Transcript IT Services Industries in Developing Nations

IT Services Industries in
Developing Nations
Jessica Cassano
Andrea Nelson
Developing Countries
Countries that are generally characterized
by low levels of industrialization,
personal incomes, educational
attainments and health standards
Source: home.ica.net/~drw/glossc-d.htm
IT Service Industries
Although India and China are leaders in
Offshoring for developing countries,
other countries are setting up the systems
and infrastructure to compete in this
global marketplace.
Global Outsourcing Report:
Opportunity, Costs and Risks
Costs (30%)
 Risks (54%)
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–
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Geopolitical risk (10%)
Human capital risk (10%)
IT competency risk (10%)
Economic risk (6%)
Legal risk (6%)
Cultural risk (6%)
IT infrastructure (6%)
Market Opportunity Rating (16%)
Hofstede Studies
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Power Distance Index
(PDI)
Individualism (IDV)
Masculinity (MAS)
Uncertainty Avoidance
Index (UAI)
Long-Term Orientation
(LTO)
Source: Geert Hofsted Cultural Dimensions; www.geert-hofstede.com
Countries
Philippines
Thailand
Philippines
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Culture
– Inequalities of power and wealth
– Collective society, extended families, group
responsibilities
– Male dominance in power structure
– Risk taking society, accepts change
– Traditions are not impediments to change
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Westernized
– English Speaking, neutral accent
– Business laws and accounting practices are similar to
U.S.
Source: www.outsourcing.ph
Source: Philippines Geert Hofsted Cultural Dimensions; www.geert-hofstede.com
Hofstede Studies ( Philippines)
Source: Philippines Geert Hofsted Cultural Dimensions; www.geert-hofstede.com
Thailand
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Culture
– High levels of inequality of power and wealth
 Not forced, cultural heritage
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Strict rules, laws, polices, and regulations
– Try to avoid uncertainty
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Low individualism
– Loyalty to family is key, over-rides rules, laws
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Less Assertiveness
– Less competitiveness
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95% Buddhist values (LTO)
– Being mindful & aware of thoughts and actions, developing wisdom and
understanding
Source: Thailand Geert Hofsted Cultural Dimensions; www.geert-hofstede.com
Hofstede Studies (Thailand)
Source: Thailand Geert Hofsted Cultural Dimensions; www.geert-hofstede.com
Philippines
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Location:
– Southeastern Asia, between
Philippine Sea and the
south China Sea , east of
Vietnam
 Population:
– 81,159,644
 Educational System:
– Similar to USA
– Good system - more
students enrolled in
University than Europe
 Major Cities:
– Manila
Source: www.computerworld.com (9/15/03); www.offshoreitoutsourcing.com
Thailand
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Location:
– Southeastern Asia, southeast of
Burma
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Population:
– 66,444,371
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Educational System:
– SchoolNet
– Only 5,000 IT specialist a year
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Major Cities:
– Bangkok
Source: www.odci.gov ; CIA – The World Factbook; Digitizing a nation; Far Eastern Economic Review; Mar 8,
2001; 164; 9
Philippines
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Religion:
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83% Roman Catholic
9% Protestant
5% Muslim
3% Buddhist and other
Language:
– Pilipino (official based
on Tagalog)
– English (official)
Source: www.odci.gov ; CIA – The World Factbook
Thailand
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Religion
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94.6% Buddhist
4.6% Muslim
0.7% Christian
.1% other
Language
– Thai
– Ethnic and regional
dialects
– English (secondary
language of elite)
Source: www.odci.gov ; CIA – The World Factbook
Philippines
Literacy Rate:
– 94.6%
 Age 15 and over can read
and write
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Life Expectancy:
– 64.65 males
– 70.46 females
Source: www.odci.gov ; CIA – The World Factbook
Thailand
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Literacy Rate:
– 92.9%
 age 15 and over can read
and write
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Life Expectancy
– 69.65 males
– 74.37 females
Source: www.odci.gov ; CIA – The World Factbook
Philippines
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GDP per Capita:
– $390.7 billion
– GDP growth: 4.5%
Government:
– 3 branches(Republic)
 President
 Congress/Senate
 Judicial
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Availability of Skilled Labor:
– 380,000 college graduates
– 15,000 IT graduates
Source: www.computerworld.com (9/15/03); Global Ventures, Inc. – Global outsourcing report pg 36
Thailand
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GDP:
– $524.8 billion
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GDP per Capita:
– Purchasing power parity $8,100
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Government:
– Constitutional monarchy
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Availability of Skilled
Labor:
– Nearly ¼ of firms are not
operating at full capacity due
to skill shortage
Source: www.odci.gov ; CIA – The World Factbook
Philippines
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Government Support for IT Services
– Tax holiday
– Business park
– Deregulation
Source: Global outsourcing report
Thailand
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Government Support for IT Services
– Business Park
– Deregulation
– SchoolNet
Source: www.odci.gov ; CIA – The World Factbook
Piracy Rates
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Philippines:
– 71% software piracy
– $69 Million in losses
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Thailand:
– 79% software piracy
– $183 Million in losses
Source: www.bsa.org/globalstudy
Philippines Technology
Infrastructure
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3.3 Million land-line telephones
 3.5 Million cellular telephones
 93 Internet services providers
Source: Global Outsourcing Report
Thailand Technology
Infrastructure

6.6 Million land-line telephones
 26.5 Million cellular telephones
 15 Internet services providers
 6.9 Million Internet users
Source: Going Global Ventures Inc., Global Outsourcing Report. pg 36
Size of IT services market
(Philippines)

2005 market growth 29%
 2.2% of GDP in 2005
 $1 Billion
 30 Companies
 10,000 software programmers
Source: Going Global Ventures Inc., Global Outsourcing Report. pg 36
Size of IT services market
(Thailand)
Increased from $817 million in 1999 to
$1.5 billion in 2002
 5.6% of population are Internet users
(2001)
 16% in Bangkok
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Source: EIU ViewsWire; Thailand industry: Internet use is held back by rural poverty; Apr 28, 2003
3 Major Software/Service
Providers (Philippines)
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SVI
 SPI
 AJK Consulting
Software Venture International
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Largest outsourcing company in RP
– 2500 Employees
– $40 Million in Annual revenues
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Low cost
 High quality
 IFC investment
Source: IFC Invest in largest Software Outsourcing House in the Philippines; Jul 2003
Outsourcing in Philippines
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Overview: Strong educational system, low risk,
language compatibility
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Ondeo Nalco Company
– Naperville, IL
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Reasons for choosing the Philippines
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English-speaking
Low cost
Joint development
Disaster recovery plans
Source: www.computerworld.com 9/03
Assessing Risks to Ondeo Nalco
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Time difference
 System security
 Militant groups
Source: www.computerworld.com
Internet penetration
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Philippines
– 4%
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Thailand
– 2%
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Global average
– 5%
Source: EIU ViewsWire. New York Aug 1,2003; Digitizing a Nation; Far Eastern Economic Review; Mar 2001;
164, 9.
Information and Technology and Ecommerce Council (Philippines)
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Failure of Congress to ratify budget for
e-commerce initiatives
 P1 Billion for ICT initiatives – rejected
 Current President Arroyo orders
E-government fund
Source: Computerworld Philippines. Metro Manila, Feb 16,2004 pg 1
E-commerce
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Philippines
~$2 to $3 Million (2000)
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Thailand
~$31 Million (1999)
Source: EIU ViewsWire. New York Aug 1,2003.
Government Regulation
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CAT (Communication Authority of Thailand)
– Government regulation of Internet and telephone
connections
– Monopolistic – high cost, poor quality, and generally
unresponsive to consumers.
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TOT (Telephone Organization of Thailand)
– 2002 – register as private companies
– 50% of each sold to the public
Source: E-commerce emasculated; Far Eastern Economic Review; Sept. 21, 2000 pg26;
www.business-in-asia.com/telecom_software_electronic.html
E-commerce Resources
(Thailand)
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National Electronic and Computer Technology
Center( NECTC)
– Government agency responsible for development of IT in
Thailand
– Initiated SchoolNet (Internet services)
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Electronic Commerce Resource Center
– Set up by Ministry of Science, Technology and Environment
– Helps with awareness, training programs
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www.thaiecommerce.net
– Government website to allow companies to sell online at no
cost
Source: Journal of Global Information Technology Management; 2003; 6,3, pg 72; Slow Progress; Asian Business.
Nov 2000 pg 19
National Electronic and Computer
Technology Center (NECTC)
www.thaiecommerce.net
Software Park Thailand

Est. 1997
 In 2003:
– 50 Companies
– 17 Companies with
International Links
– $10 Million/yr in
income
Source: www.swpark.com
Major Software/Service Providers
– Companies include:
 IBM (Thailand)
 Oracle (Thailand)
 Intel (Thailand)
 Sun (Thailand)
 Microsoft (Thailand)
Source: www.swpark.com
Risks of Doing Business
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Philippines
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Complex Disputes
Terrorism
Illicit Drugs
Typhoon Belt
Tsunamis
Rebellions
Declining Markets
ERAP Factor
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Thailand
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Complex Disputes
Terrorism
Illicit Drugs
Typhoon Belt
Tsunamis
Rebellions
Inflation
Legal System
Source: Research Technology Management; Jul/Aug 1994; 37, 4; Forbes.com, DiCarlo, 5/22/03; Knight Ridder
Tribune Business New. Wash.: Apr 26, 2005, pg 1
Benefits of Doing Business
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Philippines
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Low cost
English-speaking
Tax Breaks
Requires very little
capital for start-up
– Niche Specialties
– Backup Site
– Western Influenced
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Thailand
– Low cost
– Requires very little
capital for start-up
– Niche Specialties
– Backup Site
– Security risk is
historically low
– Western Influenced
Source: Research Technology Management; Jul/Aug 1994; 37, 4; Forbes.com, DiCarlo, 5/22/03;
Conclusions for IT Manager

Evaluate Technology Infrastructure
 Research Local IT Service Providers
 Government Initiatives/Tax Breaks
 Assess Benefits vs. Risks
 Partner with Firm for Niche Products
 Consider Backup Options