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Executive SummaryAs organizations expand globalmeet these demands, many comhas been on cost savings due tolocations. Companies often tranresponse to declining margins. The goal for most offshore progit in cost-advantaged areas. OnGartner reports that an engineeIndia costs just $25.1 A successcost savings of 70%. Cost savings, however, are a onagainst the prior year. Managemgain. In the second year, baselincost savings are not forthcominmarkets like India, 2 costs actuaEuropean-based team, but the In response to this “second yeabased decision to move offshorstrategy. This often includes exlocations around the world to mdescribes this productive comb Once an organization accepts thbegin to explore a broader apprgoals. Discussions no longer cechallenges of productivity, qualnew questions for corporate IT

1 Gartner Research: “Five Reasons Why2 Gartner Research: “Positions 2005: G2005

May 2006 | White Paper | Copyright Li

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zations are under increasing pressure to maximize ourcing, while mitigating single-source and single-

isks. Read on for eight best practices that will ensure

ssful multishoring strategy.

ly, demands on IT departments increase exponentially. To panies outsource IT services offshore. The traditional focus

the increased availability of lower cost skill sets in global sition offshore aggressively to capture cost savings quickly in

rams is to downsize staff in expensive locations, while growing this level alone, the value of an offshore model is compelling. r in the US costs $87 per hour, while the same skill set in ful transition can therefore result in an almost instantaneous

e-time return. The year following the transition looks terrific ent and Wall Street celebrate the move and resulting margin e costs are reset to the existing offshore model and additional

g. In fact, with wage inflation running at 20-60% per year in lly increase rapidly. It is still far less expensive than a US or

year-on-year shift can be dramatic.

r” paradox, companies are looking beyond the one-time, cost-e and are broadening the scope of their global sourcing panding beyond the initial low-cost region into multiple itigate inflationary or geopolitical risks. “Multishoring”

ination of onsite, nearsite, nearshore, and offshore sourcing.

at “outsourcing” is not synonymous with “offshore,” it can oach to achieving its development, production, and support nter on cost. They are oriented around the more strategic ity, and sustainability. This shift in perspective raises a host of leaders and their department heads:

Offshore Deals Fail,” May 31, 2005 lobal Sourcing and the Impact of New Delivery Models on IT Services,” March 1,

onbridge 2006 |

• Which markets offer the best short- and long-term potential? • What about the geopolitical risks in emerging markets? • Which partners provide the most stable coverage? • Can we “future-proof” our sourcing model? • What about communications between partners and internal staff? • How will our global offices react to the new team?

As a leader in multishore support, Lionbridge has helped dozens of large and mid-sized organizations address their global sourcing challenges. This paper will outline ways to better define the questions your organization should be asking, along with eight best practices for global sourcing in the areas of:

• Achieving Organizational Alignment • Partner Selection and Transition • On-Going Team Integration and Program Management

It will conclude with insights from our own field experience in the form of a case study.

The Emergence of a New Model Outsourcing is not a new concept. Anytime a services company is employed, it is an outsourced model. In the 1980s and 1990s, IT organizations turned to outsourcing to manage their data centers or help desks. In these situations, outsourcing partners often hired the displaced staff and even took over real estate from the client. They relied on efficiency gains from a centralized purchasing, training, and staffing model to offset significant upfront costs over the life of the contract. Initial phase contracts were very limiting, however. They were written with ten year terms and support costs only dropped a few percentage points each year after initial savings were captured. In many cases, the same people were sitting at the same desks doing the same job, but wearing a different badge. Resource savings were limited, hence the constrained contract terms. In response, the “offshore” model emerged. Here, the client sacrificed local presence and reliance on in-house staff to capture more substantial savings from partners who managed their work from large centers in lower-cost locations, like Ireland or India. The language was still English and services that used to be face-to-face were delivered via telephone, but the savings were significant. This offshore move brought a host of new challenges. Wage inflation and attrition rates skyrocketed as demand outstripped the supply of talent. Ireland is already priced out of traditional help desk services. India’s rates are nearly doubling annually, as firms attempt to

May 2006 | White Paper | Copyright Lionbridge 2006 |

retain staff they have diligently trained. Into this mix, new competitive markets are emerging, with China leading the way. Brazil, Eastern Europe, Russia, Vietnam and other Pacific Rim countries are eagerly training hundreds of thousands of university students to compete. With so many choices now available, each with unique opportunities and challenges, companies are not faced with a simple A or B decision. Instead, to compete effectively, companies must adopt A, B, C and D, E, F. This is the multishoring paradigm.

Defining the Multishore Opportunity A multishore model moves IT sourcing away from simple offshoring to a full global delivery model. Instead of sourcing work to a single low-cost country like India and working with a

provider that only speaks your language, multishoring moves work to multiple countries and multiple languages. Results from a recent survey conducted by Lionbridge and Ziff Davis Media highlight the improvements organizations now expect from their global sourcing initiatives.3 Multishoring achieves many of these goals through scale, productivity, and risk protection.

Scale Earlier

Outsourcing models were less complicated to adopt since most staff remained intact. But when companies sought to expand rapidly, the provider’s ability to staff up in domestic locations was taxed quickly. While the consolidation of data centers provided additional computing capacity, the human element remained the bottleneck. Clients expected support to remain onsite despite IT recruiting limits. Offshore models are similarly constrained due to attrition and intense competition for new recruits. In addition, offshore markets are maturing quickly. Staff no longer want to work on “entry level” tasks, and delegating work to load-balance is becoming an issue. With a multishore approach, the client and partner can establish a response program that routes workload to multiple locations based on skills required and availability of talent. Projects can also be deconstructed into individual components and sent to individual

3 Lionbridge and Ziff Davis Media “Global Sourcing Strategies” online survey, conducted by The Strategy Group, March 2006


specialists in each support location. Design and engineering may be done in India, testing in China, and help desk support in the Philippines.

Productivity

A key area that is often overlooked when considering global sourcing is the potential for productivity gains inherent in a multishore model. Outsourcing was limited to the same workday schedule of the original staff. Offshoring provided more flexibility, with providers typically offering to work on the US schedule to better accommodate the client teams. In both cases, work was being executed only a portion of the day. Multishoring follows the sun. With locations in multiple regions, redundant skill sets, and knowledge contained in workflows and workspace tools, production can continue 24 hours a day. Testing efforts can begin in Beijing, continue in Chennai, then Ireland, then Brazil, and then with onsite staff in the US. There is no such thing as “down time” in a multishore model. Multishoring responds to the specific goals and requirements of your organization. It is designed to deliver cost savings as well as to maximize quality and results. It enables the complete utilization of a skilled “virtual team,” supported by a nimble combination of onsite, nearsite, nearshore, and offshore locations and resources.

Risk Mitigation

With traditional outsourcing, the risk was in the single-sourced approach. If quality or response eroded, switching costs were substantial, and the loss of institutional knowledge could cripple an organization. Single-location offshoring models are also at risk, but for very different reasons. Here, the provider is expected to manage through staff transitions without loss of knowledge, and contracts are more flexible because of it. The difference is that offshore locations can be in politically unstable markets. A few years ago, India was testing nuclear weapons for use against Pakistan. Should political “unrest” turn into a protracted engagement, companies may find that their backoffice and IT teams are unable to report to work. Multishoring mitigates this by having redundant teams in multiple locations. Similar to disaster recovery centers and redundant data centers, multishoring provides knowledge and skill backups. Having multiple teams engaged with the client organization enables work to be transferred to an alternate location with minimal lead time.


Operating in a Multishore Model: Best Practice Recommendations At Lionbridge, we have identified a series of best practices you can use to integrate a multishore strategy into your global operations. Achieving Organizational Alignment Adopting a multishore model impacts the whole IT team and, depending on the nature of the work outsourced, the entire enterprise. Ensuring the organization understands the objectives, goals, and approach to the model is critical. Knowing the desired outcome and preparing the organization for bumps along the way are the keys to internal success. Lionbridge has identified two best practices for organizational alignment:

1. Secure appropriate sponsorship and buy-in from your organization. Many leaders assume this means ensuring that key business and IT stakeholders are on board. However, these individuals are rarely impacted day-to-day by this shift. To ease transition and guarantee long-term success, communication and buy-in efforts must reach deep into the organization. Focus on current IT “customers” internally and meet with them. Not just the leaders of these teams, but the users. Find the most respected administrative assistant and put that person on a panel to discuss the new help desk support model. Have the toughest product manager participate in the provider evaluations. When word gets out that these individuals were able to express their views, others will feel more comfortable knowing they had direct input in the decision.

2. Identify a particular set of projects or programs to source globally.

Identifying the proper scope for the effort is crucial. Show restraint in the face of monumental ROI analysis. Senior management will want to believe every detail shared by every provider about the cost potential, and, as a result, they will push to include more and more programs into the new model. The reality is, not all programs are well-suited to be moved to a provider. Selected projects should be well established and have enough scale to be externally sourced. Attempting to replace an onsite desktop manager with a remote person in the Philippines may look good on paper, but the return is likely not worth the effort. Start with a well-defined scope, then expand once the model is operational. It is easier and faster to grow a smaller proven model than to build an all-encompassing one from scratch.

Partner Selection and Transition

3. Choose the right size provider for your program or project. There is no such thing as “one size fits all” when it comes to a multishore model. As with any provider decision, selecting the right partner often determines the success of the program. Effective providers offer customized deliverables along with the depth and breadth to deliver your work on time and on budget. Look for vendors with experience operating


in a global footprint and inquire about how they manage their own IT infrastructure. If they are not adopting their own best practices and utilizing their own resources in multiple locations, consider another provider.

4. Find a provider who has the appropriate domain experience. Make sure

your provider has the technical and business skill sets required for your project. While multishoring may be a newer concept, many providers have participated in earlier evolutions of outsourcing and offshoring and have established domain experts along either a vertical or horizontal specialty. Choosing one with experience in the target service or business area will minimize scoping issues and improve the transition experience.

5. Work with a provider with a global footprint to deliver economies of scale

across the board. This seems obvious, but the reality is that many firms will promote their global expertise, but the bulk of their resources are in one primary facility. Be sure to explore the breadth and diversity in both front- and back-end operational capabilities in each of their locations. Recognize that if a catastrophic event in one location requires a shift to an alternate facility, all of the provider’s clients will be attempting to shift to that facility simultaneously. Do they have the scale and expertise in each of their locations to respond to such a situation? If not, then the risk profile is the same as staying with a single-location provider.

On-Going Team Integration and Program Management

6. Look for global program management (GPM) capabilities. Many providers will show a detailed map of all of their locations. This does not necessarily mean that they are operating a multishore solution model for their clients. Evidence of GPM demonstrates that a provider has successfully managed and coordinated programs across multiple geographies. Ask for references and specific examples of follow-the-sun support. Inquire about tools they use to enable transitions.

7. Adopt a governance model. Working with your partner, establish a governance

model that ensures your operations are working and moving in the right direction. Representation from your company’s financial, legal, technical, and operational teams is critical. Governance is different from service level agreements (SLAs). SLAs provide the minimum obligations that both sides must fulfill. A governance plan defines intangibles, such as innovation, process improvement, and mutual investment. Use SLAs with vendors when you are pursuing a simple one-for-one cost-savings model.

8. Establish metrics and requirements with your provider. Agreeing on metrics

helps providers gauge expectations and enable better communication between teams. Ensure ongoing measurement and reporting throughout the contract period, including cost/benefit, operation, and service quality analysis. Identifying focus areas



and reviewing them regularly also allows the provider to alert you to issues that may impact measured performance and helps your teams work together to correct the issue before the next review cycle.

Best Practices Applied: The Lionbridge Approach and Case Study Lionbridge’s strategic global sourcing model is designed to deliver sustainable value across the full application lifecycle of development, testing, global deployment, and maintenance. Inherent to our multishoring model is the idea that certain types of services are better suited for particular locations. With offices in 25 countries, our global delivery model includes strong governance through well-established program management capabilities as well as centers of expertise that provide the breadth and balance organizations seek. As an example of our best practice approach to multishoring, we offer the following case study.

Case Study

A large pharmaceutical company sought to outsource a significant number of applications for ongoing development, maintenance, and enhancement work. The company was open to global sourcing, but wanted to proceed in a cautious and logical manner, with the right balance of cost and risk. The company hoped its global sourcing program would be a blend of low costs and risk, high productivity levels, and close proximity of key resources. Other goals included strong governance to ensure the evolution of key processes and service levels, and sound metrics to facilitate ongoing program quality and goal alignment. The company chose to work with Lionbridge, citing our flexible delivery model, scalability, well-established global footprint, and domain knowledge. Lionbridge helped the company transition to global sourcing in a carefully-planned, three-phase approach:

Lionbridge Global Delivery Model25 countries, 4,000 employees

RelativeExpense

High

Low

Governance

Embracing ClientsEmbracing Clients’’ Geographic,Geographic,Technical and Budgetary NeedsTechnical and Budgetary Needs

Lionbridge Global Delivery Model25 countries, 4,000 employees

RelativeExpense

High

Low

Governance

Embracing ClientsEmbracing Clients’’ Geographic,Geographic,Technical and Budgetary NeedsTechnical and Budgetary Needs

• Phase 1 – A pure onsite model with responsibility for software development transferred from the client to Lionbridge.

• Phase 2 – A blended onsite and nearshore model, with Lionbridge support operations split between onsite, Ireland, and a second facility in Western Europe.

• Phase 3 – A true multishore approach with a blend of skills and resources onsite in

the US (39.6%), nearshore in Ireland (11.9%), and offshore in India (48.5%), managed and coordinated by a team of global program managers.

The results of this multishoring program have been significant, including:

• High productivity levels due to “follow-the-sun” work execution — more than 40 applications now managed across 12,000 miles.

• Resource flexibility and scalability for an increasing number of projects, including application monitoring, maintenance, enhancement, error escalation, problem resolution, and quality assurance.

• High vendor responsiveness to customer requests and requirements. • Deep vendor understanding of customer applications, business practices, and culture,

creating a strong, ongoing partnership.

Conclusion The delivery of IT solutions and business processes requires more than a reactive transfer of work to a single, “low-cost” country. Once an organization understands that “outsourcing” no longer needs to be synonymous with “offshore,” it can begin to explore wider approaches to achieving its development, production, and support goals. This shift in perspective will take the discussion to areas beyond cost. The multishore model is here. It’s time to adopt it. “…the phenomenon of using globally sourced labor has given rise to all the questions and analysis of what is possible remotely or in a distributed fashion. It has shattered myths about the need to have development and consumption in the same place or time zone, or processed by the same culture as the people for whom the work is done.” Gartner4

4 Gartner, “Positions 2005: Global Sourcing and the Impact of New Delivery Models on IT Services,” March 1, 2005


Contact Information

About Lionbridge

Lionbridge Technologies, Inc. (Nasdaq: LIOX) is a leading provider of globalization and testing services. Lionbridge combines global resources with proven program management methodologies to serve as an outsource partner throughout a client's product and content lifecycle — from development to globalization, testing and maintenance. Global organizations in all industries rely on Lionbridge services to increase international market share, speed adoption of global products and content, and enhance their return on enterprise applications and IT system investments. Based in Waltham, Mass., Lionbridge now maintains more than 50 solution centers in 25 countries and provides services under the Lionbridge and VeriTest™ brands.

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Lionbridge 1050 Winter Street Waltham, MA 02451 USA www.lionbridge.com

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