Novosibirsk October 2002

Outsourcing to Scandinavia

By

Jens BrinkstenCEO, Technology Outsourcing Systems

Agenda

TOS Market Research Outsourcing today The Scandinavian market Outsourcing – advantages /

disadvantages What to outsource What Scandinavian firms look for when

choosing outsourcing partners Key factors for success in the

Scandinavian market

TOS Market Research

Our study confirms that many companies experience a lack of IT resources:

lack of people with the necessary expertise in specific areas

difficulties with holding on to the young people who are easily bored with routine jobs (often a turnover of people of 30% per year)

periodical work: peaks and “start up” time-to-market

Competencies include: Microsoft software (server), .NET, SAP, WAP-programming, C++, Java, XML, database etc.

Outsourcing today…

The companies apply different strategies to address the problem of lack of resources:

outsourcing in-house (to other divisions, mostly abroad)

outsourcing to Scandinavian consulting companies

outsourcing offshore intensive headhunting and job

campaigns using freelancers

The Scandinavian Market

Norway

Sweden

Finland

Denmark

IBM

CSC

CGE&Y

Accenture

CGE&Y

WM-Data

Adcorre

IBM

CSC

Siemens CG

CGE&Y

WM-Data

Compaq

Accenture

TietoEnator

The major system integration firms in Scandinavia are:

There are numbers of other players in the market, but these are the one, we meet as competitors in our work

The Scandinavian Market

Norway

Sweden

Finland

Denmark

India

Ukraine

Russia

Baltic

India

Hungary

Baltic

Russia

Ukraine

India

Czech Rep.

Baltic

Ukraine

Russia

Philippines

Ireland

Baltic

India

Russia

From where do we see offshore development firms in the Scandinavian region?

Outsourcing - advantages

The attitude to outsourcing is generally positive, although it is recognised that there are some problems involved in this. The main advantages are:

Solving a capacity problem in a quick and low cost manner (compared to hiring people)

Solving a competence/knowledge situation No hiring of ad hoc staff Flexibility in production and delivery

Outsourcing – disadvantages - I

The main disadvantages are:

Lack of long term internal knowledge Lack of building up competences Quality control and documentation Time-consuming project management

In some companies (SMEs), it is often required to have competencies in-house also – especially when the outsourced projects are of smaller size

Outsourcing – disadvantages - II

The main disadvantages of outsourcing abroad are (besides those mentioned):

Different language (communication in general)

Different culture and political system Lack of trust and security Lack of control Not secured by European/local law

Close management of the outsourced project is required

What to outsource

IT projects most needed for outsourcing are:

Standard software programming Database programming Internet and e-commerce programming

(server and networks) WAP-applications

Projects for which the necessary competences / knowledge is lacking

Routine jobs in developmental projects

Outsourcing Partner

What Scandinavian firms look for when choosing outsourcing partners A local representative in their own country

(local contracts) Managements models and structured

project methodology Security and reliability Flexible and scalable resources Fast turn-around times Local or international references Price (quality to price)

Key factors for success

If a Russian company wants to have success in the Scandinavian market, they need to have some key factors in place: A local legal entity as representative Local marketing and success stories Local project management Strong project management tools Strong communications skills Delivery and quality assurance Support and service functions Quality to price

Russian firms already have….

Most medium and large size Russian IT outsourcing firms have: Some of the best trained IT specialists and

architects. Because of the emphasis on mathematical and logical thinking, they can solve complex problems, rather than just write code

In addition, Russian programmers have traditionally dealt with limited computing resources by developing more efficient, elegant programs.

Flexible and scalable resources Many US and European references Quality to price (attractive price level)

Russian firms needs to…. I

To make themselves more attractive, the Russian IT firms have to: Change their approach from an engineer

driven approach/profile, to a more marketing driven approach

Become more active in alliances and partnerships

Use more time on profiling efforts, such as articles in the International Press and media

Use the industry organisations more – because standing together makes you much stronger

Russian firms needs to…. II

Furthermore the firms need to: Emphasize service level, guarantees

and data security Improve communication skills TRUST……

Improve the approach to foreign firms… we are not ”blood-

suckers”, who just want to buycheap labour and then sell it in the west with high profit!

Why are we here…..

We are looking for long-term relations and partnerships with companies in Russia

We want to have close co-operation, and to understand you and your firms!

In Denmark we have a phrase saying:

””A sound business practice is aA sound business practice is a

business where both parties feel business where both parties feel

they gained from the business”they gained from the business”

SPASIBO

Technology Outsourcing SystemsTechnology Outsourcing Systems

H.J. Holst Vej 3-5CH.J. Holst Vej 3-5C

DK-2605 BroendbyDK-2605 Broendby

DenmarkDenmark

Phone: +45 7027 1620Phone: +45 7027 1620

Fax: +45 7027 1621Fax: +45 7027 1621

E-mail: office@techoutsys.comE-mail: office@techoutsys.com