Offshore Outsourcing Trends in Europe
This recent article has a good summary on the trends of offshore outsourcing in Europe.
Interesting tidbits such as Belgium has the highest outsourcing rate at 81% and France the lowest at 63%! Who could imagine Belgium to lead the outsourcing trend in Europe?!
While 70% outsourced to lower costs interestingly only 49% agreed that offshore outsourcing was an effective cost saving tool. That leaves a full 21% that feels there is a questionable costs benefit in offshore outsourcing. Given the soaring euro this is quite unusual that such a large percentage find the cost benefits of offshoring to be nebulous.
Interesting to see logistics to hold the third largest share of the pie for outsourcing segments after computing and maintenance which have been the traditional leaders in offshore outsourcing.
-- snip --
1. 70% of respondents reported outsourcing at least one business process to lower-cost countries;
2. 49% of respondents agreed that offshore outsourcing served as an efficient cost saving tool;
3. 33% pointed to better quality through hiring the specialists among the major reasons for outsourcing;
4. Computing / telecommunications (68%) along with maintenance (76%) and logistics (73%) are the largest outsourcing segments;
5. Belgium was found to have the highest outsourcing rate (81% of companies), while France was found to have the lowest take-up rate at 63%;
6. At the industry level, the finance industry is reported to be the most mature in adopting outsourcing; banking is considered to be the most focused on IT and telecommunications outsourcing with a 75% take-up rate;
7. Medium-sized companies and multinationals are the major users of offshore outsourcing;
8. The majority of respondents generally report positive experience they have had with offshore outsourcing.
9. 20% of European companies admitted intending to increase their outsourcing level within the next two years.
-- snip --
Wednesday, August 20, 2008
Thursday, August 07, 2008
Why do most SOA projects fail?
This post at ZDNet blogs states 1 out of 5 SOA projects fail. Here are my notes on why I feel this happens:
Lack of an Enterprise Integration Office – Without a string EI office through which all development efforts are approved maintaining an organization compliant with an SOA strategy becomes virtually impossible. Developers often circumvent the SOA layer by creating database level integration shortcuts under time constraints or lack of knowledge that a SOA solution exists to solve the same problem.
SOA Layer Silos and Duplication – Typically an application development team creates a SOA layer to serve the needs of the same application and a few other closely related applications. Other development teams do not use this SOA layer and it remains limited to the original application cluster that it was used for. A related problem is duplication of the same business logic in separate SOA efforts by separate development teams. These problems stem from the lack of a widely published and promoted UDDI so developers across the organization are aware of the SOA services available.
Inadequate Tool Support – If creating SOA compliant code or creating the SOA layer itself is difficult or cumbersome developers frequently will circumvent the SOA effort. Proper tool support is vital in making the job of writing SOA complaint code easier.
SOA for SOA’a Sake – SOA is not a silver bullet for all application development efforts. Unless the business logic for which a SOA layer is being created does not have an enterprise wide need , the additional work of creating the SOA layer should be avoided. Developers frequently gravitate towards using SOA and other “cool” technologies tending to over-engineer applications. Strong architectural oversight needs to be provided to prevent this issue.
Big Bang Approach – Implementing SOA across an entire organization needs time and should be done in phases rather than in one big bang development effort. The best place to start is to integrate new and strategically important applications into the SOA layer. Over a period of time as the benefits of SOA become widely recognized backward integration into existing apps should be attempted.
This post at ZDNet blogs states 1 out of 5 SOA projects fail. Here are my notes on why I feel this happens:
Lack of an Enterprise Integration Office – Without a string EI office through which all development efforts are approved maintaining an organization compliant with an SOA strategy becomes virtually impossible. Developers often circumvent the SOA layer by creating database level integration shortcuts under time constraints or lack of knowledge that a SOA solution exists to solve the same problem.
SOA Layer Silos and Duplication – Typically an application development team creates a SOA layer to serve the needs of the same application and a few other closely related applications. Other development teams do not use this SOA layer and it remains limited to the original application cluster that it was used for. A related problem is duplication of the same business logic in separate SOA efforts by separate development teams. These problems stem from the lack of a widely published and promoted UDDI so developers across the organization are aware of the SOA services available.
Inadequate Tool Support – If creating SOA compliant code or creating the SOA layer itself is difficult or cumbersome developers frequently will circumvent the SOA effort. Proper tool support is vital in making the job of writing SOA complaint code easier.
SOA for SOA’a Sake – SOA is not a silver bullet for all application development efforts. Unless the business logic for which a SOA layer is being created does not have an enterprise wide need , the additional work of creating the SOA layer should be avoided. Developers frequently gravitate towards using SOA and other “cool” technologies tending to over-engineer applications. Strong architectural oversight needs to be provided to prevent this issue.
Big Bang Approach – Implementing SOA across an entire organization needs time and should be done in phases rather than in one big bang development effort. The best place to start is to integrate new and strategically important applications into the SOA layer. Over a period of time as the benefits of SOA become widely recognized backward integration into existing apps should be attempted.
Automation vs. Outsourcing - What's the right solution?
This article of mine was recently quoted in Mortgage Technology Magazine. Read it here.
Any automation project must always be evaluated against all other options and a true comparative ROI should be established. The three possible choices facing an organization are:
Full Automation – Preferable when the process being automated has achieved process maturity and the workflow is well established. Full automation is preferable only when it is a solution for a long term need. Buy vs. build is a major decision in full automation. As a rule of thumb, if an off-the-shelf software solution can meet at least 75% of the requirements, there is no compelling justification to build the software from scratch. Proprietary plug-ins can always be built over packaged software. While this might not be the most elegant solution, considering the rate of software obsolescence this path must be given great consideration before investing in a long term automation project.
Partial Automation – Sometimes the productivity gains from partial automation might be able to provide the maximum benefit for the minimum cost. Examples of this are imaging systems, workflow software, telephony and fax automation solutions, etc. Frequently enabling the workforce with productivity improvement tools is the solution.
Outsourcing/ Offshoring – If an external vendor(s) has already made the investment in automation and/or has the economies of scale to perform a process better/faster/cheaper than a heavily automated organization can achieve, outsourcing should be the preferred path. With the outsourcing approach there is no upfront investment in software development or programmers and a variable cost model can be established. Further, there is no cost of technology obsolescence or ongoing maintenance. An organization needs to evaluate whether its investment in an automation tool achieves it a greater ROI over outsourcing the same work within a reasonable time span. Offshore outsourcing options need to be evaluated to further reduce the cost of outsourcing and to achieve a greater ROI.
This article of mine was recently quoted in Mortgage Technology Magazine. Read it here.
Any automation project must always be evaluated against all other options and a true comparative ROI should be established. The three possible choices facing an organization are:
Full Automation – Preferable when the process being automated has achieved process maturity and the workflow is well established. Full automation is preferable only when it is a solution for a long term need. Buy vs. build is a major decision in full automation. As a rule of thumb, if an off-the-shelf software solution can meet at least 75% of the requirements, there is no compelling justification to build the software from scratch. Proprietary plug-ins can always be built over packaged software. While this might not be the most elegant solution, considering the rate of software obsolescence this path must be given great consideration before investing in a long term automation project.
Partial Automation – Sometimes the productivity gains from partial automation might be able to provide the maximum benefit for the minimum cost. Examples of this are imaging systems, workflow software, telephony and fax automation solutions, etc. Frequently enabling the workforce with productivity improvement tools is the solution.
Outsourcing/ Offshoring – If an external vendor(s) has already made the investment in automation and/or has the economies of scale to perform a process better/faster/cheaper than a heavily automated organization can achieve, outsourcing should be the preferred path. With the outsourcing approach there is no upfront investment in software development or programmers and a variable cost model can be established. Further, there is no cost of technology obsolescence or ongoing maintenance. An organization needs to evaluate whether its investment in an automation tool achieves it a greater ROI over outsourcing the same work within a reasonable time span. Offshore outsourcing options need to be evaluated to further reduce the cost of outsourcing and to achieve a greater ROI.
Monday, August 04, 2008
Global financial firms go slow on recruitment - Lehman shuts down Mumbai unit
Lehman Brothers is reportedly shutting down their 100 person Mumbai unit noted in the above article on Hindustan Times. Merrill Lynch is also reported to be scaling back its India operations significantly.
Although the article notes this as a probable cost saving measure I would think that it is equally an effort to focus on core competencies. This is another example that supports my previous thread on the increasing difficulty for companies to run offshore service captives that do not have any revenue generating function in the host country.
Expect a whole host of this kind of news in the coming months and the remnants of a majority of captives being picked up by large offshore outsourcing vendors. Good times to be a vulture investor if you wanted to pickup "fire sale" equipment, office space and of course talented and trained employees from these departing captives.
Lehman Brothers is reportedly shutting down their 100 person Mumbai unit noted in the above article on Hindustan Times. Merrill Lynch is also reported to be scaling back its India operations significantly.
Although the article notes this as a probable cost saving measure I would think that it is equally an effort to focus on core competencies. This is another example that supports my previous thread on the increasing difficulty for companies to run offshore service captives that do not have any revenue generating function in the host country.
Expect a whole host of this kind of news in the coming months and the remnants of a majority of captives being picked up by large offshore outsourcing vendors. Good times to be a vulture investor if you wanted to pickup "fire sale" equipment, office space and of course talented and trained employees from these departing captives.
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