Document

Report
Knowledge Industry: Enablers of growth
Bharat Bhasker
Porfessor, Information Technology & Systems
Indian Institute of Management Lucknow
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“Sorry, the Board is Outsourcing
Your job to guy in India who’II be
CEO for 10th of your salary.”
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What is Outsourcing?
“The commissioning of a third
party to manage an organisation’s
assets, activities, services, and/or
people, to defined result”
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Why Outsource?
• Reduce risk by eliminating vertical
integration
• Get optimal talent
• Obtain new technology quickly
• Minimise overheads during slack times
• Less bureaucratic
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The real objectives
Make IT/IS projects and services
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–
–
–
More efficient,
More timely,
Higher quality,or
Lower cost
Unlock the potential!
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What to Outsource? –
Traditional View
Anything that does not underpin
company’s
Core Competencies
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What is being outsourced?
• Less skilled jobs that are
people intense
• Not part of mission
• Specialty, e.g.
– Call center
– PC Help Desk
– One Time Routine jobs
(Y2K)
• Keeps focus on mission
• Saves cost
• Higher-skill, higher-salary
jobs, e.g.
–
–
–
–
–
–
–
Mathematician
Programmer
Tester
Tutoring Services
Systems Administrator
Legal analysts and
Human resources
• Grain specialist skill
• Save time
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Motivators: Cutter IT Journal
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Major Offshore Sourcing Models
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Size of Different
Sourcing Markets
Comprised by averaging various reports from Gartner, Yankee, and IDC
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Offshoring: Crossing
Boundaries?
Internal to the Firm
Within National
Boundaries
Insourcing
Global
Traversing National
Insourcing
Boundaries
External to the Firm
Outsourcing
Offshoring /
Global
Outsourcing
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Adapted from Apte & Mason 1995
The entire spectrum of sourcing
• Outsourcing,
– To obtain components for products or services from sources outside the
organization
• In-sourcing,
– Transfer tasks that were performed outside the organization into the
organization
• Offshoring,
– Outsourcing overseas or in a separate country
• Near-shoring
– Outsourcing to cheaper overseas, still geographically closer locations,
e.g. Canada and Mexico
• Rural-sourcing and
– Outsourcing to cheaper rural areas in the United States
• Volunteers
– Least expensive but sometimes most difficult to manage
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Outsourcing to India
ITES : Information Technology Enabled Services
Software development, Data entry, programming,
Web development Services
BPO : Business Process Outsourcing
CRM, Medical Transcription, Call Centers
KPO : Knowledge Process Outsourcing
Financial Analysis, Legal Services
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Current Top 10 Indian players
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Genpact
WNS
Wipro BOP
HCL Technologies BPO
Services
ICICI One Source
IBM Daksh
Progeon (Infosys)
Aegis BPO Services
EXL Service Holdings
24/7 Customer
• NASSCOM report
– Value of total BPO market
estimated at $ 10 bn
– Top 5 IT vendors have only
6.5% of the market
• 1/3 of the market to big
BPO companies
• 1/3 to captives
• 1/3 to smaller set ups
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Factors impacting
competitiveness of industry
Market Overview
Infrastructure Elements
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•
•
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Manpower
Telecom Infrastructure
Regulatory Environment
Information Security
policy
• Investment incentives
• Costs
Qualitative Factors
• ‘Trainability’ of
manpower
• Service Delivery Quality
• Information Security
Practices
• Marketing ability
• Entrepreneur pool
• Language skills
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Regulatory Scenario
Central (Federal) Government
Qualitative Factors
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Concessions have been provided on
remittances, on software imports,
enhanced limit for External
Commercial Borrowings
Filing and clearances have been
made easier
FTP Incentives : Eg. Import of
computers allowed without license.
Customs duty exemption on import
of Capital Goods
100% Foreign Direct Investment
ITES are exempt from Service tax
Income tax exemption on exports
•
Policy
•
Advantage
•
•
•
•
Assignment of
priority sector
status
Cheap power and
real estate
Concessions in
taxes and various
fees
Favourable
legislation
Labour Laws are
relaxed for the IT
Sector
Special Information
Technology parks
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Huge market potential globally
In bn USD, 2005
USD 120-150 bn
• With only 10% of the market
being currently addressed India
has the potential to grow further
• Domestic demand has picked
up rapidly (75% growth in last
3 years)
• The Bharti-IBM deal worth in
the domestic market
Only BPO (Excludes Engineering services etc)
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Source: NASSCOM estimates
Advantage India and business opportunities
Large pool of talent available
Talent Pool in India, 2006
• Of global supply talent pool
available India is the largest,
with 28% of the total; The next
is China, with around 11%
• English is the standard language
of Business
2006 Estimate – 3 million graduates &
post-graduates
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Source: NASSCOM BOPindia.org
Attractive cost savings
India continues to lead in cost competitiveness
Typical Cost saving for illustrative processes
Transaction Processing
25-40%
Accounting
30-40%
ERP / Analytics
40-60%
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Source: NASSCOM strategic review 2006
Infrastructure being beefed up
SEZ, IT Parks
Expansion of Road
Networks
Lower land costs
Broadband, Fixed and
Wireless users on the
increase
Internet and IPLC
connectivity on same LAN
Bandwidth sharing among
multiple entities
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Source: state government policies, Media Reports
Proactive Regulatory Bodies
• Presence of a fair and well-established judiciary system.
• Legislative measures have been instituted to protect
Intellectual property Rights – It Act 2000, Intellectual
Property Rights Law, India Copyright Act.
• Initiative Activities undertaken in since then,
• Review of the IT Act 2000
• Launch of the National Skill Registry to improve the
recruitment practices in the country
• Expansion of the Cyber Lab to multiple locations to
assist the police force with relevant IT training
• Preparation of a guidebook on information security
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NASSCOM – The National Association of Software and Services company
The Drivers : Inferred
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Technology and Technical Manpower
Local Business Opportunity
Infrastructure
Business Incentive Policy
Quality of Life (Whose Perspective ?)
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Where Do We Stand?
• Technology and Technical Manpower
– IIT, IIM, IIIT, MNR, HBTI, IET and UPTU
• Local Business Opportunity
– UP State Government plans 2% of budget on IT (Guess? 200 Cr)
– E-Governance Initiatives (300 Cr?)
• Infrastructure (b/w, Electricity, Road, Rail & Airport)
• Business Incentive Policy
– Single Window
– Tax Holiday
– Preferably – Move and plug or Semi move and plug ready premise
• Quality of Life (Whose Perspective?)
– High Flyer, Cash Rich Short on Time
– Law and Order Perception
– Happening City Perception
– Services and hassle free delivery
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Business Opportunities abound
Several new areas are emerging…
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Legal
IT Audit
Patient Diagnosis
Remote Networking
Support
• Animation & Gaming
• Worldwide spending on legal
services amounts to about $250
billion a year, some two-thirds
of it in America. As yet, only a
tiny proportion goes offshore.
• The Indian market (from a
developer’s perspective) is
expected to be about $ 1b for
animation & $ 300m for gaming
in 2009
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Source: NASSCOM Economist

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