factors and policies influencing the expansion of services...
TRANSCRIPT
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Factors and Policies Influencing the Expansion of
Services Trade– Experiences of the Indian IT-BPO Sector
New Delhi, October 2006
2Copyright © NASSCOM 2006TM
Over the past decade, the Indian IT-BPO sector has witnessed phenomenal growth…
1.4 1.9 2.6 3.96.0
1.84.0
7.7
12.8
23.6
13-15
7.2
60 +
31.0
FY98 FY00 FY02 FY04 FY06 FY07P FY10^
DOMESTIC MARKET* EXPORTS*
USD Billion
Source: NASSCOM ^NASSCOM McKinsey Study 2005
26.3%
34.6%
31.2%
23.6%
21.1%
22.1%
31.0%FY00-06
28.9%FY00-10
25.7%FY06-10
CAGR
10 YR TARGET
ACHIEVED
REQUIRED
* Includes IT Software and Services, ES and Products, as well as ITES-BPO
TOTALPERIOD
4Copyright © NASSCOM 2006TM
Five factors have served as key enablers of India’s success
• Competitive pressures driving demand for more efficient business models
• Strong fundamentals– Talent, quality and cost advantage
– Emphasis on information security gaining prominence
• Demonstrated proof of concept and rapid expansion of scope and scale by the Indian vendor base
• ‘Enabling’ without ‘interfering’ approach adopted by the government
• Organized and concerted effort by the industry
5Copyright © NASSCOM 2006TM
Talent, quality and a sustained cost advantage form the core of India’s value proposition
• Annual outturn of ~3 million graduates– Over 400,000 engineers– Approximately 2.5 million graduates in other streams
• Global recognition for demonstrated standards in quality– Number of CMMI certified units in India higher than that in other
countries put together– Indian companies driving next-generation quality practices in
offshore service delivery (e.g. eSCM); combining the virtues of 6sigma, lean, etc.
• Sustained cost advantage– Sourcing from India has delivered cost savings of 35-60 percent– Factors beyond ‘wage-arbitrage’ driving sustained value
6Copyright © NASSCOM 2006TM
Unfailing information security and data protection is rapidly becoming a prerequisite
• Emphasis on maintaining highest standards by India based units – acknowledged by global regulators– In April 2005, the FSA released a report highlighting the
preparedness of India-based units to address the challenges of information security
– Banking Code Standards Board scrutinized and found the security and data privacy standards (in India) to be ‘exemplary’
• Proactive efforts by the industry and the government to strengthen the regulatory and enforcement framework– Regulatory reform
– National Skills Registry
– Self Regulatory Organization
7Copyright © NASSCOM 2006TM
Demonstrated proof of concept; ability to rapidly expand scale…
• Leading MNCs played a key role in demonstrating proof of concept– ‘Anchor clients’ instrumental in driving scale as well as building
credibility
• Indian IT-BPO sector has grown rapidly; employee base forecast to exceed 1.5 million this year– ~1 million employees added in the past 5 years alone– Forecast to cross 2.3 million by 2010
• Not just abundance of raw talent, also rich sources of domain knowledge– A lot of middle management talent across sectors (e.g. financial
services, hospitality, travel, etc.) has been sourced from localcompanies in those verticals
8Copyright © NASSCOM 2006TM
…and scope of work has sustained growth
1980 1985 1990 1995 2000 2005 & beyond
Mutual Gains Re-invest Mutual Gains
Strategic ImpactStrategic Impact
Val
ue
Val
ue
Full Process Outsourcing (F&A, HR)
Multiple Process Outsourcing
Rules-based ProcessingProblem Solving/Decision Making
Customer Contact
Transactional Data Entry
Data Entry
Cost ControlCost Control Focus on Core CompetenceFocus on Core Competence Business TransformationBusiness Transformation
Out-Tasking
BPO
Transformational BPO
Application Support
Technical Support
Customer Contact / Hardware & Installation Support
Maintenance
R&D Services Product Development & Testing
Design & Integration
ITBPO
Source: neoIT
Research and AnalyticsEngineering Services
Note: Services listed are indicative not exhaustive
1980 1985 1990 1995 2000 2005 & beyond
Mutual Gains Re-invest Mutual Gains
Strategic ImpactStrategic Impact
Val
ue
Val
ue
Full Process Outsourcing (F&A, HR)
Multiple Process Outsourcing
Rules-based ProcessingProblem Solving/Decision Making
Customer Contact
Transactional Data Entry
Data Entry
Transactional Data Entry
Data Entry
Cost ControlCost Control Focus on Core CompetenceFocus on Core Competence Business TransformationBusiness Transformation
Out-Tasking
BPO
Transformational BPO
Application Support
Technical Support
Customer Contact / Hardware & Installation Support
Maintenance
R&D Services Product Development & Testing
Design & Integration
ITBPO
Source: neoIT
Research and AnalyticsEngineering Services
Note: Services listed are indicative not exhaustive
9Copyright © NASSCOM 2006TM
The ‘enabling’ without ‘interfering’ approach adopted by the center, has been a key catalyst
• Minimal restrictions / regulatory impositions on investment in the sector– 100% FDI under automatic approval
• STPI formed in 1991 as an autonomous organization under Ministry of Communication and Information Technology – Single window clearance
– Fiscal and procedural incentives
– World class communication infrastructure
• Telecommunications sector deregulation
10Copyright © NASSCOM 2006TM
…complemented by focused efforts by several state governments
Andhra Pradesh Example