IT Offshore Outsourcing

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IT Offshore Outsourcing

• Offshore outsourcing is not generating the
  expected cost savings promised nor is it pursued
  for cost savings.

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McKinsey Global Survey
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McKinsey Global Survey
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USA is still the leading region for product
designs new product intro.
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Changing World

• Collapse of the Berlin wall
• Leadership change in China
• The European Union

Technology Bubble

• Year 2000
• Telecommunication
• Voice
• Data

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CEO /CFO View of Supplier
Source SDS network software M.L.
Emilliani
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India Attractive IT Outsource Location
High
Infrastructure Geopolitical Risk Incentives
Location attraction
Low
High
Workers Capability
English, Education, Qualification, Cost
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Criteria South East Asia Attraction
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Hourly Wages
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India moving up the value-chain in IT services

• India started by providing Cobol programmers in
  early 1990s
• Moved to porting from Fortran and Cobol onto C
  and Pascal
• Moved to converting legacy systems into simple
  client-server based systems
• Solution provider to Y2K glitch
• Moved up the technology chain to Java and XML
  programming
• Attempting to break into RD in software
  services.

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IT Services
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Multinational IT companies with RD center in
India

• Motorola India Electronics Ltd.
• Novell India Software Dev. Center
• Oracle India Development Center
• Philips Research Center
• Samsung India Software RD Center
• SAP Labs India
• Sasken Technologies
• STMicroelectronics
• Sun Microsystems, India Engineering Center
• Texas Instruments
• Zilog RD Center
• Many others in Biotech and Pharmaceutical
  Industries

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Prior to Outsourcing Evaluate

• Fit between product and where they are mfg.?
• How Supply Chain will work overseas?
• Do lower labor costs really offset shipping fees?
• Who do you want to manage your vendor
  relationships?
• Compete not on
  PRICE,
• but on SPEED FLEXIBILITY

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Offshore Outsourcing dilemma

• Will be decided in 2015
• US aging population growth
• Shortfall in domestic labor supply