Next Level InternationalProprietary & Confidential

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Outsourcing: Reaping the Benefits, Managing the

Challenges

Frances GrigsbyApril 15, 2005

• Key success factors• Risks

• Preparation

Next Level InternationalProprietary & Confidential

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Outsourcing Taxonomy

Start-Up

Inherent to company

formation

Fundamental to structure

and strategy

Customer-driven

Create presence for market

access

Respond to customer

requirements

Supply Chain Planning

Worldwide presence

Economies of transportation and

manufacture

Other Motivators• Vertical or horizontal integration• Balancing currency and economic cycles• Opportunistic – politics, major order

Early Adopter Mainstream Conservative

Next Level InternationalProprietary & Confidential

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International Software Outsourcing Industry

Unknown $8,000-10,000

30,000-50,000 Philippines

$120 million+ $3,600-6,120+

23,000 Pakistan

Unknown $5,000-8,000 3,000-4,000 Russia

$1 billion $6,000-8,000 400,000; 35,000 highly skilled

China

$6 billion $5,000-8,000 300,000 India

Total Software Exports

Average Annual Wage

Number of Trained Professionals

Country

Sources: Forbes, National Association of Software and Services Companies, Software Association of Pakistan, Software Outsourcing Research. Average annual wage is first-year salary for a highly trained professional.

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What Can Be Outsourced? • Good candidates for offshoring

– Web sales– Accounting – Order processing– Transaction processing and documents– Transcription – Telesales/telemarketing – Benefits administration – Tax processing – Human resources administration – Biotech trials – Claims processing– Product updates and migration– Defined product engineering– Manufacturing

• Questionable candidates– Customer service and inquiry handling– Help desk– Telemarketing– Account management

Next Level InternationalProprietary & Confidential

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• Turn-key nearshore

• Turn-key offshore

• Joint venture

• Build-operate-transfer

• Wholly-owned

• Local provider

Next Level InternationalProprietary & Confidential

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What Goes Wrong?

• Over-expectation

• Sloppy preparation

• Employee resentment

• Intellectual property theft

• Quality deterioration

• Price escalation

Next Level InternationalProprietary & Confidential

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Key Success Factors

• Strategic evaluation• Strong, comprehensive agreements• Disciplined planning and control• Direct personal contact with supplier, expert

outsiders to shorten learning curve• Patience about cost savings• Expectation of mixed success at beginning• Frequent communication and monitoring• Keeping core skills internal• Enhanced opportunities for employees• Protecting the customer experience• Consistent and appropriate procedures• Supplier and country with long-term capabilities

Next Level InternationalProprietary & Confidential

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Evaluating a Supplier

Market Position

Client managementCost

Reputation in marketplaceFocus

Environment

Compensation trendsPolitical stability

Legal and regulatory Education

Internal Assets

Capacity Financial viabilityOperational skills

Quality

Value propositionFlexibilityImplementation plan

Business Practicesand Documentation

ReportingHR practices

DocumentationIP protection

Strategy and Goals

Next Level InternationalProprietary & Confidential

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Next Level International

• Market entry for technology companies

• Specializing in– Business development– M&A preparation and integration– Outsourcing/supply chain

I99 Independence RoadConcord, MA 01742978-369-0012www.nextlevelinternational.com