BUSINESS PROCESS OUTSOURCINGBUSINESS PROCESS OUTSOURCING

Arunesh Chand Mankotia – Created

Tuesday, May 23, 2006

THE POLITICAL SCENARIOTHE POLITICAL SCENARIO

For over 50 years, India has been the world’s largest Democracy, structured under a secular Constitution and governed by recognized democratic institutions.

It has an active and free Press and a demonstrably independent Judiciary.

During the past decade, a process of ‘irreversible’ economic liberalization was initiated, which has been supported and sustained by successive governments.

Regulatory structures and procedures are being continuously modified.

The Government – both at the State as well as the Central level – recognizes the growing importance of the I.T Services and I.T Enabled Services industries. This has resulted in rapid improvement in I.T services related delivery infrastructure (e.g. Telecommunications), both in terms of Capacity as well as Cost.

THE ECONOMIC SCENARIOTHE ECONOMIC SCENARIO

India’s GDP growth for the past ten years has ranged between 5 –7%, making it one of the world’s better performing and stable economies.

GDP composition by Sector – Agriculture: 25% / Industry: 30% / Services: 45%.

India is the world’s 4th largest economy in terms of purchasing power parity.

It is amongst only 5 countries in the world to have a Space programmes.

India currently has the 12th largest Telecom network in the world and is growing rapidly due to privatization and demand surge.

INDIA- THE ITES SCENARIOINDIA- THE ITES SCENARIO

India is emerging as the preferred offshore outsourcing destination for organizations across the world.

Over 100,000 people are employed in this sector.

The Market size is expected to grow to $21-24 billion by 2008.

1million jobs are expected to be created in the ITES sector by 2008.

Last five-year CAGR of ITES over 100%.

Last two years’ growth 70% p.a. reaching a market size of US$ 1 billion

Customer Care, HR, Payment Services to continue constitute 70% ITES potential

Indian IT and ITES industry will be the major drivers of India’s economic growth, as indicated in the table below:

GROWTH OF IT SERVICEGROWTH OF IT SERVICE

The growth of the Indian IT Services and the ITES industry are rooted in four trends:

Dramatic increase in offshoring by the existing customers.

New customers relocating work to India.

Further penetration in existing service lines.

Penetration of new service lines.

COMPETITOR’S OF INDIACOMPETITOR’S OF INDIA

India’s closest competitor is Ireland.

China and Russia are still sub scale in terms of their industry capabilities and the value of the total software exports.

India’s: Location Comparison 1India’s: Location Comparison 1

The criteria used by the customers to decide upon a location to which IT enabled services can be outsourced are broadly classified into:

People attractivenessLocation attractiveness

Today only India and Ireland have large broad based presence in the ITES market worldwide, while Philippines and Singapore have emerged as niche players.

India: Location Comparison 2India: Location Comparison 2

India : The Manpower ScenarioIndia : The Manpower Scenario

Every year, 2.1 mn graduates and 0.3mn post-graduates pass out of India’s non engineering colleges.Although less than 10% find a job or pursue higher studies abroad, the remaining have very few attractive avenues of employment open to them.

Ireland produces approximately 43000 graduates every year.

Manpower Scenario - The Resource Pool Reservoir

Manpower Scenario –The ChallengesManpower Scenario –The Challenges

Manpower Scenario – SummaryManpower Scenario – Summary

Abundant supply of graduate level workers.

Massive low-cost, English speaking labor pool.

Wage differentials expected to continue for a few decades.

Average salary of graduate (2001) – US$ 2,400 per annum.

Total number of graduates produced in (2001) – 2,100,000.

Significantly lower employee attrition rates compared to other countries.

Low training costs.

Relatively short learning curve.

India - The BPO BenefitsIndia - The BPO Benefits

Cost Savings

India – The InfrastructureIndia – The InfrastructureConnect 33 countries enroute from Singapore to France.Connects Europe to the Middle East, South East Asia and Asia Pacific; has 40 Gbps capacity.Connects UK to Japan with landing stations in 13 countries; has 10 Gbps capacity.Links South Africa to South East Asia; has 40 Gbps capacity.The present capacity is 10 times that currently required from India.

The privatization of the telecom industry has resulted in a significant drop in telecom rates. Some recent examples of rate cuts are:

Rates of international private leased circuits (IPLC) reduced in two steps- by ~75% in November 2000 and about another 40% in January 2002Reduction in national long distance rates by 62% in January- March 2002 with the entry of the private operators

India- The ValidationsIndia- The Validations

Many corporations have either already started

or plan to start sourcing ITES from India.

BPO’S The Top RankersBPO’S The Top Rankers

The basis of ranking is the revenues generated by the BPO companies in 2003-04, as per US GAAP.

1. WNS Group 2. Wipro Spectramind 3. Daksh e-Services 4. Convergys 5. HCL Technologies 6. Zenta 7. ICICI Onesource

8. MphasiS

9. EXL

10. Tracmail

11. GTL Ltd.

12. vCustomer

13. HTMT

14. 24/7 Customer

15. Sutherland Technologies

THANK YOUTHANK YOU