Basman | Explore: IT Outsourcing

In an interview with Nayan Chanda of YaleGlobal Online, N.R. Narayana Murthy, founder of Infosys, discusses the challenges and opportunities for firms operating in India, and also identifies the factors required for success in a global market [24 min 27 sec - April 28, 2006]. For transcripts of the interview, please visit: YaleGlobal Online.

Listen to Mr. Murthy’s opening words to the first question:

How do you account for this meteoric rise of Infosys in the context of India?

Murthy: Well, you’re right. We celebrate our 25th year this year. On 2 July of 2006, we will have completed 25 years. First of all, I must say that God has been very kind to us because, as Louis Pasteur once said, that when God decides to announce his presence, he comes in the form of chance. Having accepted that, let me say this, right from day one, when we founded the company, when we sat for four hours to discuss what we should seek in this journey, we were all unanimous that we would seek respect. We would seek respect from customers, from our employees, from our investors, from our lender departments, from the government and from the society. And we said, if we seek respect from each of these stakeholders, we will do the right thing for them. And if we do the right thing for them, then everything will fall into place. So I’m happy that the company has not swerved from that part of taking respect right from day one to now. And that is perhaps the reason we have had what little success we have had so far.

Respect. Humble and impressive. Now listen to the complete interview:

And here is Azim Premji, Chairman, Wipro and in the second segment Nandan Nilekani, CEO, Infosys Technologies [56 min 40 sec - Mar 1, 2006].

See, hear and read more interviews here at Basman’s.

A Gartner Fellows Interview conducted By Ken McGee.

General Motors’ CIO Ralph Szygenda reflects on his efforts to change business processes at GM, GM’s new $15 billion outsourcing deal and his plans to profoundly improve the way in which IT vendors deliver services.

Ralph Szygenda serves as CIO for General Motors (GM), has more than 2,000 employees, oversees the delivery of IT services by tens of thousands of IT outsourcing associates and is responsible for a $3 billion annual IT budget. 2006 marks his 10th year at the world’s largest automobile manufacturer. We chose this milestone as an ideal time to sit down with him to discuss his role in changing business processes at GM, his company’s new $15 billion IT outsourcing deal, his quest to improve IT vendor processes and his view on the future of IT as a career.

Gartner: How long ago would people around here have talked about business processes as an issue that needed to be addressed at GM?

Ralph Szygenda: Well, when I came into the company, it was the number-one issue. You’ve got to remember, GM was behind a number of domestic automotive companies in terms of productivity, quality and product development cycle time in 1996.

Gartner: Where were the difficulties with business processes a condition explained to you prior to being employed?

Szygenda: Sure, that’s why I came here. This was a wonderful opportunity; it was the impossible job.

When I came to the company, the issue was common. Jack Smith (the chairman and CEO at that time) told me that we didn’t have common processes, that we didn’t have common systems. Later on, we figured out GM had 7,000 information systems. Now, a lot of those information systems were redundant; they were in each business unit doing similar things. So the autonomous business units were one thing helping to create the business process challenge at GM.

The second thing was that, for 12 years, IT was effectively outsourced to EDS and run as a separate company from GM. The strategic management of IT was given to another company that was not integrated into GM. So we had a 12-year separation from that knowledge base.

Furthermore, there was no CIO - that tells you something. In 1996, GM was the world’s largest company, and it never had a CIO. Back then, many companies had CIOs.

Finally, I put in process information officers in 1996/1997. It took until 1999 to put in business process officers; then we dual-headed them for a while.

Gartner: The first set of process officers were for IT processing?

Szygenda: The first business process officers were in IT; I put them in first in 1996. They had process knowledge, and they started to drive the process mentality of the company.

Gartner: How did you find those individuals, particularly those who knew the businesses processes outside of IT?

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An interview in The New York Times, September 16, 2006

Azim H. Premji, 61, is chairman of Wipro, India’s third-largest outsourcing firm, with $2.39 billion in revenue last year. Mr. Premji, whose 81.4 percent ownership stake makes him India’s richest man, is known for his austere style, whether providing visitors recycled drinking water at the company’s Bangalore headquarters or flying himself and his top executives in economy class.

He talked recently about outsourcing, competition and education. Following are excerpts:

Q. Has the furor over outsourcing cooled down?

A. The debate in the United States is significantly more balanced. But what is not getting adequate focus is that globalization is a two-way street. If the United States wants access to Chinese, Indian or Vietnamese markets, we must get access to theirs. U.S. protectionism is very subtle but it is very much there.

The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity and reduce work cycles. The West is not producing enough engineers. The United States will produce 75,000 engineers this year; they will produce more sports therapists than engineers. Germany, the great engineering power of Europe, will produce 35,000 engineers this year; they will produce more architects than engineers. Western companies want access to Indian talent, that is why they outsource, that is why they come to India to set up base.

Q. Wipro began as a company making cooking oil and is now the third-largest outsourcing firm in India, but you still make cooking oil?

A. Being in the consumer business helps us groom talent in areas like marketing, finance and logistics. We can benchmark our outsourcing business to our consumer business and its best practices. Plus, our consumer business is independent, profitable, growing at 25 percent annual growth rates and is now of a respectable size.

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Stephen McGuckin explains how the company consolidated its IT operations and developed a unique model for outsourcing and offshoring. This is a “real world” lecture in IT globalization. Some true lessons learned in outsourcing and offshoring. I recommend the reading. Listen to a really interesting interview in The McKinsey Quarterly: 

Few companies have as much on-the-ground familiarity with remote locations around the globe as Deutsche Post World Net, the corporate parent of Deutsche Post and DHL, a logistics and parcel delivery business. So perhaps it was natural that DPWN would emerge as a leader in the creation of a globally connected IT-development and operations model that has consolidated many of the company’s once-fragmented application-development and data-processing locations into three supercenters, in Cyberjaya, Malaysia; Prague; and Scottsdale, Arizona, in the United States. Along with some outsourced help in India, these facilities keep DPWN’s IT operations and development running around the clock. They are complemented by another application-development center, in Bonn, Germany.

Getting to such a high degree of consolidation wasn’t easy—or fully planned. DPWN’s managing director for IT services, Stephen McGuckin, who over the past decade has held a series of senior IT positions at DHL and its parent, didn’t set out to create a 24-hour IT-development and operations program when he began consolidating the company’s Asian IT centers, back in 1997. His goal then was to reduce costs and to improve the productivity of a host of IT-development locations for specific countries. After a thorough study of the possibilities, he chose Malaysia as the most central and economical. Working with the Indian IT-outsourcing company Infosys Technologies, he consolidated much of DHL’s IT staff in Asia at the new location and outsourced many activities previously undertaken in house. The lessons learned from that first offshoring experience, and its demonstrable success in terms of both cost savings and improved productivity, were essential when the program was replicated in other continents.

The consolidation of the IT centers led to the current model, with its three large IT centers. In the process, McGuckin overcame deep skepticism from many of the company’s other top executives, maintained an unwavering focus on not only the cost but also the business benefits to be gained by consolidation and outsourcing, and learned how best to manage an outsourcing vendor in a complex environment.

McGuckin discusses the lessons he learned along the company’s path to consolidation and outsourcing—from the first moves to locate an application-development center in Asia to the current global-development model—in an interview with Michael Bloch, a principal in McKinsey’s IT practice in Paris, and Marcus Schaper, an associate principal in the IT practice in Hamburg.

The Quarterly: Can you explain why IT is so important for the logistics industry and for DHL and Deutsche Post in particular?

Stephen McGuckin: It’s very simply summarized in one sentence: the information is more important than the package. Customers understand that the physical network can break down. You can have planes delayed, trucks tied up in traffic, or bad weather that delays the physical shipment. But customers won’t accept it if the information system breaks down. They won’t accept it if you don’t tell them that something’s gone wrong and give them the opportunity to take some corrective or preventive action. They may still not be happy, but they’ll be completely unhappy if they’re not informed. So the physical network can work with less than 100 percent accuracy, but the information system has to work all the time.

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Businessweek.com has made a quite interesting interview with an insider, Randy Walker, IBM’s head of outsourcing for the Asia Pacific region: 

Big Blue’s head of outsourcing for Asia-Pacific says it’s no longer just about saving money, it’s about adding talent, too

Randy Walker is IBM’s head of outsourcing for the Asia Pacific region. His job is to bring together all of IBM’s outsourcing facilities in Asia and synchronize them, but he also contributes to the company’s expertise in outsourcing services worldwide.

Walker thinks the most important trend in outsourcing isn’t how much money such arrangements save, but what kind of value they add. For instance, anyone now approaching investment in India purely on a cost basis is missing the real payoff, he believes. Walker spoke to BusinessWeek’s Bombay bureau chief Manjeet Kripalani about the changing contours of the outsourcing industry.

How does IBM operate its offshore model?
We operate a global delivery model according to the needs of our clients. We do it everywhere. Some delivery from the U.S. such as customer resource management is done from Delhi, financial services from Bangalore, human resources in the Philippines.

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LAKSHMI NARAYANAN, the chief executive of Cognizant Technology Solutions, an outsourcing company that is based in Teaneck, N.J., but has most of its employees in India, says it can compete against giants like I.B.M. and Accenture partly by borrowing American-style management techniques. Here are excerpts from a conversation with the New York Times:

Q. Right now, is your company doing relatively unsophisticated work such as writing the code that goes into software?

A. To a large extent, yes. But there is some amount of system integration consulting work that is beginning to happen.

Q. Who are the major players in India?

A. Some of the companies have broken away from the rest of the pack and came to be known as Tier 1. Those are Cognizant, Infosys, Wipro and Tata. This group of companies has grown from just writing code. They are seen as viable alternatives to the I.B.M.'s and Accentures of the world in certain areas like application outsourcing and application development.

Q. You're projecting that you'll grow to $1.3 billion in sales this year from $900 million last year. That's fast growth, but nowhere near I.B.M.'s $90 billion in sales, right?

A. Because we operate in a low-cost area, that $1.3 billion in revenue is equivalent to $4 billion or $5 billion of what a Western company would offer in terms of its billing rates. What we need to build is not so much the size and scale, but rather the ability to expand our service offerings. An Accenture, for example, can invest in a partnership with Microsoft and try to provide complete solutions. That's not a capability that any of the outsourcing companies have today.

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Im CW-Gespräch mit Premiere-CIO Günter Weinrauch geht es um die Motive für ein Komplett-Outsourcing. Außerdem erklärt Weinrauch, was man tun kann, um den Know-how-Verlust zu vermeiden, der bei Outsourcing immer droht.

Hier auf das Video (7:11) klicken.