Global leadership: IT as a competitive advantage, Claus Lund Pedersen, Head,Denmark

Payment Business ServicesOffshore Outsourcing the “Danish way”

NASSCOM India Leadership Forum 2008

Claus Lund Pedersen

Senior Manager & Head ofResource Management within IT Development

...the right resources with the right skillsat the right time for the right projects…

NASSCOM India Leadership Forum 2008PBS – Payment Business Services – 2008 ©

February 14, 2008 - page 2

Offshore Outsourcing in PBSAgenda

► Payment Business Services - PBS

► PBS’ rationale for outsourcing

► PBS’ sourcing strategy and set-up

► PBS’ experiences

► Future plans for PBS’ outsourcing Agenda



Offshore Outsourcing in PBSScope for this presentation

► Something on outsourcing of…

► IT System Development

► IT System Maintenance

► Nothing on outsourcing of…

► BPO

► IT Operations

► IT Support

► IT Data scanning

…or… So…



Offshore Outsourcing in PBSPayment Business Services

► PBS develops, sells and operates systems and services in the market for payment cards and payment services. PBS are also sub-suppliers to the common IT infrastructure of the Danish banks.

► In popular terms, PBS moves money and information between citizens, companies and public institutions. Every minute of the day several million DKK passes through our systems.

► PBS was founded in 1968 and we are owned by most of the Danish banks and the central bank in DK, Danmarks Nationalbank

► PBS employ approx. 850 people of which 99% work at our headquarters in Ballerup, northeast of Copenhagen, Denmark.

► PBS is the company behind systems such as Dankort (Danish debetcard) and Direct Debit Service (used by 94% of the Danish household).

► 1¾ billion transactions were processed via PBS in 2006



Offshore Outsourcing in PBSPayment Business Services

► Mission

► To make payments and exchange of information easy and secure

► Vision

► To be the leading supplier of payment and information solutions

► Values

► Responsibility: Because we handle other people’s money

► Creating value: For our customers as well as our shareholders

► Assets

► People

► Knowledge, experience and expertise

► Systems and services

► Profile in the market



Offshore Outsourcing in PBSEuropean market future

► New players

► New global players on the European market

► Current 15-20 players will be 3-5 players in the future

► Cross border activities

► New potential customers and competitors

► Multicurrency services

► Multilanguage services

► SEPA

► Single European Payment Area

► Costs

► Lover transaction costs



Offshore Outsourcing in PBSPBS future

Keep our position as the leader

Digitised services

Lower transaction costs

Denmark

New home market

Follow our customers

Strategic partnerships

Nordiccountries

Be ready for the new competition on the European market incl. SEPA

Europe

Expan

sion –

More

work



Offshore Outsourcing in PBSRationale for outsourcing

► 2002…

► Big project – Reengineering of a payroll system(1/3 of PBS’ development capacity for 2 years)

► Few internal experts – both old and new system

► Time and resources – scares resources

► 2007/2008…

► More work than resources

► Reduction of costs

► Release internal resources for process-improvement projects

► Expand resource-pool as variable costs

Not onlyto cut

costs !!

Lackof

resources !!



Offshore Outsourcing in PBSRationale for outsourcing

► Variable costs

Projects

PBS staff

ODC

Contractors



Offshore Outsourcing in PBSSourcing strategy

► PBS identifies the sourcing option for each project based upon the project type, duration, costs, req. stability and knowledge required

► Standard tools/systems wherever possible

► IT development/maintenance carried out by…

► Resources from PBS’ internal IT Development

► Resources from our ODC (either in India or in PBS)

► External contractors (primarily Danish or English)

► Knowledge about our systems and business needs to be in PBS !!!



Offshore Outsourcing in PBSSourcing strategy

► Resource pools

► Always a PBS Project leader/manager and a QA person on a project

► Project responsibility is always with PBS

PBSIT Development ODC

Externalcontrac-tors &

vendors

Resource Allocation

PBS has the

ultimate responsibility



Offshore Outsourcing in PBSSourcing set-up

► PBS has set-up an Offshore Development Centre (ODC)

► The ODC is an extension to the ressource pool in PBS

► The ODC has been set-up with L&T Infotech in India:

► Office-space, IT infrastructure etc. is owned by the vendor

► Resources are employed by the vendorbut allocated to the ODC 100%

► PBS has:

► 3 PBS employees for the vendor management and coordination/administration of the relationship- Based in PBS (onsite)

► 2 PBS employees for the project coordination- Based at vendors site in India (offshore)




PaymentSAP

Card




► Strategic investment !!

► PBS invest time and money in knowledge build-up at the vendorwhich results in:

► Domain knowledge of PBS’ business and systems

► Knowledge-database/repository

► Certification-program

► PBS has a three year contract which acts as a framework with supporting service orders for each project carried out by the vendor

► Fixed price …and… Time & Material

► Common processes both at onsite and offshore to ensure a smooth, efficient and predictable coorporation

► Workshops, handbooks and project introductions to minimise the impact of the cultural differences between Danes and Indians

KEY !!



Offshore Outsourcing in PBSExperiences - Maturity

► CMMI makes a difference (SEI Capability Maturity Model Index)

Current level

CMMI levelCMMI level

CustomerCustomer

VendorVendor

55

44

33

22

11

11 22 33 44 55

Good

Average

Poor

Current level

Goal

PBS



Offshore Outsourcing in PBSExperiences - Culture

► Indians work long hours

► Easy to blend in when working at customer’s site

► There are cultural differences between India and Denmark…

► Indians does not always tell you if they don’t understand you

► Shaken the head does not mean no – could mean yes or “I hear you”

► Indians are very polite – sometime too polite

► Indians accept the “unequal dimention” - Danes think everybody are equal

► A lot of Indians work far from hometown…

► Illness in the family, marriage etc. can mean leaving their job



Offshore Outsourcing in PBSExperiences - Culture

► Religion is important to Indians - Acknowledge many religions

► If you want creativity you need to ask for it

► Promotions are expected after 3-4 years in same position/rolle which does not easily comply with long term retention of knowledge in a team

► The impact of cultural differences is very much depended on the vendor’s and customer’s ability to manage these differences

► You need to understand ”hinglish”

► But… not all Indians are the same (just like the Danes and…)



Offshore Outsourcing in PBSExperiences - Recommendations

► Make your company ready as an “outsourcing customer”

► Choose the right vendor

► State clear requirements and expectations

► Create common processes, templates, checklists and plans

► Ask the “receiver” whether he/she has understood the message

► Priority on all projects – What is most important to you as customer…

► Price, Time or Quality

► Use own staff as offshore coordinators

► Make use of new technology – Videoconf., Skype, Chat etc.

► Internal communication is IMPORTANT

► Inform about plans and status – take the discussions

► Try it = Prove it



Offshore Outsourcing in PBSFuture for PBS

► PBS believes that controlled and managed outsourcing is one of the tools to ensure expansion of PBS’ development capacity

► Key numbers…

► Global development capacity needs to be expanded

► ODC needs to deliver up to 40% of the total kapacity

► Split of outsourced work: 20% onsite and 80% offshore

► Decreasing hourly rates by expanding with “cheaper” development hours



Offshore Outsourcing in PBSNot everything is suited for outsourcing



Offshore Outsourcing in PBSThank you – Contact information

► Claus Lund Pedersen, Senior Manager

► IT Development, Resource Management

► Tel.: +45 2948 2252

► Email: [email protected]