India as a Favourite Outsourcing Hub for Global Corporations

Transcription

1 neoit India as a Favourite Outsourcing Hub for Global Corporations BPO Asia 2003 December 2003 Avinash Vashistha Managing Partner neoit

2 Agenda! The State of Offshore BPO! Why Companies are Offshoring! Offshore is Difficult, Be Prepared! Country Considerations! India: A Closer Look! The Offshore Challenges! The Selection Process! Q&A Agenda 2003 neoit 2

3 Accelerating Adoption 300 of the Fortune 500 employ offshore resources Have nots 40% 2003 Have 60% An increase of 33% Year over Year Have nots 20% 2004 Have 80% Source: Gartner 400 of the Fortune 500 will be employing offshore resources Market Overview 2003 neoit 3

4 Significant Demand Growth Global IT services market Global BPO market USD Billions USD Billions Source: Gartner Source: IDC Market Overview 2003 neoit 4

5 The State of the Offshore BPO Market! Deals are happening across a wide ranging set of scopes, ownership models and price points! Deal types include! Call centers! Simple transactions! Shared services! -volume vertical processes, and! Niche vertical applications! Most common services include finance and accounting, customer contact, indirect procurement and HR! Market is still immature - domain knowledge and business process knowledge maturity is still a concern for many offshore suppliers Market Overview 2003 neoit 5

6 Why Offshore? Cost Reduction is the Major Driver. Usual reasons are dominated by economics! Lower costs! Direct labor 75% - 90% savings! Total project savings 20%- 50%! Relieve internal resource constraints! Response to competitive pressure! Achieve 24 x 7 operation and reduce cycle times Not so usual reasons! Focus on competencies! Improve service levels! Enhance internal IT and business processes! Gain access to offshore markets Why Offshore? 2003 neoit 6

7 Offshore is Difficult, Companies Need to Prepare This rigorous analysis enables a firm to build a 3 to 5 year offshore strategy and road-map! The wave strategy! Building on offshore maturity Easy Offshore Portfolio Assessment Offshore Starting point! Time accelerators Difficult Low Return Return Preparation 2003 neoit 7

8 Process & Location Selection Begins with Strategy Offshore results are generated by ensuring proper optimization of Cost Savings Control Risk Quality Preparation 2003 neoit 8

9 Location Considerations BPO India Philippines China Russia Canada Ireland Government Support Labor Pool Infrastructure Educational System Cost Advantage Quality Cultural Compatibility Time/Distance Advantage English Proficiency Low Medium Where to Offshore 2003 neoit 9

10 BPO in India 2003 neoit 10 The Evolution of BPO in India The Evolution of Offshore BPO Transactional Area Comprehensive Complexity of Service Low-level, labor intensive processes medical transcription, teleservices, etc. Inter-related services workforce management that includes both staffing and recruiting Administrative and transactional processes of a departmental area HR, Finance & Accounting Time

11 BPO in India 2003 neoit 11 Future Offshore BPO Moving Up the Value Chain TRANSFORMATIONAL BPO Multiple Process Outsourcing Full Process Outsourcing BPO Customer Contact Problem Solving/Decision Making Value Rules-based Processing OUT-TASKING Transactional Data Entry Data Entry Strategic Impact

12 BPO in India 2003 neoit 12 A Closer Look at India Risk Factor ITO BPO Summary Government Support Favorite destination for Fortune 500; Central Minister for IT; open to foreign ownership, no export taxes. Software Technology Parks of India ( provides infrastructure services in over 15 cities. Labor Pool Over 1,10,000 fresh IT graduates per year with a total IT pool of over 500,000 export-focused professionals. Over 2 million English-speaking graduates per year. Infrastructure Medium Medium Very reliable in IT parks. Outside the parks, power & telecom not dependable. Educational System Global recognition for best IITs & IIM schools, both public & private. IIM Ahmedabad ranked toughest to qualify, by The Economist. Second-largest English-speaking developer pool in the world. Cost Advantage Typical IT Services industry (software developer) salaries range from $7200 to $9500 per year; ITES/Call center/bpo range from $3500 to $7500. Quality 85 companies in India have CMM Level 5 certification, while the worldwide figure is 42. Cultural Compatibility Medium Medium Good in major metros. Accent neutralization camps mushrooming. Time/Distance Advantage 12-hour difference with North America makes it ideal offshore delivery center; true 24X7 service possible. English Proficiency Excellent in major metros. Not so good in Tier-II locations. an in-depth look at the Indian offshore market.

13 Offshore Challenges 2003 neoit 13 The Usual Offshore Challenges Difficulty Defining Opportunity & Objective Lack of Internal Readiness Difficulty Differentiating Suppliers & Locations Legal and Contractual Issues Program, Transition & Risk Management Difficulty Managing Suppliers & Operations

14 Specific Offshore BPO Challenges! Immaturity of suppliers! Misconception that offshore BPO is as mature as offshore ITO! ITO suppliers have tried to enter BPO space without domain expertise! As a result clients need to conduct much more careful due diligence! Level of control requirements is higher! More resources dedicated to management dilutes savings opportunities! Constraints of support infrastructure! Local infrastructure as a bottleneck to future development! Standardization of processes/challenges in driving innovation! A potential risk in the ability to innovate Offshore Challenges 2003 neoit 14

15 Managing Challenges with Due Diligence Strategic Objectives Reduce Cost Gain Productivity Maintain Quality Steering Committee Tactical Objectives Evaluation Criteria Deal Terms Service Levels Core Team Geographic Profile Pricing Models Transition Success Short Term Economic Impact Performance Improvement BPO Capabilities Minimum Cultural Impact Risk Mitigation IP Retention Domain Experience Performance History Transition Process Pricing Terms Transition Tools Company Culture Fit Market Reputation Infrastructure Financial Strength Risk Control Approach Knowledge Management Core Team Plus SME s Due Diligence neoit 2003 neoit 15

16 Due Diligence 2003 neoit 16 Various Supplier Models Complicate the Process Pure Play Offshore Wipro Spectramind, Daksh, WNS Consultants Accenture, Deloitte, PwC Process Specialists ADP, Exult, FDC, Hewitt, Paychex Offshore IT HCL, Infosys, Satyam BPO IT Outsourcers EDS, CSC, ACS Net Margins at EDS, Accenture: 12-15% Net Margins at Infosys, Wipro: 22-25% Net Margins at ADP, FDC: 15-17%

17 Lessons Learned! All suppliers are not created equal! Help build the market offshore BPO is in need of development! Know and understand internal service level requirements before outsourcing! Offshore delivery capabilities of large multinationals (MNCs) are weak and immature but gaining quickly! Understand the different cost structures in the offshore locations! Use a structured approach to selection and contracting! Invest in in-house staff to help build the strategy, select the partner, lead the transition and manage the relationship! Evaluate use of an advisory firm! Don t approach the marketplace until you are prepared Lessons Learned 2003 neoit 17

18 Offshore Resources 2003 neoit 18 Some Great Outsourcing Resources Outsourcing/Offshoring Knowledge! neoit: The Offshore Knowledge Center: Firmbuilder: SIG: Outsourcing Institute: Outsourcing Journal: India: Philippines: Global: To outsource through neutral parties! Global & Offshore:

19 Contact 2003 neoit 19 Contact Information Avinash Vashistha Managing Partner (925) Allisson Butler Marketing Director (925) neoit Global Headquarters 2603 Camino Ramon, 2nd Floor San Ramon, CA USA neoit Asia Headquarters 210, Bellary Road Upper Palace Orchards Bangalore India