IT Outsourcing Opportunities in US and China Shui

IT Outsourcing Opportunities in US and China Shui Yee Lee, Ph. D. , AT&T Fellow Chairman & CEO of YES Retired AT&T Vice President Commissioner of NJ Science & Technology Member of District Export Council May 18, 2006 1

IT Outsourcing Opportunities: • Company Perception on Outsourcing – Advantages and problems • Outsourcing Business Opportunities – Worldwide and US – Industry • Outsourcing Market Share Leaders – Countries – Example • How to Position China be the Market Share Leader – Improve Skill Sets – Eliminate Language Barriers • Job Opportunities in US and China 2

Company Perceptions On Outsourcing Perceived advantages technical education Depth of skilled resources in most technology areas Level 5 CCM ratings Higher productivity, 24 -hour global projects > 50% savings Critical success factors Skills Systems may not meet requirement Staffing Quality level Work Environment Cost reduction Perceived problems Language and communication barriers Security and control Concerns about potential social turmoil High support and phone costs 3

Worldwide IT Outsourcing Revenues by Region, 2003 - 2008 ($M) 4

U. S. IT Outsourcing Revenues, 2003 - 2008 5

U. S. IT Outsourcing Spending Share by Vertical Industry, 2003 Source: IDC, 2004 6

Outsourcing Market Share Leaders by Countries – India – Brazil, Ireland, Canada, Israel – Germany, Russia, China, Vietnam, Malaysia India hope to earn $50 billion from IT outsourcing alone by 2008 7

Example: Wipro’s Outsourcing development model (Revenue US $1. 2 B, Growth of employee : 500 – 55, 000 < 10 years) • Quality – – • Processes – • 66% university graduates, 29% hold masters, 5% Doctorates 4, 000 consultants spread across North America, Europe and Japan 4, 500 consultants continuously on the move Infrastructure – – • Veloci-Q, i. Pat, K-Net, Cocoon People – – – • CMM Level 5, Six Sigma, ISO 9001, PCMM level 5 15, 000+ employees trained in Six Sigma methodologies 2, 350, 000+ sq. ft. of development facilities in 21 locations in India 8 near shore development centers Certified in BS 7799 (2002) security standards Offshore centers declared 'restricted access' Alliances – 100+ alliances across products and services 8

Growth of China’s software and IT service market far outpaced the growth of global market Unit: $billion 871 CAGR 03 -07 Global IT Market Forecast 923 987 1055 1122 Total 6. 5% Hardware 5. 3% Software Service Unit: $billion 25 29. 4 34. 1 7. 1% CAGR 03 -07 China IT Market Forecast 39. 2 7. 6% 44. 4 Total 15. 5% Hardware 11% Software 23. 5% Service Data source: IDC 26. 3% 9

China is well poised to be the next outsourcing center after India 95 -02 China’s GDP grows at 7. 9% annually vs. 5. 5% for India 95 -02 China’s total scientists and engineers are more than 3 times of India’s 95 -01 China’s IT investment is more than 3 times of India’s In 2002 China’s IT infrastructure coverage far outpaced India’s Additional facts: 1. China has over 350, 000 science and engineers graduating each year, versus about 190, 000 for India and 70, 000 for the US. 2. China’s software developer and engineer’s cost is about 1/8 of those in the US, and 15 -20% less of those in India. 10

China’s outsourcing market share is small but it grows at much faster rate Global Outsourcing Market Share Global outsourcing market is growing at 29. 2% Europe & rest 45% US 45% Japan 10% In 2003, China gets 60% of its outsourcing revenue from Japan China’s outsourcing revenue will grow at 44. 2% annually in the next 5 years China Outsourcing Revenue Break-down Rest 15% Europe 10% US 15% Japan 60% Data source: IDC 11

How to Position China to be the Outsourcing Market Leader • Improve Software Development Skill – Project Management – Requirement Engineering – Project Estimation and CMMI process – Large Systems Development & Systems Integration – Practical Training • Eliminate Language Barriers – Control Customer Interfaces with Only Excellent English Speaking Resources – Use Excellent English Speaking Resources to Perform Project Management – Increase Number of English Speaking Employees on Projects – Improve Communication Skill 12

‘Anyshore’ Delivery Solutions – Global Delivery Model – An Example YES Offshore 60% US Client’s Staff 10% User Specs. RFP Review Mgmt Funding Decisions Program Project Mgmt Architecture & Planning Feedback Status Change Requests Client’s Projects Report Review Meeting Document Planning Client Software Development Systems Design Testing Production Support Maintenance 7 x 24 Coverage Help Desk YES Onshore 30% Dev. Project Mgmt System Requirement Systems Migration & Planning Resource Planning VISA Admin. Training 13

IT Job Opportunities in US and China • In US – User Specifications, RFP and Review – Program Management – Architecture and Planning – Systems Requirement – Systems Migration and Planning – System Integration and User Acceptance Testing – Release Management • In China – Project Management – Software Development and Design – Testing – Production Support and Help Desk – Maintenance 14

Thank You ! 15