Dave Clarke General Manager Vertex

India BPO Market OverviewAugust 04

>1 billion people(growing at 1.7% p.a)

at least 20significantlanguages three urban

concentrationsin world top ten

history of Britishpresence in India

c2.2 m graduates every year c100,000 engineering graduates every year

Background

Offshore Marketplace – Key Messages

Indian BPO market continues to grow dramatically and evolve

Competitor landscape is changing with pure play offshore players emerging as strong competition for global BPO providers

Vertex BPO transitioning to operate using a truly global delivery model

With increased focus on sophisticated customers and offerings including moving from “replication based” approach to a more sustainable end game model i.e. high end services

All players – global and offshore – will have to successfully address operations and people issues in the future

Source: McKinsey analysis

Size of circle corresponds to number of qualified workers

Location attractiveness

InfrastructureCommunications

Other basic infrastructure

Country risks/FDI incentivesIncentives for investments

Political environment

Time-zone attractiveness

People attractivenessQuality, Cost, Qualifications

Knowledge of English

High

Low

Low High

India

Australia

UK

Philippines

China

Mexico

Singapore

Ireland

BPO in India

Semitransparent circles denote future projections

Indian BPO market continues to grow dramatically and evolve

BPO revenues accounted for US$ 3.6 billion in revenues, up from US$ 2.5 billion in 2002-03 recording a 54% growth over last year

Total headcount in the industry was at 245,500 as of March, 2004.

By the year 2008, the segment is expected to employ over 1.1 million and witness similar growth levels (upwards of 50%)

0

2000

4000

6000

2001 2002 2003 2004 2005E0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

%

ITES-BPO revenues Contribution to GDP

USD million

Billing servicesAccounting transactionsGeneral accountingTax consulting & complianceRisk managementFinancial reporting & analysisFinancial management

Benefits administrationEducation and trainingRecruiting and staffingPayroll servicesHiring administrationRecords managementOther HR services

Credit/Debit card servicesCheque processingEDIOther transaction processing

Engineering

DesignAnimationNetwork consultancy and managementBiotech research

Tax processingClaims processingAsset managementDocument managementTranscription and translationSupply chain managementProcurement

Database marketing/ customer analysisTelesales/ TelemarketingInbound call centreWeb sales and marketing

Customer Care

Finance

BPO Opportunities

HR

Payment Services

Content Development &

Research

Supply Chain &

Administration

BPO opportunities

What is BPO? - Sophisticated customers and offerings

• Basic data entry

— Application forms

— Data conversion

• Transaction processing

• Document management

• Customer relations

— Call centers(inbound and outbound)

— On-line customer service

• Telemarketing• Document

management

• Shared corporate services

— Finance/accounting

— HR — Procurement — IT

• Helpdesk• Maintenance• Infrastructure• Applications

development

• Researchservices

• Customer analysis

• Portfolioanalysis

• Claimsprocessing

• Riskmanagement

– Credit underwriting

Back office Customer contactCommon corporate functions

Knowledge services and decision analysis

Research and development

• Content development engineering and design

• New product design

— Design specs— Pilot/

prototypes— Testing— Production

design and optimization

Low cost labor Access to highly skilled labor pool

Increasingly complex transactions

Competitor landscape is changing

BPO players in India

BPO start-ups (funded primarily by VCs)

Global BPO providers having an Indian offering

BPO businesses of large Indian business houses

BPO arm of Indian IT services players

ONE SOURCE

~ 7,000 heads

~ 4,000 heads

~ 4,000 heads

~ 4,500 heads

~ 10,000 heads

~ 3,000 heads

~ 1,200 heads

~ 2,500 heads

~ 4,000 heads

~ 8,000 heads

~ 4,700 heads

~ 9,800 heads

~ 1,200 heads

BPO providers are transitioning to operate a truly global delivery model

Glo

bal D

eliv

ery

Mod

el

Global Resource Pool

Global Knowledge

Base

Integrated Delivery Center

Managing Cultural

Diversities

Creating a global resource pool with appropriate skill-sets available to deliver high-class services to clients (matches cost Vs skill)

Creating knowledge capital across the globe as compared to operating in ‘silos’ – restricting knowledge to few centers

Creating world-class delivery centers across the globe which are virtual, integrated and offers seamless service whilst leveraging on cost of delivery

Creating an environment which makes the best of cultural diversities/ differences

Vertex provides a global model

Global Organisati

on

People Management

(Talent development &

retention)

Unifying Values

Seamless Interface

(client relationship/

management)

Best Practices (Process &

Technology)

India BPO - Cost Structure

Improved ROI through higher asset utilization and lower operating costs

At Par

UK India

Capital Costs

2-2.5

TimesAsset Utilization

50-

60%

Lower

Labour Cost

•Firms can realise cost savings of between 40-60% by offshoring various business processes. Free up resource/capacity/capital for other value creation activities.eg sales and marketing, research and product development etc

Drivers for Offshore Delivery

Financial Benefits

Access to Resources

Competitiveness

•Offshoring provides firms access to a huge global talent pool.

•This helps firms overcome skill shortages by using skilled offshore workers.

•Cost savings, increased flexibility and utilisation of skilled workers enables UK firms to improve their competitiveness in global markets.

Transition modelling – key areasto cover to enable day 1 benefits

• Poor UK process = poor offshore process. Model, document and bed in change in UK

• New services offshore need equal attention to onshore operations

• Training and support needs to understand cultural differences

• Management support essential

• Build on strengths

• Invest in the delivery over long term

• Test and trial new processes

• Create communication channels

• Make decisive moves

Vertex transitioning – What do we do to make it work for our clients?

• Understand the business. UK process experts and India process managers work together to deliver documented processes.

• Plan and develop a recruitment profile

• Develop and deliver robust infrastructure support, data centre to desktop and telephony. Create necessary resilience against distance issues

• Train trainers, training best delivered via India trainers for local cultural and “live” support

• Create quality culture in training to deliver UK+ level from day 1. Need to set high standards, don’t go for same as approach.

• Set up trial/nursery/development group for putting right all errors/services before roll out

• Create sla/ola’s for all areas so there is no ambiguity

• Monitor and manage the operation with additional UK support to offset against the savings.

Shift – Cost Sensitivity

Source: Mckinsey

Advantage India

Source : Mckinsey