BPO Industry (including SA Value Proposition and International Perspective) Mfanu Mfayela, BPeSA CEO Midrand, June 2007

Transcription

1 BPO Industry (including SA Value Proposition and International Perspective) Mfanu Mfayela, BPeSA CEO Midrand, June

2 Thinking Global Invest where you get maximum returns, source talent from where it is best available, produce where it is most costeffective, and sell where the markets are, without being constrained by national boundaries. Narayan Murthy, Infosys 2

3 Outline 1. Business Process Outsourcing - Opportunity & Background Information 2. International Developments 3. SA Industry 4. SA Value Proposition 5. Q & A 3

4 Section I Business Process Outsourcing 4

5 Potential Across the Value Chain Human Resources Payroll Processing Recruitment and selection support HRIS IT Services and Support Custom development Systems integration Hosting / maintenance Customer help desk / support Source: NASSCOM-KPMG 2004 Inbound Logistics Finance and Accounts Product Development Human Resources Management Technology Services Manufacturing / Operations Operations / logistics Order tracking Order / claims / application processing Payments processing Outbound Logistics Marketing and Sales Customer Service Sales / Marketing and Customer Service Tele-sales Order Processing Customer services and Complaints Help-desk Finance and Accounting Back-office Accounts payable/receivable Financial reporting Finance accounting Revenue accounting Research / Design and Development Clinical research VLSI design DSP chip design Avionics research Engineering design services Legal research 5

6 Global Delivery Locations - Genpact, India US, Mexico, Hungary, Romania and China - IBM, US South Africa, China, India, Malaysia, Australia, Costa Rica and the Philippines - ACS, US China, India, Fiji and Ghana - Virgin Mobile UK, South Africa 6

7 Blurring of Onshore, Nearshore & Farshore Locations - Automobile manufacturer in Europe with suppliers across the EU - Outsourcing of accounts payable Provider receives invoices from suppliers at a central location in Spain Invoices scanned and sent to facilities in India and the Philippines for processing payment Payment to suppliers facilitated by delivery centers in Spain and the UK 7

8 Offshoring is Win-Win - McKinsey summarizes their cost-benefit calculation for one dollar of outsourcing as follows: Savings accrued to U.S. investors and/or customers from lower costs resulting from the use of outsourcing come to $0.58 Imports of U.S. goods and services by providers in India equal $0.05 Profits transferred by U.S. overseas affiliates to parents equal $0.04 The value from U.S. labor reemployed is conservatively estimated to be $0.45 to $ This gives a total gross gain to the United States of $1.12 to $1.14 for every dollar of work offshored to India, for a net increase in U.S. income of 12 to 14 cents per dollar of offshore outsourcing. In addition, McKinsey did a similar calculation for India and concluded that India gains a total of $0.33 for every dollar of U.S. outsourcing. 8

9 Estimated addressable market in global offshore IT industry 2005 (UbSS$ billion) Current Penetration % Includes hw/sw maintenance, network administration and help desk Traditional IT Application development and maintenance System integration 3-4 Consulting (including network consulting) R&D sevices Total 9

10 Estimated addressable market for global offshore BPO (US$ billion) Insurance Retail Banking Travel & hospitality Auto mfg Telecom Pharma Others F&A/HR Total Current penetration %

11 AT Kearney s Global Services Location Index

12 India s IT/ITES Performance ($ billion) Sector FY 2004 FY 2005 FY 2006 FY 2007E IT services ITES-BPO Engineering Services, R&D, Software Products Total Exports

13 This will stimulate growth in Tier II Locations over the next 3-4 yrs Cost curve, 2008 Total cost of operation ($/FTE/hr) China* Existing preferred destination India Philippines ~ Demand gap of , depending on Chinese supply capacity Projected level of demand by 2008 ESTIMATES Demand gap can further increase if continental Europe offshoring increases Significant opportunity for Tier II locations to grab demand surplus Countries with ambitious growth plans include: Malaysia Singapore Russia Thailand Mauritius Pakistan South Africa 0 ~ ~2 000 Capacity utilised ( 000 people employed) * Assuming China is successful in its initiatives to undo talent supply constraints Source: McKinsey analysis 13

14 Section II International Developments 14

15 What s Happening Out there??? - USA Legislation is the Driver (Rest of the World to Follow) Do Not Call List Speed to Answer Technology Development Work from home Nth Tier Cities (Competing with Offshore Locations) Innovation - Rest of the World Quality Efficiency Technology Development New Markets; Australia 15

16 Section III SA Industry 16

17 Key Factors for a Successful Industry Infrastructure Talent Pool Government policies Promotion Success stories Smart marketing 17

18 Business Process enabling SA - National industry association representing the interests that aims to provide a national coordinated service & address key challenges incl. policy advocacy, etc. Aim to develop & grow industry to become a significant contributor to GDP, through attracting foreign direct investment & creating sustainable job creation Aim to strengthen & improve sector, ensure and promote SA as a destination of choice investors 18

19 SA has a growing number of International Brands in Key BPO Locations Over 360 contact centres (About 30% outsourced) CEO: Keryn House Cell: keryn@contactingauteng.co.za Johannesburg (Gauteng) CEO: William Goldstone Tel: goldstonew@durban.gov.za About 70 contact centres (20% outsourced) Durban (KwaZulu Natal) Over 170 contact centres (About 30% outsourced) CEO: Luke Mills Cell: luke@callingthecape.org.za Cape Town (Western Cape) About 22 captive contact centres Nkuli Mxenge-Mayende Tel: nkuli.mxenge-mayende@coega.co.za Port Elizabeth (Eastern Cape) Each region is best positioned to put its own case forward. At this stage the Support Office is not in possession of equally comparable regional facts, which could potentially disadvantage a region. Genpact is advised to contact the regions in which it is interested, directly 19

20 Realising Opportunity - BPeSA formed strategic partnership with dti and Business Trust designed to realise its objectives Has taken a non-traditional, development role as industry is being born - Urgent focus on getting Government support to enable this development - Need to achieve partnership with Government at national level, similar to successes already achieved at regional level 20

21 SA (Renewed) Foundation - Government & SACCCOM recognise that: Need to leverage strengths & minimise duplication Support & cooperate with each other Need to build strong partnership & meaningful co-operation which is essential to positioning & promoting SA as a leading offshore destination 21

22 Section IV South Africa Alive with Possibilities 22

23 SA Value Proposition - A unique opportunity to improve its service offering and delivery to existing and prospective customers Distinctive strengths in key industries and service lines A large quality talent pool A sound regulatory environment including financial service regulation and protection of data privacy and intellectual property - An attractive social, economic and political climate to extend its global footprint and thereby reduce its location risk A stable, open investment environment World class infrastructure Attractive lifestyle Competitive costs for key inputs A growing number of international brands that have capitalised on and enrich the operating environment - Expanded Government assistance to enhance South Africa s offering and support investors BPO sector support programme as part of AsgiSA A new incentives regime Targeted talent development programme Commitment to addressing concerns about security A support facility to assist investors 23

24 Attractive alternative destination In overall Service, South Africa has a fair balance between cost and quality" Quality* Onshore USA, UK and The Netherlands Cost-based offshore India, Philippines, Jamaica and Malaysia Value-based offshore South Africa, Ireland and Canada Cost/hr/FTE * Performance across key quality metrics 24

25 What are the SA Industry Standards? The Standards cover Inbound and Outbound Contact Centres, Back-Office Processing Operations and are a QA framework of: - management principles - practices and - processes These require that specific performance metrics are measured Source: BPO&O Sector Support Programme: QA workstream - October 2005 to date 25

26 What are the Industry Standards designed to do? The QA framework provides the highest probability of success resulting in: - Higher customer satisfaction - High levels of staff efficiency - High quality and service standards - Increased revenue - Reduced cost of waste - Management of business risk Source: BPO&O Sector Support Programme: QA workstream - October 2005 to date 26

27 Four Categories exist in the Standards 1. Leadership and Customer Satisfaction Management Practices 2. Operational Management Practices 3. Human Resource Management Practices 4. Technical Resource Management Practices - There are a number of requirements within each item that are required to be met from an approach, process and performance metric perspective - They manage the areas of dependency so that business efficiencies and customers experiences are successfully managed - They widen the accountability in the business, rather than focusing on the silo s of the contact centre and the back-office Source: BPO&O Sector Support Programme: QA workstream - October 2005 to date 27

28 Managing Risk Results in High Performance Leadership Management and Customer Satisfaction Management Practices Operational Management Practices Performance IT Management Practices HR Management practices Source: BPO&O Sector Support Programme: QA workstream - October 2005 to date 28

29 SA s excellent environment has already attracted some significant International Brands europ assistance This transaction accelerates our strategy to..increase exposure to selected high growth, well run markets. South Africa is a dynamic economy with great potential - John Varley, Group Chief Executive of Barclays 29

30 Established Investors Support "We are attracted by the quality of the workforce, the infrastructure and professionalism of the service providers we met" Steve Loose, SA G.M, Fusion Outsourcing " it also offers competitive labour costs, low attrition rates, easy recruitment, industry experience, flexible working shift models, and suitable employment conditions" The labour market is extremely growth enabling" Birgit Thuemecke, General Manager, Lufthansa GTS Bev Cunningham, HR Manager, CSC "South Africa can deliver cost effective top quality sales and services functions to an international client base supported by a "can do" attitude of staff, robust, and over-cheapening infrastructure and suppliers who match their foreign competitors" Peter Winslow, Chief Executive, Budget Group 30

31 THANK YOU 31

32 Case studies, challenges, and learnings" 32

33 Budget Group Type of operation 200 seat, inbound sales and customer service call centre A virtual call centre seamlessly blended with 3 UK centres Established as Fusion Outsourcing and now taking on 3rd party business Business objectives Reduce pressure on UK centres for after hours/weekend work Save up to 40% of UK costs Achievements After 9 months are MATCHING or EXCEEDING all UK KPIs for sales conversion, service, and customer satisfaction 30% cost savings being achieved versus UK first year had high secondment costs Plan to grow to 700 seats plus over 3 years 33

34 Lufthansa Type of operation Established in 1999 to handle overflow calls from German market Calls handled in German, English (US), Hebrew Business objectives Enable operation of Lufthansa Global Telesales call centres on a follow the sun basis Handle general reservations, global load control, frequent and top customer (Senator) calls and mileage programmes Achievements Cape Town is the largest call centre in a network 9 centres Handles over a calls annually 200 staff, 90% are South Africans SA operation performs consistently best in quality and cost terms in global network and operation continues to expand 34

35 CSC Type of operation Set up, March 2003, is a back office annual life and pensions administration facility for US and UK clients Uses automated workflow distribution (AWD) Business objectives Plan to grow to people by 2008 Compliment facilities in India and US to enable 24/7 operations Achievements SA operation exceeds India and US productivity standards in terms of policies per hour/error rates Value of a three country global BPO operation proven by ability to reroute work during emergencies 35

36 ABSA Type of operation Contact centre with seats, handling up to 42 lines of business As an independent commercial division of the ABSA Group offers services to other divisions at market rates as well as services 3 rd parties Achievements Division has made a significant contribution to group profits (US$8.8m) as well its customer and employee satisfaction ratings Services provide to US-based corporate, TransUnion have delivered the following value to the client Reduction of unit cost per call from $24 to $7 Consistent achievement of all 9 service and quality targets Increase in IT captures from 97% to 99.95% 36