Strategies to Address Regulation in Sourcing

International Association of Outsourcing Professionals (IAOP)

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Strategies to Address

Regulation in SourcingTony Ioele, Managing Principal, WGroup

Domenic Colasante, Chief Marketing Officer, WGroup



About WGrouphttp://www.thinkwgroup.com

Management Consulting

Founded in 2004

Specialized in Technology and Business Strategy and

Operations

Support Fortune 1000 across all Industries

Growing 32% CAGR 2014-2016

People

Average 25 Years’ Experience

Former CIOs, COOs, CFOs, & Executives

Sr. Partner level only – not a leveraged model

Non-prescriptive and Practical

Value-focused

Strategic Alignment to Business

Realization of Business Outcomes

Revenue Improvement

Cost Reduction and Containment

Agnostic (technology, provider and outcome)

Services

IT Strategy

IT Service Delivery Transformation

IT Sourcing and VMO (full lifecycle)

Transformation (M&A, Cloud, Automation)

Program Leadership



Tony Ioele, Managing Principal

Prior Roles:

Interim CIO, SterlingBackcheck

Interim CTO, Clarient Global,

a DTCC Company

Head of Shared Application Engineering,

ING

Head of Service Management, ING

Head of Solutions Delivery, ING

VP Applications Development and Integration,

Alliance Consulting

VP, Citi

Consulting Expertise:

Shared Services Strategy

Shared Services Transformation

Service and Process Assessments

Sourcing Strategy

Outsourcing RFP through Transition

IT Service Transformation

Process and IT Design and Transformation

Contract Restructuring and Negotiation

Service Provider Sourcing Selection

Educational Background:

Masters Certificate, Applied Project Management, Villanova

BS, East Stroudsburg University of PA

Tony Ioele has more than 25 years

of experience across the

Information Technology disciplines.

Tony brings strategic direction,

architectural process, customer-

focus and rapid development to the

discipline of Applications,

Infrastructure Services and

Operations. Tony is known for his

astute sourcing and vendor

stewardship focus.





Protectionism and Outsourcing

- Brace for Impact”

Trump's Presidency Could Sound Death

Knell for Offshore Outsourcing

Two Impact Areas

Offshoring Regulation and Tax

Policy

1 http://www.cio.com/article/3180703/leadership-management/protectionism-and-outsourcing-brace-for-impact.html 2 http://www.cio.com/article/3146126/outsourcing/trump-presidency-could-sound-death-knell-for-it-outsourcing.html

H-1B Temporary Worker Visas

4/3: Trump Administration Halts Expedited Processing

of H-1B Visas

4/18: Trump Administration orders government wide

review of H-1B program. Directs several cabinet

secretaries to suggest changes “as soon as practical.”

Possibilities:

Lowering number of visas granted (85,000 today)

Random Lottery Skill / Level Based

Raising Salary Minimum from 60K $100K+

Shift Industry Focus out of Tech

http://money.cnn.com/2017/03/04/news/economy/h1b-visa-expedited-suspended-reaction/

http://www.economist.com/news/business/21714994-it-firms-need-upgrade-face-technological-and-political-

shifts-indian-outsourcing



H-1B Visa Distribution

Rank 2014 2015 2016

1Infosys Limited

(24,508)

Infosys Limited

(24,334)

Infosys Limited

(25,035)

2Tata Consultancy

Services (13,371)

Tata Consultancy

Services (14,675)

Tata Consultancy

Services (11,216)

3Wipro Limited

(8,901)

Wipro Limited

(9,671)

Capgemini America

Inc.

(10,376)

4 Accenture (7,054)IBM India Private

(9,429))

IBM India Private

(8,452)

5Deloitte Consulting

(6,370)

Deloitte Consulting

(6,486)

Tech Mahindra-

America

(7,881)

6IBM India Private

(4,432)Accenture LLP (6,450))

Accenture

(7,402)

7HCL America, Inc.

(4,334)

HCL America, Inc.

(4,838)

Wipro Limited

(6,905)

8Ernst & Young U.S.

(3,949)

Microsoft Corp.

(4,128))

Deloitte Consulting

(5,783)

9Microsoft Corp.

(3,367)

Igate Technologies Inc.

(4,048))

Ernst & Young U.S.

(4,701)

10Igate Technologies Inc.

(3,066)

Ernst & Young U.S.

(3,603)

Google

(4,358)

0% 20% 40% 60% 80%

Medicine and Health

Education

Administrative Specializations

Architecture, Engineering andSurveying

Computer Related

Top 5 Occupations for H-1B Visa Holders in FY14

http://www.ciodive.com/news/4-things-to-know-about-the-h-1b-program/439570/



H-1B Distribution

Fortune, 2017

http://fortune.com/2017/04/19/h1b-visa-applicants-wages-locations/



Service Provider Impact

2017 Layoffs: Cognizant, IBM, L&T, Capgemini, Wipro, Infosys, TCS… : 57,000+

Market ConsolidationAtos/Xerox, Capgemini/IGATE, HPE/CSC, NTT/Dell

Increasing CompetitionDownward Pricing Pressure

Declining Benefits of Labor Arbitrage + Cloud + Automation

http://www.hindustantimes.com/business-news/cognizant-layoffs-2017-may-not-be-the-best-year-for-jobs-in-

it-and-tech-companies/story-gqlAvyhP2eZ9bFGB7pV8SI.html

http://zeenews.india.com/companies/cognizant-to-layoff-6000-employees_1988237.html



2017 Layoffs: Cognizant, IBM, L&T, Capgemini, Wipro, Infosys, TCS… : 57,000+

Market ConsolidationAtos/Xerox, Capgemini/IGATE, HPE/CSC, NTT/Dell

Service Provider Impact

Increasing CompetitionDownward Pricing Pressure

Declining Benefits of Labor Arbitrage + Cloud + Automation

Tax Policy

http://www.hindustantimes.com/business-news/cognizant-layoffs-2017-may-not-be-the-best-year-for-jobs-in-

it-and-tech-companies/story-gqlAvyhP2eZ9bFGB7pV8SI.html

http://zeenews.india.com/companies/cognizant-to-layoff-6000-employees_1988237.html



Service Provider Reactions

Changes to the Visa program could shave

as much as 300 basis points off our

margin.

Milind Kulkarni CFO, Tech Mahindra

We are not overly concerned because we have already

increased local hiring.

Vishal Sikkah Chief Executive, Infosys

TCS, Infosys, and Wipro gathered in New Delhi to discuss a plan

to address the skill shortage in the U.S. by setting up schools in

the U.S.’s Rust Belt towns to train local workers to do simple IT

jobs.

Wall Street Journal

January 2017

We are moving towards "Hyper

Automation”

Abidali Neemuchwala, CEO, Wipro

June 2016

India’s outsourcing giant Infosys is hiring

10,000 American workers

Reuters

May 2017January 2017

March 2017

The new Ignite My Future in School will roll out to 10 US

school districts and will include 3,000 TCS employees to build

local collations.

Tata Consultancy Services (TCS)

March 2017

https://qz.com/973316/infosys-hiring-giving-in-to-trumps-bullying-indias-outsourcing-giant-is-hiring-10000-american-workers/

http://economictimes.indiatimes.com/articleshow/56881815.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

http://www.cio.com/article/3162427/careers-staffing/it-service-providers-prepare-for-potential-h-1b-visa-changes.html

https://www.pressreader.com/india/business-standard/20170309/281496456080820

http://www.indiatimes.com/news/world/3000-software-engineers-might-get-fired-at-wipro-after-artificial-intelligence-learns-to-do-all-their-

jobs-256519.html

https://www.tcs.com/tcs-and-discovery-education-partner-to-prepare-one-million-students-for-21st-century-careers



Strategies for Action

Issue Probability Impact Mitigation

Offshore Sourcing Regulations High Medium …

Competitive Pricing Change Low Medium …

Supply Chain Disruption Medium High …

Security Breach High High …

Define Your Risk Profile

Evaluate your exposure (Scope, US Activity, Spend, Contracts, Vendors, Headcount, etc)

Challenge your Sourcing Assumptions Based on a different Risk profile

Vendor Management Must Own

Manage in the same way as an Enterprise Risk



Active Contract Review



Focus on Flexibility


Eliminate minimum revenue commitments

Ability to terminate by service or tower by convenience, or if

deal is uneconomical

Flexibility to shift locale of work delivery location,

within existing contract

Get protection for change in laws. Do not

agree to price increase clauses.

Change pricing models from labor-based to

resource unit and outcomes based.



Understand the Current Labor Delivery Model – Can it be Modified?


ASK to understand how the resources are sourced

Be wary of “Landed” resource contracts leveraging high numbers of H-1B Visas

Alternative visa mechanisms

– F-1 OPT Visa for students during degree completion efforts (27 month working max)

– L-1 Visa for transferring specialized workers from other corporate-owned

international locations to US.

– H-2B Visa for seasonal work lasting

less than 1 year

– O-1 Visa for extraordinary talent

that is “best” in their field

– Green Card submission



Diversify Vendor and Delivery Location Mix


Question your assumptions for the service delivery mix.

Reduce dependence on models with exclusive

dependence on offshore labor.

Adopt hybrid and multi-vendor sourcing strategies.

Does your vendor lead with automation, or selectively add

it to protect margin?

Consider leveraging a multi-shore service provider,

with broader capabilities than one region alone.



Look for On-Shore Sourcing Opportunities


Nexient a domestic pure-play technology services provider,

with a core strength in agile software development. HQ in Ann

Arbor, Michigan.

IAOP Phila. Chapter Sponsorhttps://www.nexient.com/

Rural Sourcing Inc, RSI, is a US-based IT outsourcing

company that provides a cost effective, agile approach to

software development, support and maintenance.

https://www.ruralsourcing.com/

Onshore Outsourcing provides Americans and veterans in rural

communities stable and rewarding IT careers.http://www.onshoreoutsourcing.com/

Saturn Systems is a 100% US-based company providing

custom software development, quality assurance and staff

augmentation services across all industries.

http://www.saturnsys.com/

QAT Global’s Rural Sourcing Centers provide enterprise

solution development services: legacy modernization, cloud

computing, big data & analytics, web & mobile apps, and

integrations.

http://www.qat.com/

https://www.ruralsourcing.com/

http://www.onshoreoutsourcing.com/

http://www.saturnsys.com/

http://www.qat.com/



Invest in Recruiting Capabilities


Will you be able to find US-Based resources if you need to?

The war for talent is accelerating - expect an aggressive market for

top talent resources.

Form relationships with US-Based staffing firms.

What is your brand? Have you looked at social media (i.e. Glassdoor,

Indeed, Vault). Are you an employer of choice? What can be done to

improve your image within the job market?



New Service Delivery Approaches, Automation, and New Technologies


Labor arbitrage is over. Look for opportunities for labor elimination.

Top process candidates – repetitive,

highly standardized, areas with

high turnover

DevOps delivery models that

require less offshore labor



Automation

Standard and Repetitive Functions

Virtual Customer Assistants

Smart Advisors

Virtual Personal Assistant

Automated Diagnostics and Repair Agents

Predictive Analytics

Sentiment Analysis

Dynamic Upsell/Cross-sell Recommendations

Knowledge Management and Organization

Language Translation

Natural-language Question Answering

Data Entry and Data Cleansing Automation

Workflow Process Automation

Test Automation

Pricing varies among all, from “Per Robot,” to “Per Process,” to “Per Outcome.”

Solutions must be evaluated in connection with the business case for improvement.

Pure Play Automation Technologies: Service Provider Automation:

Partnered with Pure Plays, or with their own

Automation has potential to allow headcount reassignment.

However, we see its value predominantly as an optimization and functional acceleration technology.



Bill Gates on Automation

https://qz.com/911968/bill-gates-the-robot-that-takes-your-job-should-pay-taxes/



Robot Tax

WGroup Perspective – Do not let the potential ‘Robot Tax’ impact decision making.

Benefits will be positive, even with a tax.

Automation drives process efficiency and forces standardization.

Automation accelerates speed of operations and can improve the customer experience.

Automation contributes to reducing security risk.

We are in a Tax Abatement period now, take advantage of it.

While Gates is right that robots–not just traditional industrial robots,

but all sorts of artificial intelligence applications–are indeed likely to

automate a lot of work over the next 20 years, computer automation

is actually increasing employment in most industries, so taxing

robots would just slow job growth and limit economic

opportunity for millions.

Fortune, February 2017

Tax revenue is essential for training and for

making new, irreplaceable jobs available to

human workers.

CNBC

February 2017

http://www.cnbc.com/2017/02/17/bill-gates-job-stealing-robots-should-pay-income-taxes.html

http://fortune.com/2017/02/25/bill-gates-robot-tax-automation-jobs/



WGroup is a Differentiated Advisory Firm

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Other Firms:10-15% WGroup Minimum: 20% WGroup Average Save: 48% We’ll Put Our Fees at Risk

Execution in Weeks, not 6+ Months

Agile Approach without an RFP Data Driven Analysis

Flexibility Location Rebalancing Hybrid Delivery & Multi-Sourcing Eliminate Min. Rev. Commits

Provider Upfront investments Amortize Transition Share in Value Delivered Strategic Financing

Experienced Financial Engineering Advisory

All engagements are delivered by our staff of former CIOs, IT leaders, and sourcing leaders.

Speed to Value

Industry-Leading SavingsActionable Strategies to Address

Regulatory Risk

Service Delivery Transformation



Tony Ioele

Managing Principal+1 [email protected]

Contact Us

Domenic Colasante

Chief Marketing Officer+1 610-854-2700

[email protected]