R Morgan

Managing Global Processes
and Remote Teams

2004 GIT All rights reserved 2
IT Challenges
IT Departments worldwide are challenged to
simultaneously:

Realize Cost Savings/Containment

Ensure the Stability/Availability of Production
Environments

Enable New Business Strategies
IT Outsourcing
Strategies
Companies are:
Reshaping according to core competencies, bringing
greater value to the customer and higher productivity to
the company

Making outsourcing a long term strategy instead of a
tactical solution

Hoping to achieve numerous benefits from appropriate
outsourcing
Increase Agility
Rapidly Capitalize on Emerging Opportunities
Get Products to Market Faster
Realize Tremendous Cost Savings
Mitigate IT Risk
Offshore Outsourcing
Trends
META Group, October 2004 (Penni Sanchez, Alan Katz)

By 2006, Most IT Organizations will have an Offshore
Strategy
Offshore Outsourcing Market Exceeds $10 Billion
Average Enterprise to Offshore 60% of Application Work by
2006
Political Backlash Toward Offshore Not Deterring Market
Adoption
Offshore Outsourcing Market to Grow 20% Annually
Through 2008
IT Outsourcing Trends
Offshore Outsourcing Trend Still Gathering Momentum

Gartner predicts that one out of 10 jobs with US-based IT vendors
and service providers will be staffed offshore by the end of 2004

Jones, Lang, and LaSalle, Inc. study states that 31% of the
companies surveyed had offshored some of their jobs. An
additional 32% said they planned to do so in the next three years.

Ross Researchs prediction of the top 10 offshore outsourcing
trends of 2004:
Outsourcing contracts will widen in Scope, Geography and Price in
2004 as offshore elements become more global and accepted
The number of countries providing offshore outsourcing services will
rise substantially in 2004

Indian IT Services
the Main Player
0% 10% 20% 30% 40%
India
China
Mexico
Ireland
Canada
Malasia
Philippines
Russia
Singapore
Computerworld Survey
of IT Managers in US
June 2004
US Managers Currently Outsourcing IT Work
to the Following Countries
Top Indian
Vendor Growth
TCS Infosys Wipro*
Comparative Parameters (FY04)
Sales Growth % 32.6 36.7 35.1
Profit Growth % 27.5 25.5 N/A
Operating Margins % 27.3 25.5 22.0
*Only for Global IT Services
Source: META Group, July 2004
More Outsourcing
Predictions
Some Changes on the Horizon

TPI (Greg Blount and Paul Schmidt, 2004) - We believe that the
Indian market will continue to experience increased competition.
What India has done is to create a blueprint for other countries to
emulate so it should be expected that other locations such as
China, the Philippines, Eastern Europe, and South America will
increase their capabilities and become more competitive.

Also:
Managing risk through multi-sourcing through multi-
geographies will continue and grow
Competition will provide more downward pressure on rates
and pure play Indian companies margins will continue to erode

Giga Research predicts that attrition will skyrocket in the Indian IT
services arena in 2004.
Prominent Causes of
Outsourcing Failures
23%
13%
11%
8%
3%
15%
11%
11%
5%
Buyer's unclear
expectations up front
Poor governance
Poor Communication
Provider's poor
performance
Buyer's multi-supplier
environment
Interests become
misaligned over time
Not mutually beneficial
Other
Poor cultural fit
Source: Outsourcing Center 2004 Survey
Other Outsourcing
Inhibitors
Geopolitical Risks

Time Zone Differences

Lack of Infrastructure

Readiness of Client

Clients Fear of Losing Control

Loss of Critical Skills

Clients Fear of Loss of Confidentiality

Lack of Understanding of Business
Client Challenges
Clients that understand the success factors of outsourcing, and
can also mitigate the inhibitors, will achieve significant benefits

Companies need to be ready - which means experienced,
capable internal Project Management and standardized
processes

Top down management support required for successful
outsourcing relationship

Companies need to be flexible and embrace mixed models
according to project objectives
Provider Challenges
Providers of outsourcing must understand the challenges of IT
departments to reduce costs, support business strategies, and
maintain aggressive technology agendas

Providers must eliminate many of the inhibitors to successful
outsourcing

New providers need to differentiate themselves from the usual
outsourcing paradigm by combining:
Compelling Low Cost
Same Time Zone Communication
Collaborative End-to-end Perspectives
Cultural Affinity
Scaleable for Small/Medium Companies
Strong Local Project Management
Outsourcing Enablers
Client/Provider Relationships, Trust, Flexibility
Comprehensive Contract/Project Management
Large Pool of Highly Skilled Resources
Advanced Infrastructure, Telecommunications,
Facilities
Mature Delivery Models
Business Oriented People Offshore
SLAs/Metrics Well Defined and Understood
Clear Objectives
Top-down Support
Premise for New
Outsourcing Model
Successful IT outsourcing does not have to be
limited to the big tech centers in India

As long as the provider country has:
Large technically educated middle class
Stable, modern infrastructure
Business experience

If providers can be from anywhere that satisfies above
requirements, why not reduce inhibitors such as time zone
differences, cultural misunderstanding, communication
issues
New Model Differentiators
Cost Equal to or less than competition
Solution Oriented Interactive, collaborative, and end-to-end business perspective
Time Zone Work day corresponding to that of the US
Culture Westernized culture and values correspond to that of the US,
facilitating communication and understanding
Geography Provides geographic alternative
Communication English speaking dialect, culture similar to US
Scope Services are scaleable and available for small and medium companies
Offshore
Differentiators
On-site Support Local staffing, project management and bench strength through
staffing company partnerships
US Project Management Experienced, US-based management team for effective project
management
Onshore
Differentiators
IT Outsourcing
Cost Model
Application Development
Sourcing Cost Model
AD Project
Phases
Efforts on
a Phase
Billing Rates
Additional
Project Costs
Effectiveness Communication
External/Market
Adjustment
Technology
Expertise
Project
Management
Expertise
Business
Domain
Expertise
Language
Collaboration
Project Sourcing Cost Factors Project Sourcing Cost Adjustments
Source: Gartner 2004
GITs Value Proposition
Compelling Low Cost and
Low Total Cost of Ownership (TCO)
Rates equal to or less than Eastern companies and with less
overhead required due to local presence
Same Time Zone Communication
Work day corresponding to that of the US, facilitating communication
and providing geographic alternative to Eastern companies
Collaborative, End-to-end Business
Perspective
US and International business/technology experience of executives
provide mature, interactive, big-picture business view
Measurable, Agreed Upon Expected
Results
Project and life cycle processes ensure collaborative
measures of success and prompt delivery of expected results
Exclusive, Dedicated Resources
Flexible staffing models allow assignment of committed resources
to client projects and ongoing engagements
Strong Local Project and Risk
Management
US based executives with extensive project management and risk
management experience ensure project control and success
Accessible to Small/Medium Size
Companies
Scaleable services allow access by small and medium
size companies unable to attract the attention of large providers
Cultural Affinity
Westernized culture and values similar to that of the US, facilitating
communication and understanding
Global Intelligence Technology
LLC
USA Sales, Liaison and Delivery
USA Clients
Development Centers
IT Factory and Staffing
Specialized
Subcontractors/Partners
(when necessary)
Service Master
Agreement
Global Intelligence Technology, LLC (GIT)
Service Master
Agreement
Mirroring
LA Clients
Argentina
USA
GIT Corporate
Structure
Latin America Shows
Outsourcing Promise
Study by Jones, Lang, LaSalle, Inc., reported by the Wall
Street Journal, Oct. 2004, (Ryan Chittum)

Latin America comes out ahead of India and China in the
offshoring equation when factors like labor quality, labor
supply, and time-zone differences are taken into account.

Increasing need for work forces that speak Spanish could
mean more jobs for places like Mexico City and Buenos
Aires.

Ranked by the size of the labor pool and the quality of labor,
the top city was Manila, the Philippines. Sao Paulo; Mexico
City and Buenos Aires were next.
Why Argentina?
Cost
Among lowest countries for global outsourcing

Superior location advantages: time zone,
distance, responsiveness

Infrastructure
Solid communication and power-supply
infrastructure development over the last ten
years
2001 most significant renewal of PCs and
servers in Latin America
Commitment to innovation and ongoing
investment in infrastructure

Human Resources
Large, highly skilled IT work force
Proven competencies in developing and
maintaining large-enterprise infrastructures
and programs
Workers possess a wide range of technology
skills, business background, and client
interaction skills

Available Skill Sets
University Students per 100.000 inhabitants
14
35
38
40
36
Knowledge Jobs
Globalization
Economic Dynamism and Competition
Transformation to a Digital Economy
Technological Innovation Capacity
Ranking of Argentina according to Meta patterns
Overall Ranking 32
Argentina is ahead of:
Poland 40
Turkey 36
Slovenia 36
Russia 34
China 34
Philipines 34
India 33

Argentina is behind:
Czech Rep. 28
Brazil 27
Hungary 27
Estonia 27
Best Ranking 1
Worse Ranking 49
Source: Meta Group, March, 2003
Argentina is at the same level of many of todays outsourcing
leaders in terms of its infrastructure, workforce, and countrys
commitment to change.
Why Argentina?
Outsourcing Agreements define Statements of Work (SOWs), Service Level
Agreements (SLAs), Operating Principles and Metrics
Project Management Processes and Tools used offshore/onshore
Standardized Development Life Cycle being used offshore with phase
deliverables defined in detailed schedules
Risk Assessments and Contingencies produced as early phase deliverables
Onshore/Offshore Architecture:
VPN or Frame Relay connection to US allowing offshore developer access to shared
files
Same firewall rules apply as currently in place at company
Repository file servers may be required onshore if deemed appropriate by client
Reporting
Detailed Project Status Report weekly
Executive Status/Early Warning Report monthly/ad hoc
Ongoing Issue Log maintained and reported
Tools
MS Project, Configuration Tools, Collaboration Tools (as required by client)
Processes/
Methodologies
Contract/Agreement
Structure
Master
Contract/Agreement
Operating
Principles
SOW 1

SOW 1

SOW N

SLA 1

SLA 2

SLA N

Metrics
Definitions

Defines the legal
terms of the
agreement
Defines the
procedures shared
between client and
outsourcer
Specifies the metrics
to be used (context
and content)
Defines the
acceptance
criteria
Defines the work
to be performed
Project
Organization Sample
Project Director
CUSTOMER
Project Manager
PMO
Business Systems
Technology
Project Manager
PMO
Business Systems
Technology
PROVIDER
Projector Director
Communication
Reporting
STEERING COMMITTE
(weekly)
Project Directors
Project Managers (Ad-hoc)
Project Plan
Issue Log
To Dos
Risk Management
Early Risk Assessment with Impacts/Mitigators

Robust Project Management Processes

Software and Data Backup and Recovery

Physical Site Security

Business Continuity Protection

Infrastructure Redundancy
Knowledge Transfer
Create Knowledge Transfer Plan with detailed responsibilities

Start with pilot

Maintain employees offshore

Understand cultural differences

Visit offshore facilities - establish relationship
Global Outsourcing
Models
Offshore
Onshore
Mixed
Completely outsourced
to single offshore
provider
Riskiest
Bring offshore resources
to local geography
Costlier, more
overhead
Combination of onshore/
offshore
Most effective
model
On-site/Off-site
Resource Mix
On-site/off-site mix varies by project:
Size of project
Complexity of project/technology
Level of specificity of requirements
Duration of project

On-site team is critical and must be skilled in
global projects
Technical translation
Cultural differences
Compliance with quality standards
Commitment to plan
Application
Delivery Model
Architecture Integration

Development of Tools,
Utilities & Middleware

Report Creation
User Interface Design

Iterative Development
Application Maintenance
& Enhancement

Package Customization
Conversion

Highly Specified
Development

Re-engineering
Unique/
Creative
Efficient/
Repeatable
Low/Freestanding High/Interactive
Required Client Interaction
Task
Characteristics
Source: Clarity Consulting, Ian Hayes
Choosing the
Right Partner
Agile Methodologies
Unique/
Creative
Efficient/
Repeatable
Low/Freestanding High/Interactive
Required Client Interaction
Task
Characteristics
Source: Clarity Consulting, Ian Hayes
Offshore Delivery Model On-site Staffing Model
More Open Culture
Robust Project Management Processes
Hierarchical Culture
Offshore Delivery Model Mixed Delivery Model
Other Model
Characteristics
Parameters
Ratio of onshore to offshore
Location of data, source code
Location of computer resources
Project governance
Interfaces - who works with who
Level of knowledge transfer needed

Logistics
Communications
Data
Telephone
Video-conferencing
Face-to-face
Collaborative Work Environment
Support Tools (project management, configuration, testing, QA)
Travel
Thank You!
Carlos DElia CEO
Robert Morgan EVP & COO

R Morgan

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Managing Global Processes

and Remote Teams

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