Novosibirsk October 2002 Outsourcing to Scandinavia By Jens

Novosibirsk October 2002 Outsourcing to Scandinavia By Jens Brinksten CEO, Technology Outsourcing Systems

Agenda § § TOS Market Research Outsourcing today The Scandinavian market Outsourcing – advantages / disadvantages § What to outsource § What Scandinavian firms look for when choosing outsourcing partners § Key factors for success in the Scandinavian market

TOS Market Research § Our study confirms that many companies experience a lack of IT resources: § lack of people with the necessary expertise in specific areas § difficulties with holding on to the young people who are easily bored with routine jobs (often a turnover of people of 30% per year) § periodical work: peaks and “start up” § time-to-market § Competencies include: Microsoftware (server), . NET, SAP, WAP-programming, C++, Java, XML, database etc.

Outsourcing today… § The companies apply different strategies to address the problem of lack of resources: § outsourcing in-house (to other divisions, mostly abroad) § outsourcing to Scandinavian consulting companies § outsourcing offshore § intensive headhunting and job campaigns § using freelancers

The Scandinavian Market The major system integration firms in Scandinavia are: §IBM §Compaq §CSC §Accenture §CGE&Y §Tieto. Enator Norway Finland Sweden §Accenture §CGE&Y §IBM §WM-Data §CSC §Adcorre Denmark §Siemens CG §CGE&Y There are numbers of other players in the market, but these are the one, we meet as competitors in our work §WM-Data

The Scandinavian Market From where do we see offshore development firms in the Scandinavian region? §India §Ireland §Ukraine §Baltic §Russia §India §Baltic §Russia Norway Finland Sweden §India §Czech Rep. §Hungary §Baltic §Ukraine §Russia §Ukraine §India Denmark §Russia §Philippines

Outsourcing - advantages § The attitude to outsourcing is generally positive, although it is recognised that there are some problems involved in this. The main advantages are: § Solving a capacity problem in a quick and low cost manner (compared to hiring people) § Solving a competence/knowledge situation § No hiring of ad hoc staff § Flexibility in production and delivery

Outsourcing – disadvantages - I § The main disadvantages are: § § Lack of long term internal knowledge Lack of building up competences Quality control and documentation Time-consuming project management § In some companies (SMEs), it is often required to have competencies inhouse also – especially when the outsourced projects are of smaller size

Outsourcing – disadvantages - II § The main disadvantages of outsourcing abroad are (besides those mentioned): § Different language (communication in general) § Different culture and political system § Lack of trust and security § Lack of control § Not secured by European/local law § Close management of the outsourced project is required

What to outsource § IT projects most needed for outsourcing are: § Standard software programming § Database programming § Internet and e-commerce programming (server and networks) § WAP-applications § Projects for which the necessary competences / knowledge is lacking § Routine jobs in developmental projects

Outsourcing Partner § What Scandinavian firms look for when choosing outsourcing partners § A local representative in their own country (local contracts) § Managements models and structured project methodology § Security and reliability § Flexible and scalable resources § Fast turn-around times § Local or international references § Price (quality to price)

Key factors for success 1. If a Russian company wants to have success in the Scandinavian market, they need to have some key factors in place: 1. A local legal entity as representative 2. Local marketing and success stories 3. Local project management 4. Strong project management tools 5. Strong communications skills 6. Delivery and quality assurance 7. Support and service functions 8. Quality to price

Russian firms already have…. § Most medium and large size Russian IT outsourcing firms have: § Some of the best trained IT specialists and architects. Because of the emphasis on mathematical and logical thinking, they can solve complex problems, rather than just write code § In addition, Russian programmers have traditionally dealt with limited computing resources by developing more efficient, elegant programs. § Flexible and scalable resources § Many US and European references § Quality to price (attractive price level)

Russian firms needs to…. I § To make themselves more attractive, the Russian IT firms have to: § Change their approach from an engineer driven approach/profile, to a more marketing driven approach § Become more active in alliances and partnerships § Use more time on profiling efforts, such as articles in the International Press and media § Use the industry organisations more – because standing together makes you much stronger

Russian firms needs to…. II § Furthermore the firms need to: § Emphasize service level, guarantees and data security § Improve communication skills § TRUST…… Improve the approach to foreign firms… we are not ”bloodsuckers”, who just want to buy cheap labour and then sell it in the west with high profit!

Why are we here…. . § We are looking for long-term relations and partnerships with companies in Russia § We want to have close co-operation, and to understand your firms! In Denmark we have a phrase saying: ”A sound business practice is a business where both parties feel they gained from the business”

SPASIBO Technology Outsourcing Systems H. J. Holst Vej 3 -5 C DK-2605 Broendby Denmark Phone: +45 7027 1620 Fax: +45 7027 1621 E-mail: office@techoutsys. com