Description
Game Changers in BPO Industry
GAME CHANGERS FOR IT BPO INDUSTRY IN INDIA
Innovation + Newer Avenues = Growth of Indian BPO Industry
Indian IT-BPO Industry
? Fastest Growing Indian Industry. ? US $ 4 billion in 1998 to US $ 72 billion in 2008. 51% share in the Global
Outsourcing Industry. ? Innovation- A Necessity
Remote Infrastructure Management
Procurement BPO
Legal Process Outsourcing
Domestic BPO
Healthcare
Manufacturing
Retail
Media & Entertainment
Mobile Applications
Evolution of Indian BPO Industry
1999-2000
• GE Enters with Back Office Operations in 1995 • BA and Amex set up Captives in 1996 • Daksh Eservices in 1999
• Dotcom crash is followed by boom in Voice Based Services • Indian IT Services as well as other corporate houses set up Third Party BPO. WNS, Spectramind, Infosys all set up their BPO Operations
The Gold Rush (2000-02)
Consolidation (2003-04)
• Third Party firms scale up revenue and diversifies their operations • IBM buys Daksh, ABG buys Transworks
Coming of Age (2005 onwards)
• M&A lead to third party camps • Players moving in towards high end, knowledge based services like analytics and market research
3
NASSCOM-Everest Research Report
? Outsourcing needs of Buyers are Changing with more focus on ? Value Drivers
? Lower Prices
? Smaller sized Projects ? Savings and Speedy Implementation ? Minimizing Risks
? Re-evaluating the Sourcing Model
? Re-thinking Captive Vs Supplier Mix ? Risk-Reward Relationship ? Opting Outcome based pricing
4
Indian BPO Market Players
? Major Sectors:
? Healthcare, BFSI, Retail, Telecom, Media and Entertainment sector
Activities
• Horizontals ? Processes that are seen as being similar across industries (Customer interaction and support, finance and accounting, HRM, procurement services, and knowledge services)
• Verticals ? Processes which require vertical-specific knowledge and are not easily replicable across industries, such as claims processing for the insurance industry or credit card collections for the credit services industry
(Nasscom-Everest 2008)
Growth Drivers : To Achieve progress in Indian BPO Space
The Game Changing Ideas
Developing Niches/Verticals Develping Cost Efficiencies
Developing New Markets
Delivering Certainty
GROWTH DRIVERS
EMERGING MARKETS: Garner Market Share
Game Changers : 1
? DEVELOPING NEW MARKETS ? BASIS : Emerging economies provide ample opportunity to garner market
share ? ACTION :Expansion in new markets driven on basis of innovation and develop Intellectual Property ? BENEFITS : Opportunity to increase foothold and garner market share ? SUGGESTIONS : ? Russia ( CAGR 12% and favorable market conditions) ? Expanding in domestic market ( 20% growth, strong SMB segments, increased privatization opening up PSU’s) ? China ( Growth rate of around 10%, and fastest developing country, but the problem is less number of English speaking people)
8
Domestic Market; A Lucrative Sector
? Opportunities
o Share of 3rd party vendors increasing
o Government emphasis on areas like E Governance and PSUs o Emergence of Small and Medium Enterprises o Strong growth potential in domestic business ? Challenges
o
Government reluctance to allow private players o Gap in availability of Industry Ready Workforce
9
INDIA = Opportunities across wide spectrum of businesses
The Action Plan; Domestic Market
SECTOR CAGR EXPECTED REVENUES(FY 2012)
Banking 38% USD 1.5 Bn
Insurance
20%
USD 390 Mn
Telecom
31%
USD 1.9 Bn
Travel
1 0
40%
USD 210 Mn
INDIA = Opportunities across wide spectrum of businesses
The Action Plan; Domestic Market
? Develop New Markets : Domestic Market ? Low Cost Structure ? Target 12% net margin by 2012 ? Target Government Projects like UID ? Evolve PPP model ? Enhance Security Compliance to secure sensitive projects ? Develop Capabilities customized for Indian Markets ? Setup Operations in Rural BPO
1 1
NICHES : Gain Differentiation and Sustainable Leadership
Game Changers : 2
? DEVELOPING NICHES / VERTICALS
? BASIS : Traditional Sectors are hit by recession and nearing saturation ? ACTION : Identify key verticals that are growing and untapped ? BENEFITS : Developing Niches enables TCS BPO with First Mover advantage
and gain Sustainable Leadership ? SUGGESTIONS : Suggested niches which can provide growth:
? Procurement (USD 15-20 BN by 2010) ? Healthcare ( USD 58 – 85 BN by 2012) ? Remote Infrastructure Management (USD 13 – 15 BN by 2010)
1 2
DEVELOPING COST EFICIENCIES = Increase in Margins
Game Changers : 3
? DEVELOPING COST EFFICIENCIES ? BASIS : BPO business is cost sensitive market with pressure on margins. ? ACTION : Reduce different cost drivers ? BENEFITS : Improve margins with Non Linear growth ? SUGGESTIONS
? Develop Workforce in Tier II cities ? Innovate business models
1 3
Most of the growth is currently concentrated in 7 leading locations
The top 7 locations account for around 90% of the industry’s employment today
Delhi Gurgaon Noida Faridabad
These locations have helped in transforming their states into a knowledge driven economy with high per capita income However, the hyper and concentrated growth across most of these leading locations have resulted in: – Saturation and deteriorating infrastructure – Presence of large number of IT-BPO players resulting in high attrition and increased wages – Rapid growth of other sectors, resulting in greater competition for talent – Rising real estate costs – Deteriorating social and living environment
Kolkata Mumbai Pune Hyderabad
Bangalore
Chennai
Success and economic growth of these locations has led to significant interest from other states / locations to leverage this sector as a growth driver for their economies
Findings indicate that the 50 locations in India are categorized along a typical four stage development path
Location Classification
Increasing Location Attractiveness
Leaders
•Bangalore •Chennai •Hyderabad •Kolkata •Mumbai •NCR •Pune • • • • • • • • • • • • • • •
Challengers
Ahmedabad(2) Bhubaneshwar Chandigarh(3) Coimbatore Indore Jaipur Kochi Lucknow Madurai Mangalore Nagpur Thiruvananthapuram Tiruchirappalli Vadodara Visakhapatnam • • • • • • • • • • • •
Followers
Aurangabad Bhopal Goa Gwalior Hubli-Dharwad Kanpur Mysore Nashik Pondicherry Salem Surat Vijayawada • • • • • • • • • • • • •
Aspirants
Allahabad Dehradun Durgapur Gangtok Guwahati Ludhiana Patna Raipur Ranchi Shimla Siliguri Srinagar Varanasi
Notes:
(1) National Capital Region (NCR) includes Delhi, Noida, Gurgaon and Faridabad (2) Ahmedabad includes Gandhinagar (3) Chandigarh includes Mohali and Panchkula
DELIVERING CERTAINTY = Differentiate in terms of Quality and Service
Game Changers : 4
? DELIVERING CERTAINTY ? BASIS : BPO market strives on Quality and defect free service deliveries ? ACTIONS : Focus on quality and Compliance to best practices ? BENEFITS : Improved Customer Satisfaction ? SUGGESTIONS : ? Compliance to quality management system ? Maintain delivery timelines ? Extensive adoption of improvement ? Compliance to best practices like lean management, Six Sigma
1 6
? “The economic model behind India’s BPO sector
is constantly changing. Historically, providers have been able to tap into relative wage differentials across geographies to build a strong value proposition for offshoring. While cost arbitrage continues to be a significant driver of global outsourcing for most buyers, the associated benefits will diminish over time…..wage inflation in India is putting pressure on operating margins of providers….Scenarios on potential momentum indicate that costarbitrage can diminish in the medium term.’
? (Nasscom-Everest 2008: 9)
Non-linear is the mantra for future growth
Last 7 Years :
Revenue Growth
Way Forward :
Revenue Growth
Headcount
Headcount
Growth = Headcount
Growth = Value
Dell Presentation, NASSCOM 2008
Indian BPO landscape
Category
Pure-play local, BPO companies Global BPO specialists Indian IT players Integrated Service Providers “Global+Local” Integrated Service Providers
Details
Basic Theme Advantage (s)
Capture Labor Arbitrage
? Core competency focused
Customer Retention ? BPO focus & expertise ? Existing Client base ? Global Service Delivery
Diversify Revenue stream
? US-India corridor
Business Transformation
? Branding & retention
Business Transformation ? Global Brand
? Existing Client base
? Business transformation capability
? Strong Balance Sheet
? Transformation= Operations + Consulting + Technology ? ‘Global+Local’ operations (Global platform – Local expertise)
Challenge (s)
? Weak Balance sheet ? Brand in tight Labor market ? Only Processing Capability
? Organizational pedigree ? Limited knowledge of local market ? Only Processing Capability ? Center of gravity out of India
? BPO business dynamics vs IT ? Low share of BPO Revenue as a % of IT Revenue ? Career prospects viz Global Brands
? Limited knowledge of local market ? Weak operations capability ? Too broad an offering
? Perceived as a Technology player
Key to Success
Ally with larger, global player or operate in niche
Build local expertise and migrate existing clients
Acquire local players / sharpen focus on BPO Operations
Move from labor arbitrage to strategic transformation
Independent Locally managed subsidiary working under Global “Framework”
Thank You
20
doc_499403999.ppt
Game Changers in BPO Industry
GAME CHANGERS FOR IT BPO INDUSTRY IN INDIA
Innovation + Newer Avenues = Growth of Indian BPO Industry
Indian IT-BPO Industry
? Fastest Growing Indian Industry. ? US $ 4 billion in 1998 to US $ 72 billion in 2008. 51% share in the Global
Outsourcing Industry. ? Innovation- A Necessity
Remote Infrastructure Management
Procurement BPO
Legal Process Outsourcing
Domestic BPO
Healthcare
Manufacturing
Retail
Media & Entertainment
Mobile Applications
Evolution of Indian BPO Industry
1999-2000
• GE Enters with Back Office Operations in 1995 • BA and Amex set up Captives in 1996 • Daksh Eservices in 1999
• Dotcom crash is followed by boom in Voice Based Services • Indian IT Services as well as other corporate houses set up Third Party BPO. WNS, Spectramind, Infosys all set up their BPO Operations
The Gold Rush (2000-02)
Consolidation (2003-04)
• Third Party firms scale up revenue and diversifies their operations • IBM buys Daksh, ABG buys Transworks
Coming of Age (2005 onwards)
• M&A lead to third party camps • Players moving in towards high end, knowledge based services like analytics and market research
3
NASSCOM-Everest Research Report
? Outsourcing needs of Buyers are Changing with more focus on ? Value Drivers
? Lower Prices
? Smaller sized Projects ? Savings and Speedy Implementation ? Minimizing Risks
? Re-evaluating the Sourcing Model
? Re-thinking Captive Vs Supplier Mix ? Risk-Reward Relationship ? Opting Outcome based pricing
4
Indian BPO Market Players
? Major Sectors:
? Healthcare, BFSI, Retail, Telecom, Media and Entertainment sector
Activities
• Horizontals ? Processes that are seen as being similar across industries (Customer interaction and support, finance and accounting, HRM, procurement services, and knowledge services)
• Verticals ? Processes which require vertical-specific knowledge and are not easily replicable across industries, such as claims processing for the insurance industry or credit card collections for the credit services industry
(Nasscom-Everest 2008)
Growth Drivers : To Achieve progress in Indian BPO Space
The Game Changing Ideas
Developing Niches/Verticals Develping Cost Efficiencies
Developing New Markets
Delivering Certainty
GROWTH DRIVERS
EMERGING MARKETS: Garner Market Share
Game Changers : 1
? DEVELOPING NEW MARKETS ? BASIS : Emerging economies provide ample opportunity to garner market
share ? ACTION :Expansion in new markets driven on basis of innovation and develop Intellectual Property ? BENEFITS : Opportunity to increase foothold and garner market share ? SUGGESTIONS : ? Russia ( CAGR 12% and favorable market conditions) ? Expanding in domestic market ( 20% growth, strong SMB segments, increased privatization opening up PSU’s) ? China ( Growth rate of around 10%, and fastest developing country, but the problem is less number of English speaking people)
8
Domestic Market; A Lucrative Sector
? Opportunities
o Share of 3rd party vendors increasing
o Government emphasis on areas like E Governance and PSUs o Emergence of Small and Medium Enterprises o Strong growth potential in domestic business ? Challenges
o
Government reluctance to allow private players o Gap in availability of Industry Ready Workforce
9
INDIA = Opportunities across wide spectrum of businesses
The Action Plan; Domestic Market
SECTOR CAGR EXPECTED REVENUES(FY 2012)
Banking 38% USD 1.5 Bn
Insurance
20%
USD 390 Mn
Telecom
31%
USD 1.9 Bn
Travel
1 0
40%
USD 210 Mn
INDIA = Opportunities across wide spectrum of businesses
The Action Plan; Domestic Market
? Develop New Markets : Domestic Market ? Low Cost Structure ? Target 12% net margin by 2012 ? Target Government Projects like UID ? Evolve PPP model ? Enhance Security Compliance to secure sensitive projects ? Develop Capabilities customized for Indian Markets ? Setup Operations in Rural BPO
1 1
NICHES : Gain Differentiation and Sustainable Leadership
Game Changers : 2
? DEVELOPING NICHES / VERTICALS
? BASIS : Traditional Sectors are hit by recession and nearing saturation ? ACTION : Identify key verticals that are growing and untapped ? BENEFITS : Developing Niches enables TCS BPO with First Mover advantage
and gain Sustainable Leadership ? SUGGESTIONS : Suggested niches which can provide growth:
? Procurement (USD 15-20 BN by 2010) ? Healthcare ( USD 58 – 85 BN by 2012) ? Remote Infrastructure Management (USD 13 – 15 BN by 2010)
1 2
DEVELOPING COST EFICIENCIES = Increase in Margins
Game Changers : 3
? DEVELOPING COST EFFICIENCIES ? BASIS : BPO business is cost sensitive market with pressure on margins. ? ACTION : Reduce different cost drivers ? BENEFITS : Improve margins with Non Linear growth ? SUGGESTIONS
? Develop Workforce in Tier II cities ? Innovate business models
1 3
Most of the growth is currently concentrated in 7 leading locations
The top 7 locations account for around 90% of the industry’s employment today
Delhi Gurgaon Noida Faridabad
These locations have helped in transforming their states into a knowledge driven economy with high per capita income However, the hyper and concentrated growth across most of these leading locations have resulted in: – Saturation and deteriorating infrastructure – Presence of large number of IT-BPO players resulting in high attrition and increased wages – Rapid growth of other sectors, resulting in greater competition for talent – Rising real estate costs – Deteriorating social and living environment
Kolkata Mumbai Pune Hyderabad
Bangalore
Chennai
Success and economic growth of these locations has led to significant interest from other states / locations to leverage this sector as a growth driver for their economies
Findings indicate that the 50 locations in India are categorized along a typical four stage development path
Location Classification
Increasing Location Attractiveness
Leaders
•Bangalore •Chennai •Hyderabad •Kolkata •Mumbai •NCR •Pune • • • • • • • • • • • • • • •
Challengers
Ahmedabad(2) Bhubaneshwar Chandigarh(3) Coimbatore Indore Jaipur Kochi Lucknow Madurai Mangalore Nagpur Thiruvananthapuram Tiruchirappalli Vadodara Visakhapatnam • • • • • • • • • • • •
Followers
Aurangabad Bhopal Goa Gwalior Hubli-Dharwad Kanpur Mysore Nashik Pondicherry Salem Surat Vijayawada • • • • • • • • • • • • •
Aspirants
Allahabad Dehradun Durgapur Gangtok Guwahati Ludhiana Patna Raipur Ranchi Shimla Siliguri Srinagar Varanasi
Notes:
(1) National Capital Region (NCR) includes Delhi, Noida, Gurgaon and Faridabad (2) Ahmedabad includes Gandhinagar (3) Chandigarh includes Mohali and Panchkula
DELIVERING CERTAINTY = Differentiate in terms of Quality and Service
Game Changers : 4
? DELIVERING CERTAINTY ? BASIS : BPO market strives on Quality and defect free service deliveries ? ACTIONS : Focus on quality and Compliance to best practices ? BENEFITS : Improved Customer Satisfaction ? SUGGESTIONS : ? Compliance to quality management system ? Maintain delivery timelines ? Extensive adoption of improvement ? Compliance to best practices like lean management, Six Sigma
1 6
? “The economic model behind India’s BPO sector
is constantly changing. Historically, providers have been able to tap into relative wage differentials across geographies to build a strong value proposition for offshoring. While cost arbitrage continues to be a significant driver of global outsourcing for most buyers, the associated benefits will diminish over time…..wage inflation in India is putting pressure on operating margins of providers….Scenarios on potential momentum indicate that costarbitrage can diminish in the medium term.’
? (Nasscom-Everest 2008: 9)
Non-linear is the mantra for future growth
Last 7 Years :
Revenue Growth
Way Forward :
Revenue Growth
Headcount
Headcount
Growth = Headcount
Growth = Value
Dell Presentation, NASSCOM 2008
Indian BPO landscape
Category
Pure-play local, BPO companies Global BPO specialists Indian IT players Integrated Service Providers “Global+Local” Integrated Service Providers
Details
Basic Theme Advantage (s)
Capture Labor Arbitrage
? Core competency focused
Customer Retention ? BPO focus & expertise ? Existing Client base ? Global Service Delivery
Diversify Revenue stream
? US-India corridor
Business Transformation
? Branding & retention
Business Transformation ? Global Brand
? Existing Client base
? Business transformation capability
? Strong Balance Sheet
? Transformation= Operations + Consulting + Technology ? ‘Global+Local’ operations (Global platform – Local expertise)
Challenge (s)
? Weak Balance sheet ? Brand in tight Labor market ? Only Processing Capability
? Organizational pedigree ? Limited knowledge of local market ? Only Processing Capability ? Center of gravity out of India
? BPO business dynamics vs IT ? Low share of BPO Revenue as a % of IT Revenue ? Career prospects viz Global Brands
? Limited knowledge of local market ? Weak operations capability ? Too broad an offering
? Perceived as a Technology player
Key to Success
Ally with larger, global player or operate in niche
Build local expertise and migrate existing clients
Acquire local players / sharpen focus on BPO Operations
Move from labor arbitrage to strategic transformation
Independent Locally managed subsidiary working under Global “Framework”
Thank You
20
doc_499403999.ppt