Best Practices in IT Outsourcing William Liu Chairman, Stream Global Pte Ltd
What Is Outsourcing? Outsourcing is contracting with another company or person to do a particular function The external firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers Outsourcing is sometimes referred to as Business Process Outsourcing (BPO) & Off-Shoring
Types of IT Outsourcing Applications Research & Developmen t Business Functions (HR/Payroll/ Finance/etc) IT Security Infrastructur e (Desktop/ Desk-side) Data Centre/ Business Continuity Call Centre
Why Do Organisations Outsource? 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 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 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) Largest public sector information technology project in Singapore Effort by Government to standardise desktop computing system is a world first Users: 60, 000 civil servants in 74 government agencies Expected savings: 28% of operating costs or S$500 million over 8 years Consortium: EDS, Singapore Computer Systems (SCS), Alcatel-Lucent, Cisco Systems, Microsoft, Fuji. Xerox, Sing. Tel, Frontline, Avanade
Features of SOEasy Harmonising desktop, messaging and network environments across all government agencies Introduction of collaborative tools such as instant messaging, desktop video conferencing services and whiteboard sharing Greater mobility as officers can seamlessly access government resources from anywhere, at anytime More regular and non-intrusive security updates
(2) Web-based Electronic Business / Company Registration & Filing System For Singapore ACRA outsourced the Biz. File application, infrastructure, hosting and helpdesk to IT Service Co, Singapore Computer Systems Reduces business/company registration & filling times from days to minutes due to streamlined and automated processes Improves compliance by enabling monitoring of statutory disclosure requirements
(3) Call Centre Outsourcing Organisations outsource call centre building and management to service providers such as Singapore Computer Systems (SCS) & NCS SCS designs & builds fail-safe telco-grade call centres e. g. Star. Hub (Singapore), Stan. Chart (Singapore), Samart (Thailand), Hutchinson (Indonesia) 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 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: § § § 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 and. Confidential SCS development services for Wiley -Blackwell’s core publishing applications in UK & USA
Outsourcing vs Best Sourcing (Adopted By Infocomm Development Authority (IDA) of Singapore)
Outsourcing ≠ 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 Best. Sourcing 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. e. SCM) & 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 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 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 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 ○ e. Government Applications System Administration and Operations
Sample IDA’s Outsourced Projects Document Management File Registry Digital Archive Library Services 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$179 M Annual operational cost savings: S$25 M 90 Projects (41%) In-sourced • Tends to involve small scope • 72 (80%) involve less than 10 headcount
Some Outsourcing Statistics & Information
Outsourcing Market Size The size of the global BPO market by 2007 would be US$173 bn (Source: Gartner) 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) 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) Americas Argentina, Brazil, Canada, Chile, Costa Rica, Mexico and Uruguay Asia/Pacific Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Sri Lanka and Vietnam 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 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: 3 G 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 Q 3 2007 compared to 546, 800 in Q 3 2005 86, 800 in Q 3 2007 compared to 59, 200 in Q 3 2005 2 million in September 2007 110 percent in August 2007 1. 44 million in Q 3 2007 compared to 66, 200 in Q 3 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 x 86 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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