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Leading Technology Firm |
Fortune 2000
Technology Industry
Suppliers: Infosys and Wipro
Scope of service: Our client's Global Partner
Engineering (GPE) group had already established a contract agreement with
Infosys and Wipro to service the company's 3 business units. While pilot
projects had commenced, GPE wanted to validate their current activities and
generate a sound plan for future offshore activities in relation to their
overall objectives. Our client asked neoIT to assess their IT products/services
portfolio, create a transition plan, develop a financial business case, and
highlight key risk factors.
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Background
Our client delivers critical infrastructure services that make the Internet and
telecommunications networks more intelligent, reliable, and secure. Every day,
they helps thousands of businesses and millions of consumers to find each
other, and to connect, communicate, and transact with confidence.
Business Challenge
When neoIT became involved, our client's Global Program Engineering Group
(GPE)** had already made the decision that offshore outsourcing was a smart
business decision. In fact, they had already signed contracts with Wipro &
Infosys for pilot projects across three divisions. They had performed some
level of upfront due diligence, but realized a more in-depth analysis was
required to establish a solid framework for the initiative. They had not
developed a business case and had only a general understanding of how offshore
operations should work. In short, they were reluctant to rely on supplier
consultation to drive their offshore activities and were uncertain about how to
move forward. They may have been able to continue forward with some success,
but the risk of failure was high.
Our client was looking to neoIT for validation of some of their initial steps
in their offshore initiative. They wanted to confirm that the work they
contracted for in the pilot stage was the right work to be done and determine
what other activities were suitable for offshore suppliers to provide. The
client team also needed to develop a business case with hard data to justify
the move offshore to the CEO and CFO. They needed to answer three key
questions:
What should go offshore and at what speed?
What will we be able to achieve?
What is the financial reward?
Solution
neoIT and the GPE team worked together to achieve success in three main areas:
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Portfolio Assessment
Process:
neoIT first provided a standard set of criteria that the client should use in
the assessment, comprised of financial impact criteria and offshorability
impact criteria. After the general set was presented the client/neoIT team
formed a discussion forum to collaboratively develop the final customized
assessment criteria. The goal was to develop a final set of criteria that was
very reflective of the business and the surrounding industry environment. For
the client, the financial impact criteria were not as important as evaluating
the offshorability of the products.
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Financial impact:
criteria about the product that relates directly to a financial value
(ex.Resource numbers)
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Offshorability impact:
criteria that affects the ability to offshore (ex. specialization)
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Value:
Together we were able to highlight the best categories in terms of
offshoreability and also exclude some categories where offshoring would not be
successful.
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Transition Roadmap
Process:
With the client team, neoIT developed a 9-month transition plan that would in
10 months reach steady state. During the process the teams applied two factors
within the roadmap that greatly impacted the results:
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Supplier productivity factor:
For every offshore initiative, a supplier resource is not as productive as a
client resource in doing the same work (in the beginning). It sometimes takes
up to a year to optimize performance in a given supplier.
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Client normalization factor:
FTE number was increased in order to calculate all of the work that needed to
be completed during a given year/quarter/etc. This was applied because there
was work that needed to be done that had no available resources. Our client
wanted to leverage offshore to perform this additional work above and beyond
the current workload.
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Value:
The team developed a 9-month transition plan that would in 10 months reach
steady state. And because of the understanding gained by the transition plan,
they were then able to better plan for product development over the next year.
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Business Case
Process:
A breakdown of the major employment costs associated with an employee was
collected. Also included was contract information related to costs of the pilot
service providers in terms of resource rates, communication costs, hardware and
infrastructure costs, PMO costs, travel costs, etc. Using the transition road
map as input, the financial results were calculated month by month as resources
were transitioned from a client-only cost structure to a hybrid global cost
model. Net savings were computed and the financials were taken out to year 3
based on the client's request. The Net Present Value (NPV) was calculated based
on a discount rate provided by our client.
Value:
The analysis provided financial foundation for offshoring by demonstrating
monthly financial results during transition and steady state. The client was
also able to understand the investment or savings necessary in today's dollars
through a calculated NPV over 3 years.
As an extra assurance to alleviate some of the internal concerns, neoIT put
together a risk questionnaire that was then developed into a risk profile. The
questionnaire asked questions related to the client's risk tolerance, perceived
risk and actual risk. The Vice Presidents in each division provided detailed
information for each of the questions. In the end, it was determined that the
business, as well as the executive leadership, was capable and willing to bear
the risk of this offshoring initiative. While one of the smaller deliverables
produced, neoIT helped to position the sponsor and the initiative for success.
The GPE group was able to move forward because of the sign off, approval and
buy-in from each of the divisions - a critical step in any offshore initiative.
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Results
As a result of neoIT's involvement in with our client's offshore initiative,
they were able to convince the CEO and CFO of the value of offshore. Since
deploying their offshore initiatives they have been able to reduce their costs
by 5%, increase productivity by 25%, decrease time to market by 10% and produce
repeatable and predictable processes. They were able to accomplish all of these
goals without layoffs. With neoIT's help they have instituted a program to
deploy local resources to more critical projects.
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AXA
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Pyxis
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Trustmark Insurance
TXU
Verisign
Visa
Warner Brothers
Wells Fargo Foothill
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For more information about
how your company can benefit from working with neoIT, please contact us. |
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