Information Systems Project Management

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(No Transcript)
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Information Systems Project Management

• Globalization and Outsourcing

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Globalization Class Agenda

• My Background
• Some Background on Globalization
• Why are Global Lessons Important?
• Whats Good About Offshore?
• Where Does It Stop?
• What is Different about Working Offshore?
• What Lessons Can We Draw?

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My Background

• About 30 Years in the Information Technology
  profession, starting as a programmer in COBOL in
  1976
• Worked primarily for Telecom Telecom Services
  companies CP Telephone Company, ATT and CBIS
  / Convergys
• From 1998-2005, final assignment with Convergys
  was program and project director of the Sprint
  Account
• Directed matrixed project team of over 500
  developing 600K Annual Hours of software
• In that assignment, was involved in setting up
  offshore center that now employs several hundred
  developers testers

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My Background (cont)

• In 1998, earned Project Management Professional
  designation (current thru 2010)
• In 2003, entered UCF EMBA Program
• In 2005, exited program the day after I resigned
  from Convergys
• Was headed for career in teaching at college /
  university level, when I got the call to apply
  for another job
• In March of 2006, accepted position as CIO of
  Seminole County Public Schools
• Still teaching in adjunct capacity off and on at
  UCF, Rollins and SCC

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For Today

• Youre welcome to ask me about anything
• But the topic Dr. Jiang asked me to speak about
  is actually Globalization
• A topic that will consume six-eight hours in a
  class Im teaching at Rollins in the Spring, and
  hope to bring to UCF some day
• A topic I lived for my last 4 years at Convergys,
  personally running the numbers as program
  director, doing the headcount allocations as
  project director, and doing ten layoffs in one
  morning as a member of a depleted management team

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The Real World

• This is real life as real as it gets in todays
  world
• And theres no stopping it, so the answer is
  learning to adjust
• As my ex-boss said, its not about those who have
  to leave, its about making the best of what
  remains
• A year later, he was himself downsized, and is
  now quite happy running his own business
• But he was and is -- right
• Lifelong learning has never been so important,
  and its importance will increase

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Some Background on Outsourcing and Globalization

• How it happened at one company The Convergys
  Story
• Convergys contract with Sprint is about to
  expire
• Sprint comes to Convergys looking for more
  aggressive pricing, to match largest competitor
  who has offered cut-rate deal
• Competitor is based in Israel, offshores work to
  India
• Decision for Convergys Come in with similar
  price, or exit business
• Even if similar pricing means moving jobs offshore

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Background Its a Small, Small World

• And its getting smaller
• There are many countries who have caught the
  capitalistic fever in some form, and they all
  want our jobs
• Starting with the lower economic rungs and
  working their way up into the domain of middle
  class, white collar jobs

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Background Data

• Indias middle class is as large today as the
  entire population of the United States
• Per Goldman Sachs, in the next decade more than
  800 million people in China, India, Russia and
  Brazil will be classified as middle class
  (defined as 3,000 per year or more)
• Thats more than the combined population of the
  US, Western Europe and Japan
• A Middle Class needs jobs, and they need goods
  and services

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Background The Effect of the Internet

• The Internet and advancing communications have
  fueled this phenomenon, and will continue to do
  so
• Anywhere, anytime Internet Access enables
  movement of information-based jobs to any point
  on the planet and 75 of todays US economy is
  information-based
• Developing countries with limited infrastructure
  have already leapfrogged the United States,
  Western Europe and Japan
• The most connected country now is in Eastern
  Europe

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Background Its Dynamic

• The new Phenomenon of Backsourcing
• Its not all black and white -- at some point
  many industries will have to deal with its
  implications
• February 2006 Billing World Article, Is the
  Shine off Offshore Outsourcing? makes point that
  especially with high-touch, customer-sensitive
  work US-based companies are reaching the
  practical talent pool limits for offshoring in
  some countries like India (question not whether
  to offshore, but in which cases to do it)
• March, 2006 Business 2.0 article suggests
  outsourcing cost objectives not met 80 of the
  time
• Contractors pay/train less, with predictable
  results
• Less CSR Customer Identity
• Better for commodity puts customer relationship
  at risk

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And the Winners Are Not All Cheering, either

• February, 2006 HindustanTimes.Com article
  Liberalisation vs. Globalisation documents the
  India viewpoint
• Impacts on farmers, factory workers, small
  businesses as global brands predominate
• India more culturally-ready for globalization,
  even while feeling the backlash
• Call center racist abuse
• And the West definition of the term, which is
  often intended to be a one-way street
• Notes Japan China have successfully resisted
  liberalisation, and forecasts less
  Westernization ahead

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Why Are Global Lessons Important?

• Per Gartner in 2003, by January 2005, 1 in 10
  U.S. IT jobs and 1 in 20 non-IT jobs were
  supposed to have moved offshore
• The Internet is opening new, less expensive labor
  markets, as well as new forms of business models
  and new applications of technology - improved
  knowledge access is the great international
  equalizer

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Why Are Global Lessons Important? (cont)

• Technology professionals will likely experience
  the same sort of wage drop as seen in
  manufacturing, and the work is moving offshore
  more rapidly
• This is because its easier to move work across
  computer networks than ship raw materials across
  borders and have to deal with tariffs,
  infrastructure issues, etc
• And its already happening

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Why Are Global Lessons Important? (cont)

• In the IT Industry, offshore spending was
  expected to have tripled in the period from 2000
  to 2005
• Many engineering jobs are already in Russia, U.S.
  tax returns are being prepared in India, software
  is being written and tested in India and
  Singapore China graduates 100,000 engineers and
  scientists annually in one province alone
• In fact, over 50 of 2006 federal tax returns
  were prepared in India
• And over 80 of US MRIs were read there

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Why Are Global Lessons Important? (cont)

• Even local governments are moving work offshore
• Convergys was in the hot seat for a while for its
  part in winning call center work on a State of
  Florida contract and outsourcing some of the jobs
  to India centers it took a lot of reallocation
  of resources to make sure the company could pass
  the red-face test while saying those jobs were
  all in the U.S.

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Why Are Global Lessons Important? (cont)

• This is still a small piece of the whole pie
• According to one recent Forrester research
  article, its only less than two percent of the
  jobs in the IT services category
• According to one federal reserve regional bank
  president, its only one-tenth of 1 of 2002 US
  GDP
• But it will continue to accelerate this is a
  structural, not a temporary change, stories on
  Backsourcing notwithstanding

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Why Are Global Lessons Important? (cont)

• It is becoming more the norm for work teams to be
  both multi-cultural and multi-national
• The India cost advantage is 13
• Russias cost advantage is 16, and their Math
  training is better than in the U.S.
• Competition drives cost reduction imperatives
  that can only be satisfied with offshore mix

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A Somewhat Dated Slide that Makes the
PointAnnual US Dollar Cost for Programmer

• Singapore 19140 Brazil 5950
• Malaysia 8130 Russia 7940
• Vietnam 4110 Mexico 5150
• China 5850 India 6400
• Ireland 23500 Canada 28200
• Philippines 7250
• This number has probably doubled due to supply
  demand conditions

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Why Are Global Lessons Important? (cont)

• Finding the best resource anywhere in the world
  for a given piece of work will be the ultimate
  driver of the final spread of jobs, but for now,
  cost is the primary driver
• But its not as evil and self-serving as it
  sounds its basically market forces unchained
  on a global scale, as the Convergys example shows

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Why Are Global Lessons Important? (cont)

• And as time goes on, our international
  competitors will thirst for more in their quest
  to fight their way up the economic food chain
• India
• Lives under a democracy that is almost 60 years
  old (worlds largest)
• Has a totally free press, and worlds third
  largest educated labor pool
• Yet 70 of people still live in rural areas, and
• Literacy rates hover around 50, but
• Aggressively pursuing excellence in project
  management
• Now outsources some work to China
• Deere turbines now manufactured in India
• Also entering semiconductor manufacturing, per
  March 2006 Business 2.0 news item
• Russia Eastern Europe are beginning to look
  more enticing
• China is busily setting up knowledge center
  business as well as manufacturing hubs

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So How About China?

• CIO Magazine article, Its Cheaper in China,
  September, 2005
• More emphasis needed on precise process
  definition communication barriers than in India
• But Chinese government investing 5 billion in
  English language education at universities
• IT leaders planning to outsource to China within
  next 3-5 years up to 40 from 8
• Labor costs 20 of U.S. lowest real estate/power
  costs PwC estimates 37 savings over India
• Hiring off-shift relationship manager good idea

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More on China

• CIO Magazine article, Making it in China,
  October, 2005
• Logistics costs high in China
• Should use importers/exporters and logistics
  providers
• If labor LT 25 of TC, may want to mfg in West
• Factories not as flexible to design changes
• Supply chain precarious (and manual, with longer
  lead times and higher inventories)
• Govt involved in everything
• Contracts not followed to the letter
• Cash- and relationship-based economic system

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More on China

• Orlando Sentinel Insight article, Should America
  Worry About China, 9/25/2005
• China India now cooperating in recognizing
  common goal of selling to West
• Rejection of central planning playing big role
• Value of human capital in growing global economy
  plays to their strengths
• China GDP growth over twice that of U.S.
• Produces 4 times more engineers than U.S.
• Purchasing power double Japans
• U.S. must increase education commitment to thrive
  in the impending global economic war for jobs

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Why Are Global Lessons Important? (cont)

• Slow but steady redistribution of worlds income
  to be less U.S.-concentrated will continue
• Some jobs will move offshore to service growing
  middle classes there
• Global work mobility will increase
• But Offshore firms will increasingly set up
  operations in the U.S., as well

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Whats Good About Offshore?

• Wider, deeper labor resource pool
• Less expensive labor that drives costs of
  products services down
• Can better service global and offshore customers
  with in-country or near-country presence
• Can more easily staff and work multiple shift
  operations

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Where Does It Stop?

• Nobody has that answer, but
• There is a ceiling on numbers and types of
  companies and jobs that will participate
• Outsourcing is difficult to manage, so its reach
  is more difficult beyond Fortune 500 companies
  unless entire projects are outsourced
• Basic supply and demand should begin to equalize
  the cost as offshore economies heat up and labor
  pools constrict
• Some customer-intensive roles, like business
  analysts, will still attach to time zones
• Niche specialties will move slowly, if at all
• Management resources will be hard to come by in
  some countries until they can be grown India is
  a prime example

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Where Does It Stop?

• With many foreign governments supporting economic
  policies that make it easier for U.S.-based
  companies to set up shop within their borders
  and
• With those same governments pushing both English
  language and knowledge economy education and
• With the WTO aggressively pushing an open borders
  agenda
• This could run a very long course

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Whats Different about Offshore?

• Recent Computerworld Top Five Barriers to
  Offshoring
• Language
• Security
• Lack of Control
• Time Zones
• Political Risk
• Pretty consistent with what weve been saying. In
  India, language not large issue

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Whats Different about Offshore?

• Time
• Zones - e.g., India 9.5 hours different, England
  5-6 hours - can make progress difficult
• Punctuality - e.g., less strict in the Eastern
  cultures, more strict in England
• Management - more concern for deadlines in U.S.
  than anywhere else
• Vacation - dissolving into a figment of
  imagination in U.S., untouchable elsewhere

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What is Different?

• Work-Life Balance
• Most cultures draw a harder line between work and
  home than the U.S. -- dont get between the
  office door and the pub at 430 in England!
• Local Cultural Observances
• In India
• 17 annual national holidays
• Have to start work on auspicious day
• Buildings must be blessed

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What is Different?

• Role of the Family Culture
• In U.S., weve worked hard over the years to
  separate family considerations from the office
• In other cultures, family blessing is a
  prerequisite to taking and staying at a job
• Advancement important to family respect in India
  - Convergys had to create multiple bands to allow
  for frequent promotions

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What is Different?

• Relationship vs. Task Orientation
• In Latin and Eastern cultures, its about who you
  know and how you treat them, versus the U.S.,
  where its more about what you know
• Management Orientation
• U.S. employees tend toward challenging
  management most other cultures are more
  respectful of hierarchies and positions
• In India, they hate to bring you bad news
• Body Language
• In India, a head shake (side-to-side in a sort of
  circular motion) signals understanding, not
  disagreement
• Decision Making
• U.S. notorious for making decisions quickly
• French will agonize over a decision
• Chinese Mexicans may not make a decision until
  theyve looked into your soul

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What is Different?

• Hiring and Retention
• Hiring practices will be different in India
• Retention is generally a big issue, so attrition
  will be higher - average tenure is 2-3 years in
  an economy where moving frequently is customary
• Retention of management is even worse - economy
  has produced many skilled workers, but is still
  struggling to produce enough managers and leaders
• Infrastructure
• Cant count on what we have in U.S. for example,
  in India
• Road system is inadequate, not having caught up
  with growth in employment centers
• Most employees do not drive - Convergys runs
  seven bus routes to get them from home to work
  and back, every day (not that theyd want to
  drive)
• Not unusual for electrical outages to occur daily

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One Other Long-Term Issue

• The Onshore Talent Erosion is a concern
• Gartner 2004 report urged U.S. based companies to
  consider risk of losing internal expertise while
  considering the cost savings of outsourcing
• Movement of too many lower-level jobs may be
  tempting, but it erodes entry level job demand,
  which in turn could mortgage the future of a
  company that gets too aggressive
• And the economic impact of that talent erosion is
  real
• Lower domestic jobs and wage growth
• Higher unemployment cost burden
• Reduced spending

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What Lessons Can We Draw?

• Cost and global service drivers make it unlikely
  that the train will slow down
• Doing this isnt as easy as developing the
  spreadsheet models - operating in and blending
  multiple cultures is hard work
• There are limitations to how many US-Based jobs
  will move, and most Fortune 500 companies will be
  hitting those ceilings in this decade (Convergys
  is close)

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What Lessons Can We Draw?

• Free economies aspire to have a strong middle
  class those that are not free need them even
  more governments that get this will push for
  their piece of the pie
• The worker of the future will increasingly be
  working as part of multi-national team
• Leadership will require more flexibility and
  awareness to deal with cultures and US staff
  backlash to off-shoring of work

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What Lessons Can We Draw?Points on Successful
Outsourcing

• From an October 2005 CIO magazine article
• Pay close attention to managing customer/vendor
  relationships
• Transaction relationship where outsourcing
  targets a well-defined, repeatable process are
  usually successful, but can be drag on innovation
• Outsourcing risk increases as client/vendor lines
  blur Co-sourcing and strategic partnership
  relationships are generally less successful

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What It Means in General

• Emerging countries like India, China, Russia
  Brazil will advance as consumers but at their
  own price points
• The US labor force will have to work even smarter
  to maintain a price differential
• Commodity labor will continue to move offshore
• Global businesses will produce to the new price
  points, using labor across the globe
• The U.S. technology workers future will include
• More frequent job changes accompanied in some
  cases by lower wages
• More frequent relocation, more frequently to
  international locations
• More constant learning and training, including
  mastering foreign languages in order to maintain
  employability

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What It Means To Us

• We do not compete for jobs in a domestic labor
  pool its largely global now
• Our educational systems will have to compete with
  systems in other countries where students spend
  up to twelve hours a day on their studies
• This is the reason I took the schools CIO job,
  and what keeps me awake at night
• We must do what is needed to stay competitive in
  this shrinking world

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What Do We Do About It?

• In Ron Michaels Marketing EMBA class, we talked
  a lot about sustainable competitive advantage
  the thing that sets you apart from others in your
  market
• Tariffs and economic barriers provide some
  short-term emotional gratification, but are not
  sustainable in the type of free economy that we
  espouse - companies are too clever
• Anti-outsourcing web sites wont help
• Neither will white collar unionization
• And tax incentivizing corporations to keep jobs
  here treats the symptom vs. the cause

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What Do We Do About It?

• Some ways we can deal with outsourcing
• With a positive attitude that makes one a master
  of fate versus a victim
• Workers should consider international assignments
  and different types of jobs/industries where they
  can use their skills
• Workers also need to determine how to
  characterize their contribution to an employers
  bottom line
• Corporate clarity during outsourcing initiatives
• Skills retraining programs
• Increased pension/insurance portability
• Increased adaptability innovation
• Individual initiative continuous learning

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What Do We Do About It?

• The Current Job Outlook is Good in at least a
  couple of areas
• Per May 2006 Business 2.0 The Next Job Boom
  article, nine of top ten hot jobs for the
  foreseeable future are in Healthcare and maybe
  surprisingly IT
• The tenth is college instructor (Paul, there is
  hope!)
• But that same article suggests that productivity
  gains are about exhausted
• Meaning exhortations to Work Smarter to combat
  the offshoring of jobs is fast becoming a stale
  strategy, especially for lower level and
  commodity service positions

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What Do We Do About It?

• So on a deeper thinking level
• If you define the market as the global labor
  pool, Id suggest that the problem definition is
  What does the United States consider the
  sustainable competitive advantage of its
  workforce?
• Nobody has a complete answer, but I have an idea
  for you to consider (developed since I began
  working with technical staff in India)

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What Do We Do About It?

• One Indian entrepreneur I met recently has earned
  a mini-fortune in amassing a string of 7-Elevens,
  and now is hiring U.S. MBAs to expand
  horizontally into other businesses and strengthen
  his management team
• Three of my Class of 2005 have been working with
  him
• Another who is an executive of several
  businesses using a US-based sales force and
  management team, and India back office staff
  has told me that we need to stop worrying about
  the lower food-chain jobs and concentrate on our
  ingenuity
• Still another an ex-Convergys colleague with a
  Harvard MBA who bought and sold an India call
  center, and is dabbling in new start-ups is
  advising US clients to redirect from the cost
  focus and sharpen the saw on the quality side to
  hold their business

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What Do We Do About It?

• Three very different opinions, but with a common
  theme
• The US has lost its cost edge
• Productivity gains working harder or smarter at
  task work will not regain that edge in
  commoditized work when its 30 cents to the US
  dollar (or less!) on the world stage
• The remaining US edge is in creativity and in a
  multi-disciplinary focus to opportunities
• Creating the Googles
• Being the engineer who knows how to manage a
  multi-cultural team
• Being the Project Manager who knows how the
  project fits the strategic business context
• Being committed to continuous self-reinvention

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Enough of the Slides, Already

• So what are your questions?
• And what are your thoughts?
• I leave you with a short article, Flat New
  World, that sums it all up for the field of
  project management, and for todays global work
  environment
• Be the best at something, focus on a skill area
  that requires face-to-face contact, and commit
  yourselves to continuous learning