IT-BPO industry in India Transforming global businesses 27 Oct, 2010
Key agenda • An overview • Indian IT-BPO industry • Focus on Transformation and Innovation • Looking Ahead 29-Nov-10 2
India – The growth engine Stock Market +131% indices GDP growth back to FY08 levels GDP growth % FDI Inflows USD bn +7% Source: BSE, Ministry of Commerce and Industry
Increasing connectivity driving demand for technology Telecom growth Fastest growing telecom market in the world; 670 mn telecom subscribers (wireless & wireline) in June 2010 with 10-15 mn mobile subscribers being added every month Growth in PC sales From 3 mn units in FY04 to 8 mn units in FY10 at a CAGR of 17% Internet growth 17 mn internet subscribers and 9.5 mn broadband subscribers in June 2010; likely to have 200 mn high speed subscribers by 2015 Govt. leveraging technology 250,000 panchayats (village councils) to be connected through broadband Infrastructure Ever improving air, surface and ports infrastructure facilities Source: MAIT, Frost & Sullivan and TRAI 4 29-Nov-10
IT-BPO Industry diversified across service lines and ownership IT-BPO Export revenues sector- wise break-up, USD bn • 51% of total global sourcing CAGR market 17% • 25% of India’s exports; 10.5% of services revenues • Foreign providers accounting for over 30% of the total market • Services delivered from 50+ locations and 20+ villages (Rural Sourcing model for Exports FY2010 Engg Design BPO) IT Services BPO &Prod Devpt • Transformation, new business models, driving organization wide efficiencies Indian Providers Foreign Captives Foreign Providers 29-Nov-10 5
Increasing breadth of services – New markets, New services, New verticals *BPO Exports only Non-English speaking geographic revenues Non Voice revenues Building language capabilities Growth of Non voice services SMB revenues Revenues from New verticals New customer segments Greater Diversification 6 29-Nov-10
A global and diversified delivery model (nos) 2007 2008 2009 Countries of ~48 ~52 ~60 No of Delivery Centers Operations EUROPE Operating Centers 340 ~400 ~460 32% NORTH AMERICA 25% MIDDLE EAST AND AFRICA 67% AUSTRALASIA SOUTH AMERICA 38% 100% 2.3 million employees;~60 countries; 35+ Languages; 5% Foreign nationals 29-Nov-10 7
Reinventing, transforming in a short span End-to-end Discrete Processes Development Product IT strategy and innovation Scale and complexity New service consulting End to end Y2K contracts lines such as High-end product Data Entry IT-BPO ADM KPO, LPO services such development Customer Product IT support Large scale as analytics Business and support Integration ADM Engineering transformation Software Service projects design services and re- Offerings development engineering ADM Transaction Processing Scalability Legacy Access to new Domain Access to Lower Business migration capabilities expertise R&D Y2 K deadlines Accelerate time End to end operating costs capabilities needs Value creation to market services Mid 2000 to Going Late 80’s -Mid 90s Late 90s Early 2000s Forward… present 29-Nov-10 8
Changing client relationships – industry emerging as a strategic partner 1 Shift towards managed services model New Business Models 2 Shift from FTE based to outcome based, pay per use model 3 IP Led innovation Innovation and Transformation 4 Innovation through process re-engineering 5 Top-line impact in addition to bottom-line Service delivery across value chain 6 Competency creation
Creating Business impact across the value chain LABOUR EFFICIENCY EFFECTIVENESS $146 Million ARBITRAGE Branch opening cycle time business impact Outsourcing Process Re-engineering & - 20% reduction in cycle over $30 Million Savings > improvements $ 1.5 End to end projects time, revenue addition- outsourcing $30 Million Million benefit $21 Mn Staff optimization $ - $21 Mn reduction in 5 Million $100 Million net market risk, Cash Flow unmatched bond trades $140 reduced to 10% from Million 22% $40 Million Value Banking operations - Efficiency up by 30%, $5 EBIT Impact Million 12% additional space $6.5 creation, improved Million workflow and layouts $1.5 Million Improved customer experience $100 $30 Million - C-SAT score up by 40 Million bps 2006 - 2009 Transformational Business Impact has realized the true potential of off-shoring
Increasing focus on frugal engineering 1 2 Low Cost Design and Target-contenting Value Chain Optimization I. Utilize lowest labor cost I. New Baseline Platform in the region II. Optimize customer II. Co-locate suppliers interface features and eliminate non-value III. Co-development of add features parts with suppliers III. Efficient design with IV. Utilize non-traditional Tandberg’s small & portable USB low cost base supply base Webcam 3 4 Capital Efficiency Product Development Efficiency I. Manufacturing I. Lower factor costs simplicity II. Organizational efficiency II. Reduced capital III. Process efficiency through incentives IV. Sharing Testing Costs III. Optimal balancing of capital and labor costs Source: NASSCOM – Booz report 11
Future Outlook for the industry- a redefined market with tremendous potential Demographic shifts will fuel the growth of new sectors (healthcare), markets 1 (BRIC, Japan, Germany) and service lines (process transformation for productivity improvement) Global Megatrends Social, environmental and technology trends will create hitherto unseen 2 opportunities (e.g., climate change, servicing SMBs) and risks (automation of core service lines) that could endanger up to a third of today’s market The addressable market for global sourcing will triple in size from USD 500 3 billion today to USD 1.5-1.6 trillion in 2020. A Redefined 80% of incremental growth will be driven by opportunities outside the current Market 4 core markets, verticals and customer segments The exports component of the Indian industry is expected to expand three- 5 fold and reach USD 175 billion in revenues by 2020. Industry Outlook The domestic component will grow to USD 50 billion, equal to today’s exports 6 revenues. 12 29-Nov-10
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