Offshore Development: Overview and Best Practices

Copyright ©2003 Virtusa Corporation | CONFIDENTIAL

Offshore DevelopmentOverview & Best Practices

Kris CanekeratneChairman & CEO, Virtusa Corp

creati

ng

com

peti

tive a

dvan

tag

e

Copyright ©2003 Virtusa Corporation | CONFIDENTIAL2

Virtusa: A Quick Overview

• DNA based on building and releasing over 500 product-class solutions for Global 2000 and leading ISVs

• Over 1000 Professionals• 94% employee retention

• Location• US : Westborough (Head Quarters), New York, San Francisco, Atlanta, Chicago, Columbus

• Asia : Colombo, SL; Hyderabad, India

• 7 Years of Sequential Growth• 50% growth in LTM

• 3-Year CAGR, 50%

Leading US Provider of Outsourced Engineering Services Leading US Provider of Outsourced Engineering Services Bringing Time and Cost Efficiencies Through Productization & Bringing Time and Cost Efficiencies Through Productization & GlobalizationGlobalization

creati

ng

com

peti

tive a

dvan

tag

e


Representative Clients

Virtusa enjoys a 100% referenceable client base

Financial Services Telecommunications

Manufacturing/Transportation Retail

Software Products

creati

ng

com

peti

tive a

dvan

tag

e


Global Delivery Model Has Disrupted IT Services

• 2002 IT Outsourcing to Indian Sub Continent $7.5B growing to over $70B by 2008 – Nascomm & McKinsey

• Forrester Research: 20% of US IT Services Jobs will move offshore

• Global 2000 already spend 28% of their IT budget on Offshore Services

“Pick something to move offshore today!”- Brian Valentine, No. 2 Exec,

Microsoft“We tell our clients to let us help them use India as a hub.”

- Richard Brown, CEO, EDS

“We are going to aggressively move everything we can offshore.”

- Ann Livermore, EVP, HP Services

2 out of 5 Fortune500 companies have gone offshore 2 out of 5 Fortune500 companies have gone offshore to meet to meet their IT services needs, ISV’s following similar patterntheir IT services needs, ISV’s following similar pattern

creati

ng

com

peti

tive a

dvan

tag

e


Real Issue: Offshore Services Getting Commoditized

• Offshore industry evolved on the premise of labor cost arbitrage• For every vendor, there is a lower bidder somewhere in India or China

4th Gen Business Transformation

3rd Gen On-site/Offshore

2nd Gen Offshore Code Factory

1st Gen Staffing

• Business Consulting• IT strategy + Biz Integration

• IT Maintenance, integration• Good for inline cost cutting

• Focused on Cost reduction• Legacy skills, quality issues

• Replacement shops

• Little strategic impact

How do clients gain efficiencies beyond simple head-count related How do clients gain efficiencies beyond simple head-count related unit cost reduction?unit cost reduction?

creati

ng

com

peti

tive a

dvan

tag

e


Learning From The Auto Industry’s Global Disruption

Product Line approach: Quick assembly of reusable components

Modular, flexible design

Honda: 80% reuse across Civic, Accord, Odyssey, Insight

Toyota: “Global Body Line”

Japanese Automakers entered US markets as the cheaper alternative to Detroit’s Big Three

American companies struggle to keep up with the quality, innovation and product-line efficiencies of Honda, Toyota, Nissan

Yesterday Today

Productization + GlobalizationProductization + Globalization

Quality + EfficienciesQuality + Efficiencies

Automakers know how to create efficiencies, move up the value chain

creati

ng

com

peti

tive a

dvan

tag

e


Next Gen Outsourcing: Productization + Globalization

Bringing Product-Class rigor into IT services using GlobalBringing Product-Class rigor into IT services using Global

Collaboration ModelCollaboration Model

• Productization

• Product Line Approach to Software building

• Reusable components (self-contained units of business logic and data)

• Assemble components to create new systems, products and applications

• Build these components using global efficiencies

• Benefits

• Immediate ROI through quicker software development cycles

• High Quality Products and product-class applications

• Robust, lasting design through engineering rigor

• Significant downstream economies of scale and scope

• Flexible architecture to scale to future challenges

creati

ng

com

peti

tive a

dvan

tag

e


30%Productivity

Increase

New Breed Of Global Service Providers

Focus on Velocity and Productivity• Rigorous Engineering Processes. Mature talent• An environment that fosters creativity and innovation

Immediate ROI• A pleasant by-product of globalization• Lower blended costs without compromising quality

ReduceEngineerin

gCost by 40-

50%

Accelerate Time-To-Market

• Next Gen, nimble Global Collaboration Framework • 24-hour work days via optimally distributed global teams

GlobalizationGlobalization

Significant Downstream Value via Productization• Reuse of software assets & engineering best

practices• Ease of exploiting multiple markets & customers

Immediate & Long Term

ROIProductizationProductization

creati

ng

com

peti

tive a

dvan

tag

e


Core Differentiators of Next Gen Providers

• Benefits of Productization• Productivity and quality• Pervasive Reusability, Component Technology• Significant Downstream Value

• Peace-of-mind of a US-based Services Company• Executive, technical, domain leadership in close proximity to

clients• Intimacy with Client Business Practices• High-touch, high-end value

• Next Generation Global Delivery Framework• Predictable, transparent global collaboration model• Timeline Acceleration• Cost Efficiencies

ProductizationProductization

creati

ng

com

peti

tive a

dvan

tag

e


Risk-Mitigation Engagement Strategies

• Do the leg work in detailed due diligence. Look for

• References from clients

• On-site visits to assess capabilities, culture fit, maturity

• Engineering talent is a provider’s key asset. Look for:

• Quality and maturity of engineers (college grads Vs. Senior level)

• History of attracting and retaining top talent

• Recruiting, Interviewing and training process rigor

• Performance metrics for productivity (not just unit costs, quality, etc.)

• Work with a partner who offers

• Collaborative models that force your deep involvement

• Regular performance audits

• Client Dashboards to take the temperature at any given time

• Executive team visibility

creati

ng

com

peti

tive a

dvan

tag

e

Copyright ©2003 Virtusa Corporation | CONFIDENTIAL11Boston Chicago Atlanta San Francisco New York Columbus Hyderabad Colombo

Offshore Development: Overview and Best Practices

Documents

offshore services

global efficiencies

cost efficiencies

hp services

services jobs

productclass rigor

productization globalization

productclass solutions