BPO in China: Reality and Potential

Sept. 8, 2006 XiamenRoc Yang, CDG

A real life example of outsourcing

Contents

BPO DefinedBPO in China: a reality checkBPO in China: What’s in storeBPO in China: a Case StudyCDG Snapshots

BPO Defined

“ BPO is the delegation of one or more IT-intensive business processes to an external provider who, in turn, owns, administrates and manages the selected process(es), based upon defined and measurable performance metrics.”

Gartner Dataquest

Business Process Outsourcing started in the early 90’s, but has recently experienced an increased level of interest and acceptance.

•Maturation of worldwide BPO service providers•Emergence of and acceptance of low-cost location delivery models

•Improvements in telecommunications and the availability of bandwidth

•Technological evolution of the Internet, e-Commerce, imaging, and application service providers

The key enablers for BPO

BPO-Some key statistics

(US $bn) 2001 2005 2008

Total Business ProcessOutsourcing Market

127 234 310

Percentage Offshored toCountries such as India, Ireland, etc.

5% 15% 20%

Offshored BPO Market 6.4 35.1 62.0

India ITES Exports 1.5 9.5 21

Contents

BPO DefinedBPO in China: a reality checkBPO in China: What’s in storeBPO in China: a Case StudyCDG Snapshots

Can “World Factory” last forever?

Why China should embrace BPO?

To fully leverage manufacturing expertise To service world office without having to go abroad It is a “smoke free” industry To fully tap China’s human resources pool To Have facilitate industry migration in China

Value Chain Migration as a country

“Made in China”

“Managed from China”

“Created by China”

0-9 years education

12 years-University level education

University and above

BPO

KPO

Manufacturing outsourcing

• Absence of country marketing, leaving China out of the radar screen of global BPO players;

• Lack of industry self discipline;• Lack of necessary supportive measures as a lo

ng term strategic industry; • Incomplete industry value chain not complete

BPO in China: a macro perspective

BPO in China: a micro perspective

• Low end and low value-add services;• Business through agents, leaving little or even

no margin at all;• No industry and process expertise involved; • Small workshop or family business without glo

bal competitiveness;• Purely opportunistic and ad hoc offshore playe

rs; • Not many visionary companies in the space

Contents

BPO DefinedBPO in China: a reality checkBPO in China: What’s in storeBPO in China: a Case StudyCDG Snapshots

China: hotspot for BPO

• MNCs set up captive centers in China;• Indian players to leverage on global clie

nt base for the Asian pie;• Local players grow both in number and s

ervice capability and• China maturing as both a vendor base a

nd a market

China to vie for the top BPO spot

• Set up “country marketing” engine• Improve basic infrastructure• Polish the relevant policies• Build up the vendor base• Improve the industry value chain;

e.g. language skills and domain knowledge

Contents

BPO DefinedBPO in China: a reality checkBPO in China: What’s in storeBPO in China: a Case StudyCDG Snapshots

An IFC Portfolio BankThe Client's Problem

Back office centralization created new bottlenecks and need for a large staff pool Unbearable management time and efforts to manage cost and business risks

CDG's Solutions

Took over one key function of the client’s back office to replace about 180 staff BPR to decompose the existing processes through technology Concurrent mass processing to meet real time requirements Insurance coverage for service failure

The Results

Focused on front end customer servicesCut down back office operations cost while making it transparent;Shortened service delivery time from 15 minutes to 3 minutes ；Reduced operations management complexity and difficulty, particularly during the holidays and at business peaks.

Contents

BPO DefinedBPO in China: a reality checkBPO in China: What’s in storeBPO in China: a Case StudyCDG Snapshots

CDG Snapshots

HistoryFounded in 1998 as Cybersky Technologies and had been China’s Top Three Imaging System Integrator for the financial services sector. It was restructured into CDG with financial support from CDH, a leading private equity fund in 2005 to focus on BPO.

Industries and ServicesLeveraging on the 8+ years experience in the banking, financial services and insurance sectors, CDG has established “One-stop Shop” business process outsourcing solutions around its mass production capabilities.

Management TeamThe team came from consulting, System integration, IT outsourcing and the BFSI sectors. Their strength lies in their capability to leverage technology and industry know-how to turn BPO business into a low cost mass production in China.

Facilities Network CDG’s main data processing operation is in Beijing with 600+ seating capacity on one shift basis. The Shanghai BPO Center is scheduled to open in June 2006. The third facility in Guangzhou is also on the agenda to serve the South China markets.

Technology and OperationsCDG has the industry’s leading Data Processing System that processes client’s transactions based on scanned images on a JIT basis. The system supports multiple languages and multiple clients simultaneously in a paperless environment.

Thank you!