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© 2003 Cap Gemini Ernst & Young - All rights reserved3
Top 10 Market Factors
• Overall, Outsourcing Is Still A Healthy Market• Maturity of IT Outsourcing• Immaturity of BPO, 2003 Expected To Be Critical Year• Growing Demand for End-to-End Services Requires Focus• Increased Competition Leads To Intense Price and Capital Pressure• Highly Fragmented Competitive Landscape• Outsourcing Market Volatility• New Outsourcing Business Model• Outsourcing Shift to a Long-Term Value Proposition• Impacts of Economic Downturn: Elongated Sales Cycles, Cautious
Spending
© 2003 Cap Gemini Ernst & Young - All rights reserved4
Factors, Trends, & Implications
FactorFactor Trends/ CommentsTrends/ Comments Implication for CGE&YImplication for CGE&Y
1. Overall, Outsourcing Is Still A Healthy Market
Outsourcing is the fastest growing segment of professional services Although some aspects of IT have slowed and components of
process are in their infancy, key growth opportunities exist (e.g., AM, Offshore, SCM, F&A)
Enhance efficiency and effectiveness of internal and external sales channels, including consulting, outsourcing, and technology services, market makers, EY, and alliances
Improve awareness in North America
2. Maturity of IT Outsourcing
Big 3 (IBM, EDS, CSC) established as early adopters in IT High penetration; at least 50% of Global 2000 now outsource at least
some of their IT Commoditization of IT assets has caused cost cutting to shift from
assets to cutting labor costs and raising productivity while clients are slow to invest in productivity projects needed for deal profit
Improve deal selection and qualification Bundle ITO with BPO and consulting Leverage CGE&Y’s position in terms of flexible deal
structures and solutions (in comparison to EDS and IBM models geared at big IT deals)
3. Immaturity of BPO
Key offerings that build on existing IT and process expertise, such as SCM, F&A/ERP and CRM, provide strong opportunities to bundle consulting, technology and process
Small number of BPO deals signed in 2002; 2003 expected to be critical year in gaining BPO market share and capability
BPO competitive landscape is in flux. Some of the more aggressive BPO providers are relatively new market entrants. Market consolidation, mergers and acquisitions are affecting other BPO players
Short-term opportunity costs in terms of outsourcing revenue, long-term impact to recurring revenue from consulting
Invest in capability and market CGE&Y as BPO provider with strong focus in 2003
Leverage strengths in SCM, CRM, and Finance Transformation
4. Growing Demand for End-to-End Services
Client demand stems from need to reduce cost and make business improvements
Provider demand fueled by need to achieve profit from deal and maintain other consulting revenues
Few competitors can offer blended outsourcing-consulting solutions Strong value propositions tied to industry and/or process expertise
Develop robust, yet focused service portfolio to enable efficient bundling and quick response to client demands
Identify enterprise-wide incentives for selling and delivering both outsourcing and consulting
Clearly articulate value proposition of consulting & outsourcing to marketplace
5. Increased Competition
Increasing pressure in pricing environment and capital intensity Diverse entrants entering market as their revenue streams decline
(e.g., packaged application, software, and hardware companies)
Focus on sales & delivery efficiency (e.g., offshore model, network of centers, methodology, smarter qualification and due diligence, and shared risk/reward in deal structure)
© 2003 Cap Gemini Ernst & Young - All rights reserved5
Factors, Trends, & Implications
FactorFactor Trends/ CommentsTrends/ Comments Implication for CGE&YImplication for CGE&Y
6. Highly Fragmented Competitive Landscape
Shrinkage of consulting services, systems integration and packaged application markets
Consolidation expected which will further alter the landscape (e.g., IBM-PwCC and non-traditional entrants)
Differentiate focused offerings and build capabilities through various strategies (e.g., organic, alliance)
Consider acquisition to complete capabilities portfolio
7. Outsourcing Industry Volatility
Increased deal renegotiation; IBM and EDS have a high dependence on recurring revenue
Although rare, contracts are more frequently going to new providers Risks for service providers are associated with top clients (e.g., EDS-
WorldCom, IBM-Lucent and CSC-Nortel) Questionable accounting standards has brought negative coverage of
industry thus impacting client acceptance of outsourcing (e.g., % completion for EDS)
Market opportunity from contract renegotiation Minimize risk through smart client “portfolio” Maintain strong finance and deal structuring
standards
8. New Outsourcing Business Model
Mega deals have not materialized; Analysts report approx. 1 to 4 signed in 2002
Unable to assess cost structure and complete proper due diligence has impacted profitability and success of deals
Elongated sales cycles and introduction of process and consulting to IT outsourcing has brought new complications to model
Define organizational model to support selling and delivery of end-to-end offerings
Improve due diligence efficiency Focus on deals most likely to achieve financial
success and/or enhance capability, not mega deals
9. Outsourcing Shift To A Long-Term Value Proposition
Outsourcing has shifted from simply reducing costs to driving strategic change and overall business improvement
Due to economic environment, clients not funding innovation/ enhancement projects. In order for service providers to achieve profit, these projects are required
Ensure enhancements/innovation projects are bundled into outsourcing deal to protect profitability
Bundle through a combination of consulting, BPO and ITO, as well as delivery options (e.g. center, offshore)
10. Impact Of Economic Downturn
Elongated sales cycles, cautious spending, and lack of attention from key C-Levels required to close deal
Reduction in scope of existing deals or restructuring of contracts Clients pushing more financial risk on service providers via tighter pricing
and/or more capital-intensive deals
Improve qualification process with sharp focus on Return on Sales (ROS)
Emphasize shared-risk, shared-reward in marketplace Clearly articulate value propositions for C-Level
audience that make the buying decision
© 2003 Cap Gemini Ernst & Young - All rights reserved6
Market Growth
Key Findings Gartner’s May 2002 forecast update is
significantly different from the November 2001 forecast
ITO was forecasted to grow at 11.2 % (CAGR) and is now forecasted at 8.0% (CAGR)
BPO forecast was lowered from a forecast of 15.0% to 9.0% (CAGR)
IT outsourcing continues to experience relatively healthy growth during the economic downturn, compared with other IT services, as a result of user emphasis on cost-reduction and efficiency enhancement
The lack of disruptive new technology on which to build new solutions and drive transitional outsourcing had a negative impact on outsourcing overall
Companies are focusing on core business processes, increasingly outsourcing non-core business processes, particularly back-office functions
Note: Gartner published its forecast of the outsourcing market in November 2001 and a revised update in May 2002.
Source: Gartner, Outsourcing Forecast Update: Feeling the Pain. 11 July 2002, Bruce Caldwell, Allie Young, Rebecca Scholl
New Era of Greater Maturity and Moderated Growth for Outsourcing
0
20,000
40,000
60,000
80,000
ITO BPO
2000
2005
North America IT Outsourcing & BP Outsourcing Forecast, 2000-2005(Millions of USD)
Operational ServicesApplications Management
Help Desk Management
Transaction Processing Services BPM Services (business
transformation expertise applied as a part of a BPO contract)
8.0% CAGR
9.0% CAGR
© 2003 Cap Gemini Ernst & Young - All rights reserved7
Business Process Outsourcing
Opportunity to improve ROI from mature investment projects such as ERP, CRM and Shared Services, as well as need to focus on core business, fueling demand
Just as ERP systems enabled growth of Applications Management, SCM and CRM systems are expected to support growth of outsourcing technology and process in these areas
Offshore represents opportunity to lower delivery cost— not a mature offering, except in very specialized process areas such as medical claims transcription and some contact center operations
Through CRM, outsourcing plays a stronger role in impacting revenue generation vs. cost reduction only
Increased demand for multi-process outsourcing Increased demand for knowledge-based business
process outsourcing (from non-core/non-critical to non-core/critical to core/critical)
Dependence of service providers on shared service model to offer cheaper, standardized and best-in-class services, and achieve profitability
Growth of specialized industry solution centers that are able to manage both technology and process requirements, and adjust to industry needs
IT Outsourcing (AM, IM)
IM capability as a blended component will impact pricing and service packaging, not as a stand-alone offering
Growing emphasis on offshore capability. Increased acceptance of offshore as providers demonstrate quality cost and customer service. Large outsourcers not moving fast enough to take advantage of this shift.
While IT outsourcing overall has slowed, software development outsourcing has experienced growth and niche providers have prospered (e.g., Infosys revenues were up 32% in 2Q2002)
Applications management expected to be the fastest growing sub-segment of ITO at an 11.6% CAGR in North America through 2005
New and formidable competitors emerging, including packaged application, software, and hardware companies. As systems integration and deployment revenue matures/declines, these companies are looking for new revenue streams in outsourcing
Service Offering Key TrendsIncreased Focus on End-to-End Business Function, Requiring a Combined Look at IT
and Process
© 2003 Cap Gemini Ernst & Young - All rights reserved9
Operate Americas Outsourcing Vision:“Earning the Right To Be Your Partner”
Contract Type
Same thingsame way
Same thing new way
New thingsnew way
Act
ivit
y
Fixed Charge Transaction Based/ Open Book Shared Risk/Reward
Facilities management• Data Centre Services• Application Support• Desktop Support• Network Services
Operate:• Application Management• Infrastructure Management• Business Process
Management
Providing Service to an AgreedService Level
Responsibility for an ITor Other Business Function
Helping to Achieve YourChanging Business Goals
Strategic Relationship• Business Solutions• Build and Operate• Full IT Outsource
© 2003 Cap Gemini Ernst & Young - All rights reserved10
Outsourcing Is a Natural Extension of Consulting Services
Management VisionEnterprise Technology StrategyBranding/Channel Strategy
Systems Development & IntegrationTechnical Infrastructure
Business Process OutsourcingApplications ManagementInfrastructure Management
Health
Strategy Integration Outsourcing
Energy / Utilities / Chemicals
MRD
TMN
FSI
Cri
tical Tech
nolo
gie
s
Su
pp
ort
Serv
ices
Su
pp
ly C
hain
CR
M
Str
ate
gy &
Tra
nsfo
rmati
on
ER
P
Full-Scope Service
Spectrum
Full-Scope
Sector & Service Lines
Ou
tsou
rcin
g
© 2003 Cap Gemini Ernst & Young - All rights reserved11
What are Companies Outsourcing?
Operate is a collection of service offerings that provides capability beyond the traditional consulting model to include maintenance and operation of client systems.
Applications Development Applications Development and Managementand Management
(ADM)(ADM)Infrastructure ManagementInfrastructure Management
(IM)(IM)
Information System Management (ISM)
IT-Enabled Business Process ManagementIT-Enabled Business Process Management(BPM)(BPM)
Enterprise Solutions Management (ESM)
© 2003 Cap Gemini Ernst & Young - All rights reserved12
Outsourcing Offerings
Applications Development and Management (ADM) Ongoing maintenance, enhancement and development, and new
releases/upgrades for client software applications
Infrastructure Management (IM) Ownership of client’s IT platform hardware and its operations e.g. Data Center Operations, Network Services, Desktop Services,
and Help Desk
Business Process management/Outsourcing (BPM/BPO) Ownership or management of a business process function e.g. Call Center operations or Accounts Payable function
© 2003 Cap Gemini Ernst & Young - All rights reserved13
• End User Support
• Distributed System Support
• Centralized System Support
• CyberCenters/Web Hosting
• Network Solutions
• ASP Support
Measured Delivery
Infrastructure Service Centers
Service Management
CUSTOMER
Site
Su
pp
ort
FM
(CC
S)
Site
Su
pp
ort
Call Logging, Incident Management, Query handlingLocal Knowledge - Personalised Call Reception
Problem Diagnosis/Analysis
Local KnowledgeProduct Specialization
Remote Support
Product/TechnicalSpecialists
1st
2nd
3rd
PR
OB
LE
M M
AN
AG
EM
EN
T
CH
AN
GE
MA
NA
GE
ME
NT
SE
RV
ICE
MA
NA
GE
ME
NT
RE
P’IN
G
SIP
/QU
AL
ITY
MA
NA
GE
ME
NT
SE
RV
ICE
Cen
ter
Field
Su
pp
ort
AM 3rdP
arty
Oth
er C
G
Co-ordination ofField Support
CO
NF
IGU
RA
TIO
N M
AN
AG
EM
EN
T
Infrastructure Service Centers - CGE&Y, Customer, Third Parties
Third Party Management
Infrastructure Management
© 2003 Cap Gemini Ernst & Young - All rights reserved14
BPM Offerings Are Aligned With Major Non-Core Business Functions
Supported by our Global Network of Centers (BPM, AM, IM)
• Inbound & Outbound Call Center Mgt.
• Billing
• Collections
• Customer Intelligence / Data Warehousing
CRM Transformation
• General Accounting
• Accounts Payable
• Accounts Receivable
• Fixed Assets
• Credit & Collection
• Billing
• Management Reporting
• Payroll
Finance &Employee
Transformation
Supply Chain Transformation
• Lead Logistics Provider
• Sourcing / E-Procurement
• Freight Management
• Fulfilment
© 2003 Cap Gemini Ernst & Young - All rights reserved15
Once Non-Core Activities Are Identified, They Can Be Outsourced Or Eliminated
Necessary
Not Necessary
Core Non – Core
Eliminate
OutsourcePerform
Internally
© 2003 Cap Gemini Ernst & Young - All rights reserved16
Top 10 Reasons Client’s Choose Outsourcing
Source: Cranfield International Outsourcing Survey—693 US, UK & Continental European companies participated in the survey.
Cost reduction is clearly a decision criteria in any deal but enhancing service and delivery (through business change) is also a key factor. Cost alone is not compelling enough to drive decisions for
outsourcing
Cost reduction is clearly a decision criteria in any deal but enhancing service and delivery (through business change) is also a key factor. Cost alone is not compelling enough to drive decisions for
outsourcing
Cluster 3: New Technology & Capabilities Want to gain access to new
technologies and skills Want to reduce headcount Want to develop new products and
services Want to reduce capital expenditure
Cluster 1: Cost & Efficiencies Want to achieve best practice
throughout the organisation Want tight control over costs
Cluster 2: Service & Delivery Want to improve service quality Want to enhance the organization
core competencies
27.4
28.4
34.0
36.0
36.6
37.1
41.0
42.1
58.6
60.2
Reduce transaction costs
Grow in-house expertise
Reduce capital cost
Enhance capability to develop new product/service
Reduce headcount
Access to new technologies/skills
Focus on core competencies
Improves service quality
Cost discipline/control
Aim to achieve best practice
© 2003 Cap Gemini Ernst & Young - All rights reserved17
Change in executive management
Capital spending in non-core business functions
Entry into new markets or customer segments to improve market share
Loss of confidence in internal IT Planned spin-off,
downsizing or merger
Divestiture of non-core businesses
New business alliances in process to broaden services
New quality improvement
programs underway
New project initiatives slow to deliver or huge backlog of
projects
Headcount reductions to reduce operating costs &
increase productivity
CEO Agenda to reduce transaction costs
Business Transformation
ConsiderConsiderOutsourcingOutsourcing
Know How to Spot an Outsourcing Opportunity
Major new systems projects planned
Launch of various programs to improve operational efficiency
© 2003 Cap Gemini Ernst & Young - All rights reserved19
ADM Addresses Four Key Sets of Issues
Business IssuesBusiness Issues
Free the organization to focus on its core competence Secure funds & resources for business critical initiatives Improve quality of service & reliability of critical systems Increase competitiveness Concentrate on services innovation to drive future
revenues Share / manage risk across the development life cycle
Free the organization to focus on its core competence Secure funds & resources for business critical initiatives Improve quality of service & reliability of critical systems Increase competitiveness Concentrate on services innovation to drive future
revenues Share / manage risk across the development life cycle
People IssuesPeople Issues
Free up resources for strategic business & IT initiatives Avoid having to find & retain expertise, thus reducing
use of external contractors Avoid need to hire staff on a ‘just in case’ basis Mobilize and demobilize resources quickly Offer better career paths for IT professionals Quickly staff new projects (speed-to-market) Gain network to knowledge through CGE&Y’s network of
centers and resources
Free up resources for strategic business & IT initiatives Avoid having to find & retain expertise, thus reducing
use of external contractors Avoid need to hire staff on a ‘just in case’ basis Mobilize and demobilize resources quickly Offer better career paths for IT professionals Quickly staff new projects (speed-to-market) Gain network to knowledge through CGE&Y’s network of
centers and resources
Financial IssuesFinancial Issues
Gain visibility & predictability of costs Optimize Fixed vs. Variable costs Ensure value for money Increase revenue & therefore profitability Reduce costs – typically by 20% Reduce debt burden
Gain visibility & predictability of costs Optimize Fixed vs. Variable costs Ensure value for money Increase revenue & therefore profitability Reduce costs – typically by 20% Reduce debt burden
Technology IssuesTechnology Issues
Gain access to better methodologies & tools Migrate to new application more quickly Optimize IT systems to handle increasing complexity of
offers & products Align technology with business direction Industrialize the IT systems after launch period Benefit from a partner technology/packages watch
Gain access to better methodologies & tools Migrate to new application more quickly Optimize IT systems to handle increasing complexity of
offers & products Align technology with business direction Industrialize the IT systems after launch period Benefit from a partner technology/packages watch
© 2003 Cap Gemini Ernst & Young - All rights reserved20
ADM Critical Success Factors
• Staff Maintain staff with depth of skills required to effectively manage environment
• Demand Management Respond to demand increases/ decreases for support resources
• Solutions Knowledge Effective solutions knowledge to provide consistent, reliable application support
• Proven Methodologies Disciplined methodology for delivering support services in a cost effective manner
• Change Prepare for business and technical environment change
© 2003 Cap Gemini Ernst & Young - All rights reserved21
Application Development & Management Solutions
Applications Development and Management ServicesBreak/FixQuality Assurance/TestingApplication Enhancements/UpgradesNew Application Development
Applications Development and Management ServicesBreak/FixQuality Assurance/TestingApplication Enhancements/UpgradesNew Application Development
Configuration ManagementLevel 2 Help Desk SupportVendor ManagementRun/Host Applications
Ad Hoc SupportProcess ManagementRelease Management
Optimizing Clients
Business Models
Optimizing Clients
Business Models
“Run”Management of existing
package and/or custom built applications portfolios
“Build & Run”Management of the entire application lifecycle or specific IT Functions which could include development and support
of new applications
“Run - Build - Run”Maintenance of existing applications
while transforming replacement applications, followed by the
management of the new applications
© 2003 Cap Gemini Ernst & Young - All rights reserved22
Build/Run Value Proposition for Clients
• Focus on core strategic competencies and rely on CGE&Y to deliver other needs
• Implementation Planning• Post Go-Live Support
• Reduce operating and capital costs over the life cycle of the application• Accelerate the pace of implementation and smooth the transition to the
maintenance environment• Gain access to scarce technical resources, as needed, rather than
staffing to “just in case”• Share/manage risk across the development life cycle• Increase knowledge continuity of the application implementation into
production, including application and business specific information• Improve service levels
© 2003 Cap Gemini Ernst & Young - All rights reserved23
Build/Run Can Deliver Significant Cost Savings Over the Life of the Application
Y1 Y5Y4Y3Y2
Cost
Reduces overall cost of build ANDcost of transition to maintenance team.
Efficiencies, cost reductions further reduce cost over time.
© 2003 Cap Gemini Ernst & Young - All rights reserved24
Service Management
User Support
Maintenance
Enhancements
Development
Staffing
• Ours• Yours• New• Combination
Staffing
• Ours• Yours• New• Combination
Location
• On-site• Off-site• Near-shore• Off-shore• Combined
Location
• On-site• Off-site• Near-shore• Off-shore• Combined
Pricing
• Baseline• Fixed• Resource-based
Pricing
• Baseline• Fixed• Resource-based
ADM Provides a Full Range of Services to Maximize Value, Quality & Flexibility
Applications Development and Management (ADM) is:“a set of services which takes the contracted responsibility for any or all aspects of the maintenance, enhancement and evolution of applications systems within well defined service levels to maximize value, quality and flexibility.”
Scope
• Legacy AM• Custom Apps• Third-Party
• Plan, Build, & Run• ASP / Hosting
Scope
• Legacy AM• Custom Apps• Third-Party
• Plan, Build, & Run• ASP / Hosting
© 2003 Cap Gemini Ernst & Young - All rights reserved25
CGE&Y’s ADM Solution: Scope of Services
Base Services Extended Services
Service Management• CGE&Y service delivery management• Other 3rd-party provider management
Maintenance• Level 2 help desk• Break/fix & routine maintenance• Software configuration management• System & regression testing• Implementation of required routine vendor-
released software patches• Analysis of routine vendor-released
functional upgrades
Enhancements• Minor enhancements, as agreed
Service Management• CGE&Y service delivery management• Other 3rd-party provider management
Maintenance• Level 2 help desk• Break/fix & routine maintenance• Software configuration management• System & regression testing• Implementation of required routine vendor-
released software patches• Analysis of routine vendor-released
functional upgrades
Enhancements• Minor enhancements, as agreed
Major Enhancement/Development Support
• Enhancements that exceed limits established for Base Services support
• New module evaluation• Implementation of major releases, new
functionality, new modules, new interfaces, etc.
• Process reengineering activities• Decision support
Consulting Services• Supply Chain Optimization• Customer Relationship Mgmt• eCommerce• Shared Services• ERP Extension
Infrastructure Management• Data center operations• Server administration & performance
management
Major Enhancement/Development Support
• Enhancements that exceed limits established for Base Services support
• New module evaluation• Implementation of major releases, new
functionality, new modules, new interfaces, etc.
• Process reengineering activities• Decision support
Consulting Services• Supply Chain Optimization• Customer Relationship Mgmt• eCommerce• Shared Services• ERP Extension
Infrastructure Management• Data center operations• Server administration & performance
management
© 2003 Cap Gemini Ernst & Young - All rights reserved26
CGEY’s ADM Solution: Center-Based Support
Client Location ADM Service Center
Service Manager• Management• Service CoordinationUser Liaison/Business Analyst• Requirements Gathering• Problem Resolution
Service Manager• Management• Service CoordinationUser Liaison/Business Analyst• Requirements Gathering• Problem Resolution
Management• Project SupportMaintenance• Configuration Management• Process Documentation• Break/fix support• TestingEnhancements• Applications Tuning• Minor releasesDevelopment• Technical support• Interfaces
Management• Project SupportMaintenance• Configuration Management• Process Documentation• Break/fix support• TestingEnhancements• Applications Tuning• Minor releasesDevelopment• Technical support• Interfaces
Additional on-site CGEY staff
(as needed)
Additional on-site CGEY
delivery sites
© 2003 Cap Gemini Ernst & Young - All rights reserved27
CGEYAS Has an Integrated Global Delivery Capability That Is Transparent to the Client
On Site
CGEYAS Center
Near Shore
Off Shore
Near Shore
© 2003 Cap Gemini Ernst & Young - All rights reserved29
The Prime Integrator Methodology Coordinates the Delivery of
CGE&Y’s Global Delivery Centers
© 2003 Cap Gemini Ernst & Young - All rights reserved30
CGEY’s Prime Integrator Is a New Approach Based on Proven Capabilities
Prime IntegratorPrime IntegratorAchieves bothAchieves both quality delivery quality delivery andand lower price point for lower price point for
mainstream systems development projects mainstream systems development projects
• Substitution of lower cost Substitution of lower cost resources for certain development resources for certain development activities which can be performed activities which can be performed offshoreoffshore
• Substitution of lower cost local Substitution of lower cost local contracting resources to support contracting resources to support the local team the local team
• Local client/CGEY control of Local client/CGEY control of all aspects of the projectall aspects of the project
• Proven delivery & methodology Proven delivery & methodology
• Defined activities within eachDefined activities within eachphase – requirements, design,phase – requirements, design,development, test, deploymentdevelopment, test, deployment
• Risk and quality managementRisk and quality management
How Do We AchieveHow Do We AchieveThe Price Point?The Price Point?
How Do We AchieveHow Do We AchieveSuccessful Delivery?Successful Delivery?
© 2003 Cap Gemini Ernst & Young - All rights reserved31
What Research Has Shown About Offshore Systems Development
The current market for services delivered via offshore resource remains fairly small at less than 5% of the total IT services market (Gartner)
Interest in offshore providers runs high. While 44% of the firms we spoke with engage offshore providers today, two-thirds intend to do so by 2003 (Forrester)
The number of large firms using offshore providers will grow by 50% in the next two years, and offshore technology budgets will more than double (Forrester(
In the “indirect approach”, pivotal providers carry out activities formerly conducted by user companies…like contract negotiation and project management. Because they assume more responsibility, pivotal providers cost more than going direct… but they also minimize complexity, lock in the right expertise and keep labor costs in check for user firms. By 2005, we believe 64% of firms going offshore will adopt an indirect approach (Forrester)
Prime Integrator builds significantly on the ‘indirect approach’Prime Integrator builds significantly on the ‘indirect approach’
© 2003 Cap Gemini Ernst & Young - All rights reserved32
Projects are Complex:
Low definition High complexity High volatility High velocity
Projects Delivered Inexpensive:
• Highly defined• Low complexity• Low volatility• Low velocity
Local Offshore
Onshore
Offshore
Onshore
Offshore 00
1001009595
55
While cost advantages move work offshoreproject attributes determine the team mixWhile cost advantages move work offshoreproject attributes determine the team mix
7070
3030
5050
5050
Typical Projects: Package
Implementations CRM ERP Billing OSS
Custom Development
Application Mgmt
Typical Projects:• Application
Maintenance• Application
Management• Testing/QA • Legacy
application development
The Market is Currently Segregated into Either Totally Local or Totally Offshore
© 2003 Cap Gemini Ernst & Young - All rights reserved33
Typical Projects: Package
Implementations CRM ERP Billing OSS
Custom Development
Application Mgmt
Typical Projects:• Application
Maintenance• Application
Management• Legacy application
development
Local Offshore
Onshore
Offshore
Onshore
Offshore 00
1001009595
55
The proration of local versus offshore is preset into the prime integratormethodology based on project type and cannot be modified
The proration of local versus offshore is preset into the prime integratormethodology based on project type and cannot be modified
7070
3030
5050
5050
50/50
40/60
30/70
5/95
Prime Integrator Enables Mainstream Projects to be Executed by a Prorated Combination of Local and Offshore
© 2003 Cap Gemini Ernst & Young - All rights reserved34
CGEY’s Prime Integrator Delivery: What Client’s Have Been Concerned About Loss of ‘control’ is resolved:
by local project & technical management within the project team Loss of flexibility is resolved:
by close local relationship with the client, local requirements iteration, design management, and iterative delivery & review
Loss of velocity is resolved:by scheduled prototypes and direct local control
Risks of greater communication flexibility is resolved: by periodic review sessions and standard status, issues and change summary
Security is resolved:by hardware, software and physical location
Business Continuity is resolved:by back-up recovery processand secondary facilities
Capability maturity is resolved:through over 1,500 projects and over decade of prior experience
Risk Management is resolved: by rigid quality control & review and OTACE
RUP Methodology is a constant as in current projects
Project, Build and Architecture Management
ASE RSW Requirements
Offshore Preparation
ASERSW
Prototype Design
Client Review
Integration/Build
Construction Workstream #1
Construction Workstream #2
Construction Workstream N
Infrastructure Management
Test Design Test Dev Testing
Deployment Design Deployment
Process Design Process Development
B01
2
3 4
B1 B2 B3 B4
Projects are Complex Low definition High complexity High volatility High velocity
Training Design Training Development
Offshore
Local
Legend
Mixed
© 2003 Cap Gemini Ernst & Young - All rights reserved35
Enhancements Have Been introduced Over the Last 2 Years to Assure Quality of Offshore Delivery Initial Project Assessment
Client business environment Client IT Environment
Workplan management Just-in-time activity and task management Daily issues logs & resolution Exploit time difference to project advantage
Communication Discipline Daily activity log Build reviews Video conference reviews
Prime Integrator Methodology Initial requirements ASE’s and prototype Defined contingency points Iterative approach Additional management due to geography Training and certification process Defined communications & process
Prime Integrator QA Process QA Process & OTACE
RUP Methodology is a constant as in current projects
Project, Build and Architecture Management
ASE RSW Requirements
Offshore Preparation
ASERSW
Prototype Design
Client Review
Integration/Build
Construction Workstream #1
Construction Workstream #2
Construction Workstream N
Infrastructure Management
Test Design Test Dev Testing
Deployment Design Deployment
Process Design Process Development
B01
2
3 4
B1 B2 B3 B4
Projects are Complex Low definition High complexity High volatility High velocity
Training Design Training Development
Offshore
Local
Legend
Mixed
Users
Designers
On-Site CGE&Y ADC
Project Track 1
Lead
Developers
Testers
Project Track n
Project Track 1
Production Support
Users
Designers
Lead
Lead
Developers
Testers
Production Support
Lead
Project Track n
Offshore Project
Manager
Onsite Project
Manager
Integrated Tools and Methods
© 2003 Cap Gemini Ernst & Young - All rights reserved36
Distributed Delivery is an Essential Component of Productivity
Offshore savings in unit cost of labor have to be considered alongside the productivity gains resulting from the accelerators and center-based delivery
Off-shore
Near-shore
Productivity Accelerators
1
23
2a
Sav
ing
s fr
om
Off
& N
ear-
shor
e
• Center-based delivery• Methods• Estimation & metrics• CMM
• RSW• Reuse• Standard Process
• Project Management• Knowledge Management
Up to 50%
savings
The route to achieve higher savings depends on the approach• Many organizations are looking to off-shore first & then to improve processes and productivity (1-2-3)• Others are looking to improve consistency with productivity accelerators first (1-2a-3)• The prize is achieved by combining the two areas & delivering incremental savings over time (1-3)
Savings from productivity
© 2003 Cap Gemini Ernst & Young - All rights reserved37
Evolutionary Stages in Offshore Models
The distributed Delivery Model and capabilities should be able to support stage 1 to 4
Per
sist
ence
of
Ser
vice
s
Complexity of Service Delivery
Stage 1Onsite Contract Worker
•Delivery team on shore• Charged hourly• Managed by the onshore team
Stage 2Onsite Project Teams
• Delivery team on shore• Charged hourly maybe milestone fees• Managed by the onshore team
Stage 3Pure Offshore Projects
• Fees normally project based•Projects are managed by onshore team•Common processes and tools•Cost is primary driver•Increased transfer of intellectual capital
Stage 4Cross Border Collaborative Services Delivery
• Dedicated offshore/ near shore facilities•Common procedures, methods & approaches•Leverages complimentary skills, capacity &/or lower cost•Sharing of organizational best practices & intellectual capital•Full collaboration between teams•Common development platform(s)•Two-way SLAs in place
Optional Offshore Development Centers (ODC)
• Dedicated offshore /near shore facilities•Commitment required for long term revenue stream•Processes & technology infrastructure is common between ODC & the client•Typically connected to client site by direct telecom link
ComplexSimpleLow
High
© 2003 Cap Gemini Ernst & Young - All rights reserved38
We will deliver excellence regardless of the manner or location in which the project is provided
Scoping
Planning
Business Requirements
Design
Development
Configuration
Testing
Deployment
Detailed Design
Development & Testing
Quality Management
Deployment & Testing Support
Maintenance
Training Content Development
Onsite Off Shore
Onsite Offshore
Scoping
Planning
Business Requirements
Design
Development
Configuration
Testing
Deployment
Detailed Design
Development & Testing
Quality Management
Deployment & Testing Support
Maintenance
Training Content Development
Onsite Remote
Onsite Remote
© 2003 Cap Gemini Ernst & Young - All rights reserved40
CGEY Offers a Full Compliment of Outsourcing and Consulting Services
Strategy Integration Outsourcing
Applications Development & Management
Infrastructure Management
IT-Enabled Business Process Management
© 2003 Cap Gemini Ernst & Young - All rights reserved41
The CGEY Advantage: A Global Leader in Applications Development & Management
Outsourcing is a significant focus within the CGEY organization $1.8B in revenue and growing rapidly 13,000 employees worldwide (AM & IM) Over 1,250 past and current clients Critical mass and capability in all key geographic markets
Strong presence in the Americas $400 M in revenue with several recent large contracts 2,500 employees (AM & IM)
An Innovator in the Market Place 1st to market with formal Applications Management offering (late 1980’s) A unique and powerful combination of consulting and full-scope outsourcing
India
New YorkChicago
SingaporeSecure VPN
2 Mbps
Secure VPN2 Mbps
Secure VPN2Mbps
Paris
Secure VPN2 Mbps
© 2003 Cap Gemini Ernst & Young - All rights reserved42
Why CGE&Y: Differentiators
Investment
Industrialized AM processes Specialized AM training Diverse skills Proprietary & integrated AM toolset Global network of AM Service Centers
Culture
Easy to do business with, 100% Service focus Customized contracts, living SLAs, OTACE “People matter to us” career paths,
employee surveys Value system of Honesty, Boldness, Trust,
Freedom, Team Spirit, Modesty, Fun
Leadership First to market with formal, stand-alone
AM service offer Industry analyst recognition & rankings Client references
Alignment Global Industry & Sector focus Industry experience on AM teams Vertical application templates
(e.g.,SAP/ERPb)
Delivery SLA performance results Business results testimonials OTACE ratings Contract renewals
© 2003 Cap Gemini Ernst & Young - All rights reserved43
State-of-the-ArtConnectivity:• 7 x 24 x 365 Operations & Monitoring• Fully-integrated client development
servers and workstations• Backup & Recovery Systems• Change Management, Escalation &
other operational processes in place
Infrastructure:• Infrastructure as required to provide
remote AM support, including:•Client secured worksite with client configured workstations
•Laptops and mobile phones for off hour support
•Test and Development Servers•Telecommunications
Customers:• 7 x 24 x 365 Production Support
coverage• Development and Production
Support teams manage applications for approximately 10 business areas within one dedicated client
Telecommunications & Network:• In support of client applications:
• Telecommunications Monitoring
• T1 connections to multiple networks using Cisco routers, switches and firewalls
Applications Management:• 120 professionals providing AM
services• 80+ custom applications
supported• Supported development
languages include:• COBOL• Java• C, C++, Visual Basic• Natural / Adabas• Smalltalk
Supported Environments:• Supported development and
operations environments include• Mainframe / CICS / DB2• Mainframe Adabas• Unix / Oracle• Internet (Web Logic,
Vitria, .Net)• Terradata Data Warehousing
Chicago Service Center
© 2003 Cap Gemini Ernst & Young - All rights reserved45
What Services Do We Offer?
Application Development
& Management
StaffAugmentation
Projects
Production SupportDevelopmentTest Only
DevelopmentTesting
AnalystsArchitectsDevelopersTesters
Application Development & Management Services that take contracted
responsibility for any or all aspects of the maintenance, enhancement and evolution of applications systems.
Projects Services that are discrete. Can take
responsibility for one or more aspects of the SDLC within an engagement.
Staff Augmentation Services where we provide the client
with temporary, high quality and low cost resources to fulfill a variety of IT needs within the SDLC, including project management.
© 2003 Cap Gemini Ernst & Young - All rights reserved46
Associates within Affinity Teams work on projects across Sprint Application Areas …Affinity Teams are self-sufficient support systems of a group of people who will work together toward a common goal in a large action.
OO Affinity (LOOP)
Mainframe Affinity
Application Projects
Project Management Affinity
Community Affinity
Value to the Employee• Create an atmosphere for excelling• Provide a form for knowledge enhancement and
sharing• Support the career path
Value to the Customer• Support innovation• Knowledge pool results in faster turnarounds• Reduces time for training
Value to the organization• Improve employee satisfaction and morale• Keep associated focused on skill enhancement• Channel for communication • Indirect feedback on employee requirements
Value Proposition
Unique Quality Processes & Procedures - Affinity Team Model
Major AccomplishmentsOO
• Sponsored, contributed, & founded Smalltalk solutions• Trained 23 associates through “Smalltalk Boot camp”• Established board membership on Smalltalk Advisory Board• Held over 15 brown bag and technical lunches
Java• Built Sprint specific training curriculum for beginner &
intermediate n-tier developers• Attained Sun Certification for 75 programmers, 16 developers,
and 1 architect
• Trained 41 associates through “Java Boot camp”• Presented at JavaOne Conference 2001• Developed & delivered EJB & Unix training curriculum
Project Management• Supported 21 employees through PMP certification• Established presence within national PM community • Established presence at PMI Seminar & Symposium 2001
Production Support• Created standardized Prod. Supt. Documentation used by Sprint• Performed audits of all CGEYAS Prod. Supt. projects
© 2003 Cap Gemini Ernst & Young - All rights reserved47
Sprint
Sector Telecommunications, Media & Network Deal Type Applications Development and Management Geography North America Structure Outsourcing Duration 6 years Start Date June 1999 Total Revenue $500 Million
Various business growth initiatives created a need within Sprint’s Long Distance Division to rapidly expand its software development and production support and testing capacity by engaging the services of an outside supplier.
A primary component of this engagement was to free up key resources to focus on Sprint’s core competencies
Solutions and Benefits to Client CGE&Y provides software development, systems analysis, systems design, production support, testing and
related software services and associated deliverables in connection with certain software development and Production Support projects
CGE&Y established, and is delivering to, mutually agreed service levels for all aspects of the engagement The successful transition of applications and the consistent delivery have provided Sprint the ability to
reposition its own critical resources to pursue strategic projects within its core competency Additionally, access to special skills at CGE&Y supports transformation of the enterprise providing less risk,
greater benefit, and higher speed to market. Sprint recognized CGE&Y as an extension of its organization