attrition Rate

Service Level Agreements

# of Tickets Closed

Outage Time

Qualitative (Soft)

Factors

Engagement of People

Shared Vision

Stakeholder’s Satisfaction

Mgmt Relationship with

Staff

Questions?


© 2014, Cognizant

Malcolm Frank

Chief Strategy Officer, Chief Marketing Officer, Head of Cognizant DigitalWorks

Sourcing in our Digital World The new opportunities…and the new risks

©2013, Cognizant Confidential

Ben Pring Cognizant’s Center for the

Future of Work

Capitalizing on

Code Halos

in the IoT

Marketplace

2 | ©2012, Cognizant Confidential. Not for distribution.

WE ARE INCREDIBLY LUCKY

| © 2014, Cognizant

We have the opportunity to build (and manage) the

“vast, silent, unseen

Second Economy”

“By 2025 the Second Economy will be as large as the 1995 physical economy”

W. Brian Arthur, Santa Fe Institute – McKinsey Quarterly, Oct 2011; http://www.mckinsey.com/insights/strategy/the_second_economy

http://www.mckinsey.com/insights/strategy/the_second_economy


Everything is up for grabs (again) …

“We are in era where we are re-imagining nearly everything … powered by new devices, plus connectivity, plus new user interfaces, plus beauty….”

—Mary Meeker - Kleiner Perkins Caufield & Byers


Which is great … and terrifying


“Get Dilbert on line 1”


SO, HOW DO WE CAPITALIZE ON THE DIGITAL OPPORTUNITY?


CODE HALOS


… which are created by every


… every digital interaction any body and/or any

thing has

| © 2014, Cognizant 11

How to best build a relationship with him?

• Basic demographics?

• A few data points? • Salesmanship?

| © 2014, Cognizant 12

Or knowing his exact needs and preference?


It’s the algorithms that “see” and “understand” us …

13

•Personal ratings •Collaborative filtering

•Algorithms •Based on user

activity

… every “thing” can – and should – have a Code Halo

around it


“Now any Noun … any person, place or thing … has a virtual self as well a physical self.”

The mobilization of everything

Source: https://contractiq.com/Internet_Of_Things_Report_2014

17

The numbers are staggering …

World Population

Connected Devices

6.3 Billion

500 Million

6.8 Billion

12.5 Billion

7.2 Billion

25 Billion

7.6 Billion

50 Billion

Connected Devices

Per Person 0.08

2003

1.84

2010

3.47

2015

6.58

2020

More

connected

devices

than people


WHEN CODE HALO MEETS CODE HALO

THE “SPARK” CREATES NEW BUSINESS MODELS


Six Companies, 10 Years, $1 Trillion Created

19

They did it with Code Halos

Value Migration

20

Code Halo

Company

2003 Value 2013

Value

Traditional

competitor

2003

Value

2013

Value

Amazon $15 $176 Borders $1.4 Bankrupt

Apple $64 $506 Nokia $77 $7

Facebook Not yet founded $131 MySpace Private $0.035

Google Private, 4 yrs old $355 Yahoo! $41 $34

Pandora Private, 3 yrs old $6 Tower $3 Bankrupt

Netflix $0.7 $21 Blockbuster $4.3 Bankrupt

Totals $22 Billion $1,195

Billion

$127

Billion

$41

Billion


Source : The Motley Fool





Some client voices on Digital: CXOs The Client Challenge

“Advances in technology and shifts in customer

expectations show no signs of abating. They

bring in their wake both disruption and

opportunity. We need to recognize that banking

is a digital business.”

Every business is a digital business. Every

customer is a digital customer. AIG must

evolve to compete

Robert Benmosche, CEO, AIG

Simon McNamara, CAO, RBS

Martin Sorrell, CEO, WPP

"We increased our target for digital to 40%-45% of our

business. If you asked — what do I regret about the

past five or ten years? We didn't go fast enough."

| ©2011, Cognizant

But this creates new

challenges in IT sourcing

and delivery

27

Copyright 2014 Cognizant 28

Foundational Technology The infrastructure,

connectivity, devices and security that bring

solutions to life

Technology & Business Solutions

Applications, business analytics, and process

services to move business from physical to digital

Design Processes, interfaces, and

connections to create improved moments of

engagement

Digital Strategy Capturing the commercial

digital opportunity

Successful digital solutions connect…

DigitalWorks

The Digital Experience

Perceived by customers, employees,

partners, and even devices


Four big issues when outsourcing digital

1. Turning Big Data into Meaning

2. Digitization of Processes

3. Brand Wars via Software

4. Staying Secure






4. Staying Secure


From transactions…


…to Journeys How do you effect events as events are unfolding?

How do you manage overall customer journeys – based on the culmination of all transactions?






4. Staying Secure

| ©2010, Cognizant Technology Solutions 34

Digit realities • Communication costs near zero • Unbundling of humans and information • Coordination costs plummet – external • Cheaper Information is (nearly)

infinite and universal

Widget assumptions • Communication costs expensive • Co-location of humans, information • Coordination costs high (internal ownership) • Information is finite and proprietary


Designed for Widgets….not for Digits

35

The Digitization of Processes


Physical and Virtual Value Chains Harmonized

36

• What goes digital? • What stays physical? • How are the two

harmonized? • What goes

where…and when…and how…any by whom?






4. Staying Secure

© 2008, Cognizant Technology

Solutions.

Confidential

3

8

Most Companies’

Systems

Most Customers

Software as the new

Brand Battleground


“Software is the brand”

01110011 01101111 01100110

01110100 01110111 01100001

01110010 01100101 00100000

01101001 01110011 00100000

01110100 01101000 01100101

00100000 01100010 01110010

01100001 01101110 01100100

And technology becomes marketing.






4. Staying Secure

295 million…

| ©2011, Cognizant

Security is the potential Achilles Heel of Digital

| ©2011, Cognizant

Software is eating the world…

…but don’t let software eat you.

Every company is becoming a software

company

What can we learn from Digital Software Leaders? A culture of security

Top Down: Executive

Commitment

• Full recognition that enterprise

value and brand reputation are

directly tied to digital security

• Focus from the top, infused into

the DNA

• Every product

• Every services

• Every day

“If you spend more on coffee

than on IT security, you will

be hacked. What’s more, you

deserve to be hacked.”

Richard Clarke

What can we learn from Digital Software Leaders? A culture of security

Bottom Up: Gray Hat Culture:

• Think like hackers – Understand the latest risk

– Thrive on the ongoing chess match between black hats and white hats

• Knowing the hacking “state of the art” • Constantly reverse engineering the

latest hacks, and what they might mean to your company

• Baking Security into the offer – From day one – Security for customers, not

captive users – Not the department of “no” – Make cultural room for the

security cynics • Note: If you feel slightly

uncomfortable in their presence, you’ve found the right people

| ©2011, Cognizant

One final thought…

49

| ©2011, Cognizant 50

Why does this all matter?

© 2014, Cognizant

Thank you

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Risks Associated with Offshoring - GARP€¦ · Risks Associated with Offshoring Malcom Frank Executive Vice President, Strategy and Marketing Cognizant Technology Solutions Michael