Offshoring

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REV: JULY 11, 2005

Offshoring at Global Information Systems, Inc.
The Opportunity
Early in the first quarter of 2004, Jane Harding was considering a proposal to shift 3,000 wellcompensated computer programming jobs from the United States to existing company locations in
China, India, and Brazil. Harding was the senior vice president for Human Resources in the Global
Services Division (GSD) of Global Information Systems, Inc. (GIS). GIS had 2003 revenues of nearly
$90 billion (Exhibit 1). GSD accounted for about half of GIS’s total revenues and an equal fraction of its total profits. It also included more than half of the company’s 315,000 worldwide employees.

Background
A significant portion of GSD’s business came from customers outsourcing their business-process needs. GSD signed multiyear contracts with customers. Most of these long-term contracts were won through highly contested competitive proposals against firms such as Accenture, Ltd., Electronic
Data Systems Corp., Computer Sciences Corp., and Perot Systems (Exhibit 1). The multiyear billings of some contracts totaled in excess of $1 billion. Pretax profit margins at the division level were close to 10%.
In order to present the most attractive value proposition to potential customers, GSD sought to cut costs and improve performance by “offshoring” certain activities. The combination of huge capacity expansion and similarly large price reductions in telecommunications made it highly efficient to establish customer service/call centers, software development centers, engineering design centers, and back-office accounting centers in low-cost areas of the world that had been or were now developing politically and socially reliable infrastructures.
In India, for example, exports of information technology services grew fivefold…...

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