Copyright ©2003 Virtusa Corporation | CONFIDENTIAL
Offshore DevelopmentOverview & Best Practices
Kris CanekeratneChairman & CEO, Virtusa Corp
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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
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Representative Clients
Virtusa enjoys a 100% referenceable client base
Financial Services Telecommunications
Manufacturing/Transportation Retail
Software Products
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Copyright ©2003 Virtusa Corporation | CONFIDENTIAL4
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
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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?
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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
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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
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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
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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
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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
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