can your offshore provider help in business transformation?

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Can Your Offshore Provider Help In Business Transformation?Sudin AptepPrincipal AnalystForrester Research

June 9, 2010


Sourcing & Vendor Management

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Sudin AptePrincipal AnalystForrester ResearchJune 9, 2010

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Theme

Offshore providers fall short ofOffshore providers fall short of delivering true end-to-end business transformation.

However, they can successfully deliver isolated subprocesses or


IT-focused projects.

Agenda

• Why are companies looking at offshore for their transformation projects?

• Types of transformation projects and capability required

• Review of top offshore providers for transformation projects

• Q&A



Cost cutting remains a top priority

Very important Important

“How important are each of the following business goals to your internal IT organization when making software decisions?”

22%

48%

60%

37%

28%

29%

Improve collaboration

Regulatory requirements

Reduce costs


13%

21%

24%

37%

Sustainability goals

Increase innovation

Base: 1,007 North American and European enterprise software decision-makersSource: Enterprise And SMB Software Survey, North America And Europe, Q4 2009

To survive budget cuts, companies cut waste and want to pay as they get value

24% 43%Consolidate enterprise applications

Very important Important

“How important are the following software initiatives in supporting your firm's current business goals?”

9%

16%

16%

25%

24%

23%

38%

42%

41%

43%

Expand use of Agile

Upgrade enterprise applications

Increase collaboration techs

Modernize key legacy applications

Consolidate enterprise applications


8%

9%

8%

17%

20%

23%

Outsource app development

Outsource app maintenance

Increase our use of SaaS or cloud



Cost-saving projects and reducing the application portfolio are top of mind

2% 70%Accelerate cost saving projects

Decrease Increase

“How do you expect the following activities to change over the next 12 months as a result of the current economic conditions?”

15%

6%

4%

3%

2%

24%

39%

20%

55%

60%

App maintenance outsourcing

Defer software spending

Move to subscription models (like SaaS)

Increase ROI reviews

Reduce the application portfolio


34%

29%

18%

20%

19%

26%

Size of internal IT staff

Speed of software upgrades

App development outsourcing


Business roles are as important as IT roles in the buying process

“Who is significantly involved in the decision-making process for selecting third-party IT service providers at the following stages?”

IT rolesBusiness roles


Base: 942 North American and European enterprise IT services decision-makersSource: Enterprise IT Services Survey, North America And Europe, Q2 2009


Theme





Business transformation programs

• Focus on making firms stronger, leaner, and more adaptable by making their operating models, supporting business processes and underlyingsupporting business processes, and underlying technologies flexible, leaner, and more adaptable to change.



Components of the true end-to-end business transformation definition• Executive commitment

Covers three key components people process• Covers three key components — people, process, and technology

• Ability to innovate

• Typically long-term

• Aligned with business strategy and goals


g gy g

Example of a vendor’s enterprise transformation capability:Accenture’s business transformation approach• “High-performance research initiative”: collecting and structuring information and insights on business g gperformance across industry verticals and horizontal processes

– Measuring inputs and outcomes, linking outcomes to metrics, building business blueprints



Example of a vendor’s enterprise transformation capability:Accenture’s business transformation approach (cont.)• “Process excellence initiative”: building a central repository of information, data, and benchmarks p y , ,

– Build process best practices, use metrics to build process KPIs, already more than 10,000 processes covered

•“Predictability and insights at scale” (Don Rippert, CTO, Accenture)

– Build and maintain centers of excellence for defined k (i t l t t t il


key processes (i.e., talent management, retail banking).

Example of a vendor’s enterprise transformation capability:Accenture’s business transformation approach (cont.)• Common tool set and solution architecture for building software packagesg p g

– Central repository for knowledge capturing to drive reuse

– Focus on key platforms (i.e., .NET, NetWeaver)– Standard tools for training and development

• Standard methods for engagement planning and project management


project management– Select projects based on how well they fit

Accenture’s business and technology ambitions.– Leverage global delivery backbone rigorously.


Theme





Why don’t clients think of offshore providers for transformation?• Historic value proposition around cost arbitrage

• Primary capability around technology and delivery• Primary capability around technology and delivery processes

• Limited skills on the business domain side to develop an industry-leading business process

• No business transformation experience in the past, limited business consulting capability


limited business consulting capability

• Typical offshore teams include mostly an army of juniors, and onshore teams are small.


All transformation deals are not the same

• Mega-size corporate/financial transformation – Focus on business re-engineering

• Business process transformation– Process optimization and leadership

• IT apps and infrastructure transformation– Cut waste and make lean.

IT i ti d ti li ti


• IT organization and process rationalization– Focus on efficiency and alignment

Offshore providers build new capability to deliver parts of transformation

20 Entire contents © 2010 Forrester Research, Inc. All rights reserved. Source: Upcoming, “A Strategic Review Of The Top Five Offshore Vendors” Forrester report


Indians have an appetite to grow

Financials for the 12 months ended March 2010, compared with 2009


The top offshore providers made more money during the recession

Financials for the quarter ended March 2010, compared with the same quarter in 2009



How do the top five Indians’ next-gen capabilities stack up?


Examples of successful transformation projects done by top Indians• Business process transformation

– Case study: Infosys transforms the order-to-cashCase study: Infosys transforms the order to cash (OTC) process of a top retailer globally

• IT apps and infrastructure transformation– Case study: Wipro transforms legacy applications at a

top five insurance provider to eBusiness

• IT org and process transformation


• IT org and process transformation– Case study: HCL builds a next-gen partnership

between IT and the business by building business-oriented service centricity


Case 1: Infosys transforms the order-to-cash (OTC) process of a top retailer globallyClient A Fortune 500 global retailer

Issue/focus Meet new competitive pressures by collaborating better with customers. TheIssue/focus Meet new competitive pressures by collaborating better with customers. The client also wanted to transform its order-to-cash process.

Challenge The client wanted to grow revenue realization and reduce operating costs. It also wanted to substantially increase operational benefits and margin to improve the company's valuation.

Vendor approach

Infosys deployed its IMPACT and VRM frameworks and methodologies.

It leveraged its strong SAP capability and partnership, accelerators, and prebuilt solutions.


It created a vertical-focused process repository with country-specific legal and statutory requirements (for 45 countries).

Benefits The incremental approach resulted in higher predictability — Infosys deployed this SAP-based solution in one region before successfully rolling it out globally.

The client realized $70 million in benefits to its operations after rollout.

Case 2: Wipro transforms legacy apps at a top five insurance provider to eBusinessClient A top five insurance firm that wanted to move legacy apps to eBusiness

Issue/focus The client wanted to provide applications access to trading partners so they could service customers better and improve satisfaction. It also wanted to reduce the cost of operations.

Challenge Long cycle times; involvement of multiple teams in a single request/ticket; multiple and unintegrated apps result in data loss/redundancy, manual error, and lack of reconciliation.

Vendor approach

Wipro deployed Web service wrappers to stitch functionality across multiple applications that resulted in straight-through processing (STP).

It leveraged its strong tech capability across platforms such as WebSphere,Jacada HostFuse, and Apache Tomcat.


It used its systems integration and software engineering skills.

Benefits Number of Web-based screens was reduced from 15 to two.

End-to-end process time was cut by 33%; data input by users was reduced by 45%.

The client achieved real-time data and applications with ease of use.


Case 3: HCL builds business-oriented service centricity and business partnershipClient Dr. Pepper Snapple Group (DPS), a leading beverage company

Issue/focus DPS wanted to enable a next-generation business-IT partnership by transforming its IT org and processes.

Challenge Improve business-value-oriented IT with greater service centricity. Lower costs and build business alignment.

Vendor approach

DPS signed a multiyear contract with HCL for app development, app maintenance, and infrastructure support on high-end service parameters.

HCL deployed on-site dedicated service delivery managers (SDMs) and domain experts for better coordination with DPS’s business units.

HCL's used its Enterprise Discovery Framework, Process Watch dashboard, Prizm design tool and value Portal


Prizm design tool, and value Portal.

Benefits Day-to-day problems decreased and on-time delivery improved.

Business got a single point of contact for IT across tech silos.

Centralization and offshoring drove cost savings.

Innovations reduced cycle time and increased internal customer satisfaction.

Summary

• Offshore providers fall short of delivering true, end-to-end business transformation.

• But not all transformation falls in this category.

• Top offshore providers can successfully deliver parts of business- or IT-focused work.

• They can bring age-old offshore benefits blended with newly honed domain and consulting capability.



The next 90 daysThe next 90 days

• Explore how can you leverage providers’ new capability like intellectual property solutions to get incremental value in your coming projectsincremental value in your coming projects

• Add quickly new criteria in your Q2 vendor score-card to capture new offshore value proposition

• If negotiating for transformation work, rope in a offshore provider to get costs down. Mere presence of Indian supplier will get on-shore provider’s costs down quickly

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quickly.

Longer termLonger term

• Set the right goals for your transformation projects delivered from offshore. Focus on a subset at a time and go up incrementally.

• Invest in vendor education, especially on business processes

• Invest in internal change management and new collaboration and workflow tools to manage complex and globally distributed projects

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complex and globally distributed projects


Thank you

Sudin Apte

+91 (20) 4014 7728

[email protected]

www.forrester.com
