Transcript Best Practices in IT Outsourcing William Liu Chairman, Stream Global Pte Ltd

Best Practices in
IT Outsourcing
William Liu
Chairman, Stream Global Pte Ltd
What Is Outsourcing?
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Outsourcing is contracting with another
company or person to do a particular
function
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The external firms that are providing the
outsourcing services are third-party
providers, or as they are more
commonly called, service providers
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Outsourcing is sometimes referred to as
Business Process Outsourcing (BPO) &
Off-Shoring
Types of IT Outsourcing
Applications
Research &
Development
Business
Functions
(HR/Payroll/
Finance/etc)
IT Security
Infrastructure
(Desktop/
Desk-side)
Data Centre/
Business
Continuity
Call Centre
Why Do Organisations Outsource?
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Lower total cost of ownership (lower permanent
headcount cost)
Access to a larger skilled IT workforce than what is
available in-house
Focus on Company’s Core Buisness
Tap Into Innovation/Ability To Respond
Ensure consistent delivery via Service Level
Agreements (SLA)
Manage Outcome versus Resources
Overall, to reap better value
Stages of Outsourcing
Strategic Thinking
• To develop the organisation's philosophy about the role
of outsourcing in its activities
Evaluation and Selection
• To decide on the appropriate outsourcing projects and
potential locations for the work to be done and service
providers to do it
Contract development
• To work out the legal, pricing and service level
agreement (SLA) terms
Outsourcing management or governance
• To refine the ongoing working relationship between the
client and outsourcing service providers
Criteria For Selecting Outsourcing Partner
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In depth understanding of customer
requirements
Value for money
Able to deliver quality service on time
Cultural match; Responsive & easy to work with
Proven track record
Strong change management methodology
Use of world-class frameworks and tested
methodologies such as CMMi, ITIL, ISO, etc
Global Footprint
Key Ingredients For Successful
IT Outsourcing
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Top management commitment
Clearly defined Service Level Agreements
Trust between customer and supplier
Track changes & measure outcomes
Open and timely communication & knowledge
sharing
Integrated customer and supplier team that
works together as one team – form a “customersupplier partnership” [e.g.: before the contract is awarded,
customer and supplier are on opposite sides of the table, but once the
contract is awarded, they are on the same side facing the end-users]
Some Case Studies
From Singapore
(1) Singapore Government IT
Infrastructure Outsourcing
Awarded February 2008
(SOEasy)
Standard ICT Operating
Environment (SOEasy)
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Largest public sector information technology project in
Singapore
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Effort by Government to standardise desktop computing
system is a world first
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Users: 60,000 civil servants in 74 government agencies
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Expected savings: 28% of operating costs or S$500
million over 8 years
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Consortium: EDS, Singapore Computer Systems (SCS),
Alcatel-Lucent, Cisco Systems, Microsoft, FujiXerox,
SingTel, Frontline, Avanade
Features of SOEasy
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Harmonising desktop, messaging and network
environments across all government agencies
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Introduction of collaborative tools such as instant
messaging, desktop video conferencing services
and whiteboard sharing
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Greater mobility as officers can seamlessly access
government resources from anywhere, at anytime
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More regular and non-intrusive security updates
(2) Web-based Electronic Business / Company
Registration & Filing System For Singapore
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ACRA outsourced the BizFile application,
infrastructure, hosting and helpdesk to IT
Service Co, Singapore Computer Systems
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Reduces business/company registration &
filling times from days to minutes due to
streamlined and automated processes
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Improves compliance by enabling
monitoring of statutory disclosure
requirements
(3) Call Centre Outsourcing
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Organisations outsource call centre building and management to service
providers such as Singapore Computer Systems (SCS) & NCS
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SCS designs & builds fail-safe telco-grade call centres
 e.g. StarHub (Singapore), StanChart (Singapore), Samart (Thailand),
Hutchinson (Indonesia)
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Managed call centre services
 Over 200 seats
 In-bound and out-bound calls
 State-of-the-art technology
 Real-time service tracking
 High service availability
 Sample customers: ACRA, MOM, MINDEF, Temasek Poly
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Enhance customer interaction experience through multi-channel touch
points (Phone, Email, Fax, Web, Online Chat, etc)
(4) Business Continuity:
Singapore is the first in the world to have a Business
Continuity/Disaster Recovery Standard
SCS is Asia’s Top Business Continuity
Provider of the Year (2007)
SCS’ Business Continuity Centre:
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Established since 1987
Over 100,000 sq ft of space
Over 150 customers outsource BC/DR to SCS
First batch to be certified as Full BC/DR
Provider based on Singapore’s Standards
(2005)
First in Singapore – ISMS Certified for BC/DR
First in Asia Pacific
to launch
Mobile Business
Continuity Office
(Feb 2007)
(5) Application Outsourcing to Singapore by
Global Publishing House
Business Times, 9 July 2007
Singapore was first of all
selected as the best place to
conduct business…excellent
infrastructure, strong legal
framework, reputation as a
trusted business hub
Wiley-Blackwell was looking
for a partner with a successful
track record of implementing
Microsoft-based applications
and integrating systems in
diverse domains…SCS
seemed to be the best fit in
terms of understanding who
we were and what we required
Application management
development services for
SCSand
Confidential
Wiley-Blackwell’s core publishing applications in UK & USA
Outsourcing
vs
Best Sourcing
(Adopted By Infocomm Development
Authority (IDA) of Singapore)
Outsourcing ≠ Best Sourcing
Best Sourcing
Outsourcing
If private provider
is more efficient
• Finding the Best Source of
Provider
• Engage Private Sector
Provider if it is more
effective and efficient
In-sourcing
• If in-house team is more efficient
• Functions may also be in-sourced
to other public agencies
Organisations have a choice of whether to
Best Source or Outsource
Competitive Considerations for
Best Sourcing
Cost Efficiency
(labour, infrastructure, tax and
regulatory costs)
Conducive business and
living conditions
(political stability, robust and trusted
infocomm infra quality, IPR, Cultural
adaptability, data protection)
Quality of Human Capital
(availability and skills,
education and language,
attrition rate)
Best Sourcing Drivers & Obstacles
Fear of change & unknown
Lack of competencies
Staff issues
Lack of internal measures
Fear of loss of control
Budget cuts
Rising public expectations
Limited resources to meet new challenges
Cost savings
Focus on core
How IDA built the IT Outsourcing
Industry in Singapore
Increase Revenue & Employment
Stimulate Demand
Public Sector Demand
• Leverage the
government’s BestSourcing Efforts
• Encourage foreign
companies to work
with local companies
•Leverage inter
agencies campaigns
(e.g. MOF)
Private Sector Demand
• Demand aggregation
• Work with key verticals to
seed projects: Transport &
Log, Finance, Healthcare,
Manufacturing
Enhance Supply
Capability Development
• Enhance companies’
capabilities through
certification programs (e.g.
eSCM) & formation of industry
associations
• Develop manpower
• Foreign demand inflow such capabilities at all levels through
BPO manpower framework,
as shared service centres
courses & seminars
• Aggregation of SMEs
• Upgrade Infrastructure
IDA’s Industry Development Efforts
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Promote Singapore as a global outsourcing hub
for high value and mission critical activities
 Focus on attracting shared IT services & BPO operations via
supporting product development/pilots
 The hub and spoke model
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Ensuring a conducive business environment
 Ensure competitive overall business cost
○ Includes Intellectual Property protection, security, data
protection, etc
○ Efficiency in preventing defects/re-do
 Develop manpower competencies
 Support development of industry standards, e.g
Singapore standard on BC/DR
Sample IDA’s Outsourced Projects
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IT Services
 IT support (including Technical &
Applications Support &
 Applications Development
○ Tax filing & Assessments
○ Immigration & Checkpoint Control
○ Work Permits & Employment Pass
○ Housing applications
○ Traffic Management & Control
○ Vehicle Licensing
○ Manpower Management
○ Hospital Systems
○ eGovernment Applications
 System Administration and Operations
Sample IDA’s Outsourced Projects
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Document Management
 File Registry
 Digital Archive
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Library Services
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Administrative Functions
 Payroll processing
 Claims processing
 Cheque Processing
 Customer service counters
 Training Administration
Market Tested Projects (Feb 03 – Oct 05)
128 Projects(59%)
Outsourced
Value of contracts: S$179M
Annual operational cost
savings: S$25M
90 Projects (41%)
In-sourced
• Tends to involve small scope
• 72 (80%) involve less than
10 headcount
Some Outsourcing
Statistics & Information
Outsourcing Market Size
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The size of the global BPO market by 2007 would be
US$173bn (Source: Gartner)
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BPO market in the Asia-Pacific region, excluding
Japan, to rise from US$7 billion in 2006 to US$15
billion by 2011, recording a compound annual
growth rate (CAGR) of 16 percent (Source: IDC)
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Singapore Business Process Outsourcing (BPO)
market is expected to grow from US$565 million in
2007, at an average annual rate of 12.7 per cent till
2011 to reach US$900 million (Source: IDC)
Some Global Outsourcing
IT Service Providers
Top 30 Countries for IT Outsourcing
(from Gartner)
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Americas
 Argentina, Brazil, Canada, Chile, Costa Rica,
Mexico and Uruguay
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Asia/Pacific
 Australia, China, India, Malaysia, New Zealand,
Pakistan, the Philippines, Singapore, Sri Lanka
and Vietnam
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Europe, the Middle East and Africa (EMEA)
 the Czech Republic, Hungary, Ireland, Israel,
Northern Ireland, Poland, Romania, Russia,
Slovakia, South Africa, Spain, Turkey and Ukraine
Positive Country Factors For IT
Outsourcing
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Conducive and safe business environment;
i.e. easy to establish and conduct business
Availability of physical (airport, seaport, etc)
and IT infrastructure & connectivity
Top-class educated talent pool
Strong legal framework and protection of
intellectual property
Vibrant economy & stable government
Free from natural disasters
Competitive costs
Singapore’s IT Profile
Households with computers:
Households with Internet access:
Household broadband penetration:
Business broadband adoption in 2006:
Residential broadband subscriptions:
Corporate broadband subscriptions:
Total wireless broadband subscriptions:
Mobile phone penetration:
3G subscribers:
Total SMS sent:
IT spending for 2006:
Infocomm industry revenue in 2006:
78 percent in 2006, up from 74 percent in 2005
71 percent in 2006, up from 66 percent in 2005
72.9 percent in August 2007; on track to
achieving goal of 75 percent by year-end
Less than 10 staff (44 percent); 10-49 staff (69
percent); 50-249 staff (83 percent); 250 and
above (99 percent)
848,300 in Q3 2007 compared to 546,800 in Q3
2005
86,800 in Q3 2007 compared to 59,200 in Q3
2005
2 million in September 2007
110 percent in August 2007
1.44 million in Q3 2007 compared to 66,200 in
Q3 2005
1.02 billion in August 2007
US$4.74 billion, projected to hit US$5.03 billion
and US$5.34 billion in 2007 and 2008,
respectively
S$45.4 billion (US$31.3 billion), 19.9 percent
increase from 2005; domestic revenue 36
percent, export revenue 64 percent in 2006
Singapore’s IT Profile
Projected SMB software-as-a-service
US$3 million
spending for 2007:
Per capita public sector IT spending in 2006: US$152.89. In Asia-Pacific, Singapore ranks
third after New Zealand (US$198.78) and
Australia (US$193.82), in terms of per capita
spend on IT in the public sector
Desktop PCs shipped in 2006:
365,084 units, projected to hit 396,881 and
402,014 units in 2007 and 2008, respectively
Portable computers shipped in 2006:
451,990, projected to hit 609,981 and 805,618
units in 2007 and 2008, respectively
x86 servers shipped in 2006:
29,712, projected to top 33,254 and 34,064
units in 2007 and 2008, respectively
PDA/handhelds shipped in 2006:
29,000 units, projected to fall to 20,700 and
17,000 units in 2007 and 2008, respectively
Software vendor revenues in 2006:
US$641.3 million, projected to top US$787.8
million and US$728.1 million in 2007 and 2008,
respectively
Security vendor revenues (include software, US$129.4 million, projected to hit US$146.6
hardware and services) in 2006:
million and US$162.8 million in 2007 and 2008,
respectively
Singapore’s IT Profile
Storage hardware revenues (include tape
drives, tape automation, fiber channel
switches, external disk storage systems) in
2006:
Discrete outsourcing market size (where a
select component of a company's IT
environment is outsourced):
Enterprisewide outsourcing market size (a
comprehensive outsourcing contract which
includes more than one discrete
component):
IT manpower:
US$207.06 million, projected to drop to
US$175.07 million and US$174.48 million in
2007 and 2008, respectively
US$351.96 million in 2006, projected to top
US$401.84 million and US$436.88 million in
2007 and 2008, respectively
US$235.07 million in 2006, projected to top
US$243.78 million and US$251.94 million in
2007 and 2008, respectively
130,400 in 2007, 8.9 percent increase from
2006; 119,700 in 2006, 7.5 percent increase
from 2005. Government aims to create 55,000
new infocomm jobs by 2015, pushing the total
number up to 170,000
Average annual salary of IT professionals in S$64,943 (US$41,501), making Singapore IT
2006:
pros the second-highest paid after Hong Kong,
according to ZDNet Asia's IT Salary 2006
survey across seven countries
Mongolia in
IT Outsourcing
How Mongolia Can Be A Niche Player?
Identify Areas of Strength: costs, focus
 Investment on Human Capital
 Continuous Upgrade of IT Skills
 Investment in IT Infrastructure
 Learn From and Work With Others Who
Have Done It (e.g. Singapore, Korea,
India)
 Market Its Services and Strengths
 Government Policies & Support
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Thank You
For Your Attention! 