bpo industry (including sa value proposition and ... in sa-3.pdf · 1 bpo industry (including sa...
TRANSCRIPT
1
BPO Industry (including SA Value Proposition and
International Perspective)
Mfanu Mfayela, BPeSA CEOMidrand, June 2007
2
Thinking Global
“Invest where you get maximum returns, source talent from where it is best available, produce where it is most cost-effective, and sell where the markets are, without being constrained by national boundaries.”
Narayan Murthy, Infosys
3
Outline
1. Business Process Outsourcing- Opportunity & Background Information
2. International Developments
3. SA Industry4. SA Value Proposition5. Q & A
4
Section I‘Business Process Outsourcing’
5
Potential Across the Value Chain
Source: NASSCOM-KPMG 2004
Finance and Accounts
Product Development
Human Resources Management
Technology Services
Inbo
und
Logi
stic
s
Man
ufac
turin
g / O
pera
tions
Out
boun
d Lo
gist
ics
Mar
ketin
g an
d S
ales
Cus
tom
er
Ser
vice
Human Resources• Payroll Processing• Recruitment and
selection support• HRIS
IT Services and Support• Custom development• Systems integration• Hosting / maintenance• Customer help desk /
support
Operations / logistics• Order tracking• Order / claims /
application processing• Payments processing
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
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
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
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 $0.47- This gives a total gross gain to the United States of $1.12
to $1.14 for every dollar of work offshored to Indi a, 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 $0.33 for every dollar of U.S. outsourcing .
9
Estimated addressable market in global offshore IT industry 2005(UbSS$ billion)
150-18014-173-430-36
30-36
70-85
0
20
40
60
80
100
120
140
160
Traditional IT Application
development
and
maintenance
System
integration
Consulting
(including
network
consulting)
R&D sevices Total
2 31 5 10 30 11Current
Penetration %
Includes hw/sw maintenance,
network administration and
help desk
10
Estimated addressable market for global offshore BPO(US$ billion)
25-35
35-40
10-12
10-128-10 4-5
10-15
20-25 120-150
0
20
40
60
80
100
120
140
Insurance Retail
Banking
Travel &
hospitality
Auto mfg Telecom Pharma Others F&A/HR Total
6 9 3 9 9 9 9 88Current
penetration %
11
AT Kearney’s Global Services Location Index 2007
12
India’s IT/ITES Performance ($ billion)
23.6
30.3
5.3
7.2
17.8
FY 2006
31.3
39.7
6.5
9.5
23.7
FY 2007E
22.616.7Total
17.712.9Exports
3.92.9Engineering Services, R&D, Software Products
5.23.4ITES-BPO
13.510.4IT services
FY 2005FY 2004Sector
13
This will stimulate growth in Tier II Locations ove r the next 3-4 yrs Cost curve, 2008
* Assuming China is successful in its initiatives to undo talent supply constraintsSource: McKinsey analysis
ESTIMATES
0
2
4
6
8
10
12
14
Total cost of operation ($/FTE/hr)
Capacity utilised (‘000 people employed)
China*
India
Philippines
Existing preferred destination
~2 0001 600 1 800
• 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
~1 100200-500 160-200
~500
Demand gap of 200-500, depending on Chinese supply capacity
Projected level of demand by 2008
14
Section II‘International Developments’
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
16
Section III‘SA Industry’
17
Key Factors for a Successful Industry
Infrastructure Talent PoolGovernment
policies
Promotion Smart marketingSuccess stories
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
19
SA has a growing number of International Brands in Key BPO Locations…
Cape Town (Western Cape)
Johannesburg(Gauteng)
Durban (KwaZulu Natal)
Port Elizabeth (Eastern Cape)
•
• •
•
Over 360 contact centres (About 30%
outsourced)
Over 170 contact centres
(About 30% outsourced)
About 70 contact centres (20% outsourced)
Nkuli Mxenge-MayendeTel: +27 41 [email protected]
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 disadvantag e a region. Genpact is advised to contact the regio ns in which it is interested, directly
CEO: William GoldstoneTel: +27 31 311 [email protected]
CEO: Luke MillsCell: +27 72 198 [email protected]
CEO: Keryn HouseCell: +27 83 263 [email protected]
About 22 captive contact
centres
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
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
22
Section IV‘South Africa – Alive with
Possibilities’
23
SA Value Proposition- A unique opportunity to improve its service offerin g 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 climat e 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 Afr ica’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
24
Attractive alternative destination
Quality*
Cost/hr/FTE
Onshore USA, UK and
The Netherlands
Value-based offshoreSouth Africa, Ireland
and Canada
Cost-based offshore India, Philippines,
Jamaica and Malaysia
“In overall Service, South Africa has a fair balanc e between cost and quality"
* Performance across key quality metrics
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
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
27
Four Categories exist in the Standards
1. Leadership and Customer Satisfaction Management Practices
2. Operational Management Practices3. Human Resource Management Practices4. 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
28
Managing Risk Resultsin High Performance
Leadership Management and Customer
Satisfaction Management Practices
IT Management Practices
HR Management practices
Operational ManagementPractices
Performance
Source: BPO&O Sector Support Programme: QA workstream - October 2005 to date
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
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"
– Birgit Thuemecke, General Manager, Lufthansa GTS
“The labour market is extremely growth enabling"
– 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
32
“Case studies, challenges, and learnings"
33
Budget Group
• 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
• 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
• Reduce pressure on UK centres for after hours/weekend work
• Save up to 40% of UK costs
Type of operation
Business objectives
Achievements
34
Lufthansa
• Established in 1999 to handle overflow calls from German market
• Calls handled in German, English (US), Hebrew
• Enable operation of Lufthansa Global Telesales call centres on afollow the sun” basis
• Handle general reservations, global load control, frequent and top customer (Senator) calls and mileage programmes
• Cape Town is the largest call centre in a network 9 centres
• Handles over a 1 000 000 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
Type of operation
Business objectives
Achievements
35
CSC
• Set up, March 2003, is a back office annual life and pensions
administration facility for US and UK clients
• Uses automated workflow distribution (AWD)
• Plan to grow to 1 000 people by 2008
• Compliment facilities in India and US to enable 24/7 operations
• 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
Type of operation
Business objectives
Achievements
36
ABSA
• Contact centre with 1 600 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 3rd parties
• 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%
Type of operation
Achievements