ABC India!

Siddhant BhansaliMBA, Indian School of BusinessB. S., University of Illinois

…Outsourcing to India!

ABC US

Overview

• ABC US - Vision

• Outsourcing – popular perceptions...

• Outsourcing – changing perceptions...

• What is outsourcing?

• Types of offshoring

• Outsourcing to India – Present reality

• Why Outsource Work?

• Why outsource (statistics)

• Outsourcing – Clear Advantages

• Who outsources work to India?

• Why should ABC US outsource?

• What can ABC outsource right away?

• Why India?

• Offshore location: India offers the best package

• Checklist for setting up in India

ABC US

ABC US - Vision

• Vision: To provide the most complete XYZ solution available for all stakeholders.

• ABC India Vision: to further the ABC US vision and to contribute to increasing ABC’s reach to global markets through most efficient utilization of internationally available resources.

ABC US

Outsourcing – popular perceptions…

- "America's pain, India's gain", The Economist, Jan 2003

- "Is your job next ?", BusinessWeek, Feb 2003

- "Study sees 406,000 U.S. jobs shifted overseas in 2004", Financial Times, Oct 2004

• A 2003 McKinsey Global Institute study estimates that outsourcing by US companies is likely to increase by 30 to 40 percent over the next five years and this will result in the loss of about 200,000 jobs a year in services over the next decade.

ABC US

Outsourcing – changing perceptions…

• … but a growing economy creates new jobs…

• Over a 10 year period from 2000-2010, McKinsey expects that 2 million service jobs will be lost through offshore outsourcing,

but…

• 22 million new jobs will also be created.

• Technology and medicine are expected to be major drivers for job creation.

• Headlines are changing…

- "Stop Blaming Bangalore For Our Jobs Problem", Fortune, Apr 2004

- "UBS Study Finds Outsourcing Not Big Hit to U.S. Jobs Market", The Wall Street Journal, Oct 2004

ABC US

What is outsourcing?

• Outsourcing - transfer of an organizational function to a third party.

• Offshore outsourcing – when this third party is located in another country.

• Offshoring – Technically, “offshoring,” represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not.

• “Captive outsourcing”

- In house work being done for the parent organization

- This form is preferred by Microsoft for its India Development Center and many others like Google, Yahoo, Dell, Citibank, etc…

ABC US

ABC US

Outsourcing to India – Present reality

• India has 700,000+ engineers with starting salaries of $5,000.

• S. Ramadorai, chairman of Nasscom and CEO of Tata Consultancy Services, said in a statement: "Today the Indian IT and BPO industry is estimated to be $22 billion. The industry is in a strong position to leverage the global software opportunity and establish India as the premier IT destination in the world.“

• McKinsey predicts global offshore outsourcing spend to hit $110 billion by 2010.

• How much is the total market (by 2010)?$300B• India is set to capture more than 50 percent of the market if it

overcomes its challenges --McKinsey.

• India has fewer than 3,000 software services companies. - At least 15 of these have more than 2,000 workers.- Some, including Infosys Technologies, Tata Consultancy Services and Wipro

Technologies have "garnered international recognition and a global clientele.“

ABC US

Why Outsource Work?

• Because you don't have the time to do it yourself.- You may have got a product to develop and you've got to get it

into the market before your competitor does. Even if you have the time, getting it outsourced may be more efficient utilization of resources

• Because you don't have the money to do it yourself.- Your business is growing exponentially but your resources

can't cope with the growth.

• Because you'd rather focus on mission-critical issues.- You're not interested in frittering away time and energy on

non-core functions.

• Because you don't have the skills to do it yourself.- You need the best talent in the world, but it's scarce/out of

reach/ just not available or just too expensive.

• Because its cheaper.- You want to save on costs while keeping the long term

perspective also in view.

ABC

ABC US

ABC US

Outsourcing – Clear Advantages

• Cost advantage?

• Scalability option?

• Increased focus on customers?

• But, Outsourcing can be a strategic move!!

- 24 hour work cycle

- Extend product offerings for the customer (eg. greater support hours)

- Make previously uneconomical tasks economical

- Enable non-US market entry, particularly developing countries

YesYes

Yes

ABC US

Who outsources work to India?

• America Online

• American Express

• Dell

• Delta Airlines

• GE

• IBM

• Microsoft

• Oracle

• Sun

• AMD Advanced Micro Devices

• AT & T

• Accenture

• Albertsons

• Bell South

• Cisco

• Citibank

• Delphi Automotive

• EDS

• Fingerhut Direct Marketing

• First Consulting Group (FCG)

• Fluor Daniel

• GE Capital

• Gateway Computers

• Glaxo Smith Kline

• Hewlett Packard

• Hyperion

• IRS Electronic Returns

• JCPenney

• McKinsey & Company

• Oracle

• Perot Systems

• Prudential

• Qwest

• Rand McNally

• Schlumberger

• State of Tennessee

• The Home Depot

• The Sutherland Group

• TransUnion

• …

ABC US

Some more…

AETNA, ALCOA, AOL Travel/Travelocity, Anheuser-Busch, Avon,

Bluelight, CIGNA, Capital One, Carlson Companies, Caterpillar,

Charles Schwab, Citizen Communications, Computer Sciences Corporation,

Dana Corporation, Delta Air Lines, Dish Network, Dupont, Eaton Corporation,

Electronic Arts, First American Title, Focus Infomatics, Glaxo Smith Kline,

Google, H.E.B. Grocery Company, Home Depot, Intel, Intuit,

Johnson and Johnson, Juno, LaSalle Bank - formerly ABN AMRO,

Level 3 Communications, Lexmark, MBNA credit cards, Nestle Purina PetCare,

Network Solutions, Netzero, Nike, Northwest Surgical Specialists,

Norton Symantec, Option One Mortgage (HR Block), Pioneer Hi-Bred Int'l. Inc.,

Providian Card Services, Renac Computer Corp - Medical Billing,

Sage Software (ACT), Sallie Mae SBC, Shell, St. Paul Travelers, Sun Microsystems,

Sunterra - Timeshare company, Target, Tenet Healthcare, US Bank, US Government,

United Airlines Reservations Call Center, United Health Group, Veritas Software,

Wachovia, Walmart Connect Internet, Washington Mutual, Western Digital Corp, White & Case, LLP

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Why should ABC US outsource?

• Direct cost savings (lower resource costs, lower recurring costs)

• Teams working in parallel - greater organizational flexibility

• As ABC India evolves, faster turnaround on assigned areas (because they have built expertise in those)

Allows ABC US to

- concentrate on core, customer facing functions

- focus on bringing in additional clients

Translates into lower development costs which can translate into savings for customers as well!

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What can ABC outsource right away?

• Ideally, fairly “independent” work

• Work that can easily be “separated”

• Non-critical, non-customer facing work (for starters)

• Customer support over email (for starters)

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Why India?

• Tried and tested model / Most of Fortune 500 here already

• Large resource pool of talented engineers with decent English communication skills

- Approximately 700,000 in the IT and BPO sectors

- Starting pay for IT engineer = $6,500*

- With 1-2 years experience = $8,000*

• Improving infrastructure enabling better telecommunications

• Supported by Govt interventions and economic policies

* varies by city, skills and experience

ABC US

ABC US

Checklist for setting up in India

1. Determine requirements from ABC US

2. Narrow choice of cities / location

3. Incorporate ABC India

4. Setup office premises / setup infrastructure

5. Hire developers and staff

6. Training and development

IMPORTANT

ABC US

Thank youThank you