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Global Sourcing of IT-based Services
and Developing Countries
The Market
• Between 2004 and 2008,
the global sourcing market
grew three times to reach
$89 to $93 billion
• Addressable market likely
to increase from $500
billion in 2008, to $1.5 -
$1.6 trillion by 2020
2Source: (i) NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.
(ii) NASSCOM ‘Industry Trends’ available at http://bit.ly/19tr6j.
Selected occupations ranked by Princeton economist Alan
Blinder as “highly offshorable”: 8.2 million workers
OccupationsNumber of US
workers
Computer programmers 389,090
Data entry keyers 296,700
Actuaries 15,770
Film and video editors 15,200
Mathematicians 2,930
Medical transcriptionists 90,380
OccupationsNumber of US
workers
Interpreters and translators 21,930
Economists 12,470
Graphic designers 178,530
Bookkeeping accounting and
auditing clerks1,815,340
Microbiologists 15,250
Financial analysts 180,910
Source: ‘Pain from Free Trade Spurs Second Thoughts’, WSJ March 28, 2007
Global distribution of offshore IT and ITES
markets
Source: Tholons 2006
ITES marketIT services market
Source: NASSCOM-Everest 2008
Exports of IT-based Services from India ($ billion)
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Source: NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.
Industry Impact in India
• Economic
– Direct employment of 2.23 million, indirect ~8 million
– 5.8 percent of GDP
– Has offset close to 65 percent of India’s cumulative net oil
imports
• Social
– Over 30 percent of employees are women
• Educational
– Top 7 states that account for 90 percent of industry exports
have founded six to seven times more colleges than other
states
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Source: (i) NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.
(ii) NASSCOM ‘Industry Trends’ available at http://bit.ly/19tr6j.
7Source: NASSCOM-Deloitte, ‘Indian IT/ITES Industry: Impacting Economy and Society’, 2008.
Available online at http://bit.ly/1iWSoZ.
The Future? Black Swans?
“But in all my experience, I have never been in any
accident…of any sort worth speaking about. I have seen but
one vessel in distress in all my years at sea. I never saw a
wreck and never have been wrecked nor was I ever in any
predicament that threatened to end in disaster of any
sort.”
E.J.Smith, 1907
8
Captain, RMS Titanic
Source: Nassim Nicholas Taleb, ‘The Black Swan, The Impact of the Highly Improbable’, Random
House, 2007
The Crisis Resilience of Services Trade
9
Source: Ingo Borchert and Aaditya Mattoo, ‘The Crisis Resilience of Services Trade’, World Bank PREM note,
April 2009. Available at http://bit.ly/H4CF3.
U.S. Monthly Imports and Exports of
Goods and Services,
January 2006–February 2009
Year-on-Year Growth Rates of U.S.
Monthly Imports of Goods and Services,
January 2007–February 2009
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Year-on-Year Growth Rates of U.S. Quarterly
Imports of “Other Private Services”
January 2006–December 2008
The Crisis Resilience of Services Trade
Source: Ingo Borchert and Aaditya Mattoo, ‘The Crisis Resilience of Services Trade’, World Bank
Policy Research Paper, April 2009. Available at http://bit.ly/4Dxx5q.
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Sub-Sectors of “Other Private Services”
Source: Ingo Borchert and Aaditya Mattoo, ‘The Crisis Resilience of Services Trade’, World Bank
Policy Research Paper, April 2009. Available at http://bit.ly/4Dxx5q.
India has about 30% of global supply of low-wage labor for IT/ITES
Likely to have a talent shortfall of 0.8 million to 1.2 million by 2012
Total Addressable Market for Global Sourcing and
Domestic Outsourcing, 2020 ($ billion)
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Core markets
2008
Growth in
Core markets
New
verticals in
developed
Countries
• Public sector
• Healthcare
• Media
• Utilities
New
customer
segments
• SMBs
Outsourcing
market in
new
geographies
• Brazil
• Russia
• China
• India
Source: NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.
14Source: McKinsey on Business Technology, Number 16, Summer 2009
Gartner’s Hype Cycle for Business Process
Outsourcing, 2009
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Skills Development Components
Knowledge Hub Skill assessments
Software Developer
Certification/CERTFoundational BPO
Training
TSP/PSP
Domain
Training
COPC
6 sigma
CMMi
Universities
R&D
Mangmt
Training
IT Services IT Enabled Services
Companies
Broadband
• Finland has become
the first country in
the world to make
broadband internet
access a legal right
• South Korea will
provide access to
1Gbps bandwidth to
citizens by 2012
• New submarine cable
systems for Africa
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New Parks
18
• 22@Barcelona
– 115 blocks at Poblenou
– 4000 housing units
– 145,000 square meters of facilities
• South Korea’s Digital Media City
– Located at Sangamdong (135 acres)
– Experimental video 40’X20’
• Parque de Investigación e Innovación
Tecnológica (PIIT) Monterrey
– Multidisciplinary approach
Policies
• “Thousand – Hundred – Ten” project launched in October 2006.
Ten cities expanded to 20 in November 2008
• Taxation: From January 2009 to December 2013, outsourcing
providers charged only a 15% tax rate
• Training Subsidies: IT services providers receive 4,500 yuan
(US$658) for every college graduate hired
• Guaranteeing benefits: Encouraging banking and insurance
companies to create loan products and insurance packages to
guarantee an outsourcing company's benefits
• Capital injection: China has allotted 370 billion yuan (US$54
billion) for technology advancement in 2009
19Source: Gartner, ‘Analysis of China as an Offshore Services Location’, October 2009.
Fast Movers
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Holistic approach: ITIDA’s Strategy Framework
21Source: ITIDA
Nati
on
al ed
ucati
on
syste
m a
nd
research
cen
ters
In-sourcing and mega companies (FDI)
Local marketdemand
Export growth
Enterprise capacity building
Innovation, research and development
Human capital development
IT industryintelligence
Real estate(infrastructure)
Legislative environment
Telecommunications infrastructure
Mu
ltinatio
nal s
up
po
rt
Unique focus placed on ensuring
vibrant links with the education system
Andhra Pradesh
State with 80 million people
Cyberabad 1995
The New Face of Cyberabad
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IT Parks:
200,000 SFT in
1998, now 40
million
Imagine there’s no heaven
Increasing competition
Pressures mounting for better, faster, cheaper service delivery
It’s easy if you try
We will support you
Rebate on cost of land (~$450 per job per acre)
Free infrastructure for power, water, sewerage, and roads
No hell below us
No red tape, no bureaucracy
APFIRST will be single point of contact
Time bound clearances
Above us only sky
Exports of IT/ITES in million dollars
MarchMarch
Imagine all the people
23% of India’s software engineers from Andhra Pradesh
32 engineering colleges in 1995, now 527
8,000 graduating engineers in 1995, now 173,032 every year
Living for today
Entry level agent salary: Less than $2,000 a year
Software developer: Less than $7,000
Imagine there’s no countries
World class education
Indian School of Business: Faculty from Wharton, Kellogg,
London Business School, Stanford, Chicago, Duke and Texas
It isn’t hard to do
Microsoft’s largest Development Center outside the US is in
Hyderabad
Nothing to kill or die for
Enough talent available
Lowest attrition rates
And no religion too
Software development
Engineering design
Business Analytics
Animation
Financial services, Call centers…
Imagine all the people
350,000 graduates every year
140,000 English speaking
Living life in peace
Dedicated workforce
IT Enabled Services declared essential services
No strikes or labor unrest
You may say I’m a dreamer
Andhra Pradesh has a Vision 2020 for the State
But I’m not the only one
The people of Andhra Pradesh share the vision
I hope some day you’ll join us
In celebrating Andhra Pradesh’s success
And the world will be one
High speed links to the world
SEA ME WE: South East Asia to Western Europe
FLAG: Fiber Link Across the Globe
I2I: Chennai to Singapore
Imagine no possessions
Real Estate Developers:
Offices as per your specifications
Third party service providers:
Nipuna, 24X7, Firstsource, Deloitte, ADP Wilco…
I wonder if you can
Co-brand training programs with us
Participate in industry – linkage program with Universities
Provide us with your wish list
No need for greed or hunger
Andhra Pradesh is Power Surplus
Hyderabad is the cleanest city in India
Cyberabad: Asia’s new IT hub
A brotherhood of man
Hyderabad has the lowest crime rate among metropolitan cities
Growing expat community
Hyderabad a truly cosmopolitan city
Imagine all the people
Private sector training institutions available:
NIIT, APTECH, Hero Mindmine, QAI…
Head hunting agencies like Mafoi
Sharing all the world
New International Airport at Hyderabad
Flights to Amsterdam, Bangkok, Colombo, Dubai, Kuala
Lumpur, London, New York, Sharjah, Singapore
Hyderabad is the national hub for Air Sahara
You may say I’m a dreamer
We hope to make Hyderabad a major Technology hub in Asia.
But I’m not the only one
Microsoft
IBM
Oracle
Computer Associates
Convergys
Keane
Cordys
Motorola
Nokia
NVIDIA
Intergraph
Kanbay
CSC
Honeywell
Infosys
TCS
Wipro
Visualsoft
Infotech
Intelligroup
Sierra Atlantic
Polaris
Mentor Graphics
Qualcomm
NCR
HSBC HDI
FranklinTempleton
Bank of America
Verizon
UBS
Analog Devices
Cognizant Tech
Cadence
Connexant
Invensys
Synopsis
Patni
Sonata
I hope some day you’ll join us
We look forward to having you with us.
And the world will live as one
Geography is History!
Randeep SudanLead ICT Policy Specialist
Global ICT Department
The World Bank
Email: [email protected]
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