Transcript Why should you choose India for IT Offshoring?

Why should you choose India for
IT Offshoring?
Agenda
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Introduction to offshoring
Key drivers
Industries & market revenues
Key criteria for offshore selection (10)
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Language
Government support
Labor pool
Infrastructure
Educational system
Cost
Political & Economic environment
Cultural compatibility
Global and legal maturity
Data and Intellectual Property Security
• Location ratings
• Comparison & Competitors
• Conclusion
India as an Offshore Services
Location
 Largest democracy: 1.1 billion population
• GDP growth over 8%; Gross GDP - $3 trillion – fourth
largest economy
• Primary offshore destination for large—scale, processoriented work, such as application development,
transactional business process outsourcing (BPO)
services in which India’s "first shift" can provide 24/7 IT
support.
• 10 categories (Source: Gartner Inc.) that organizations
should consider when looking at a potential location for
offshore or “nearshore” IT or business process services.
Key drivers for Global offshore/
outsourcing as a strategic
alternative
Increasing global competitiveness
Access to global talent
Economies of scale
Process engineering and enhancements
Wage arbitrage
Increased profit margins
Improvements in quality
Key Industry Verticals
Telecom
Manufacturing
Transportation
Retailing
Utilities
Automotive
Pharmaceuticals
Banking & Insurance
HR & Medical
Global technology spending
Revenue Breakup – India
Offshoring (2009)
Offshoring – Examples (BPO)
Key Criteria – Offshore location
selection
Language
• India is ranked 17th in the IMD global
competitiveness ranking for English language
skills.
• India has a strong foundation in the use of
English, which is the de facto business language
across the country.
Government Support
• Recognizes IT as a strong engine of job creation within
the country
• Endeavors to increase the country’s e-readiness by
focusing on key emerging technologies.
• Drive improved governance and transparency in
government interactions with the citizens
• Focus on IT education and IT-based education,
technologies, systems and applications, broadband,
smart cards, radio frequency identification, and
networking technologies.
• Heavy investments establishing Bio IT Parks, IT
investment regions and the Trans Eurasia Information
Network
Labor Pool
• In 2010 India ranks seventh in IT skills by IMD
Global on the availability of IT skills.
• The size, quality and scale of the Indian labor pool
continues to differentiate it from all other countries
• Employment in the IT industry stands at 2.21 million,
which is the largest pool of offshore talent in the
world.
• Reverse “brain drain” back to India has created
high-end expatriate talent with overseas education
and work experience
Talent Dynamics
• Top 5 American employers in India:
General Electric:
Hewlett-Packard
IBM
American Express
Dell
: 17,800 employees
: 11,000 employees
: 6,000 employees
: 4,000 employees
: 3,800 employees
• Top 5 Indian employers:
Infosys: 40,000
Wipro: 35,000
TCS: 100,000
Reliance: 120,000
Satyam: 35,000
Infrastructure
• Govt. is spending 6% of its gross domestic
product (GDP) on infrastructure ($37B)
• proposal to increase spending on infrastructure
to $1 trillion - highways, ports, airports, power
plants and other infrastructure through 2016 to
2017
• Recent overhaul of 3G telecommunications
infrastructure, boost in power generation
(nuclear) adding to output
Educational System
• India ranks 20th in IMD Global's Educational System
ranking of 2010 that looks at educational system's ability
to meet the needs of competitive economy.
• Ranks 13th on management education and 22nd on
university education, has second-highest number of
engineering graduates, after the U.S
• Has one of the largest numbers of higher education
institutions - 490 universities and 20,769 colleges
• Private and public sponsorship of R & D initiatives
Cost
• Even with salary escalation, India has a reasonable cost
differential.
• On an absolute basis, the annual salary of a programmer
with about three years' experience is $12,000 to $17,000
• Diversified delivery center locations from Tier 1 cities to
Tier 2 and 3 cities to achieve more-competitive labor
rates
• Look beyond cost savings as a long-term value
proposition from India
The real economics of offshoring
1.45-1.47
0.45-0.47
$1.00
$
1
0.33
$1.45
0.67
$1
$.33
•$1
previously
spent in
•. . .
delivers
value to
U.S.,
now
offshored
to India . .
.
India . . .
– Taxes
($0.04)
– Revenues
($0.20)
– Local
suppliers
($0.09)
* Estimate based on historical U.S. reemployment
trends
•. . . brings
savings
and
•. . .
creates
new value
from
returns
to U.S. . . . reemployin
– Cost savingsg U.S.
($0.58)
labor*
– Goods/
services sold. . .
($0.05)
– Profits from
Indian
•. . . and
makes the
global pie
that much
bigger
Political and Economic
Environment
• Reasonably stable nation with a progressive economic
mind-set and a stable government
• Most recent data from Central Statistical Organization
shows annual GDP growth of 8.8%
• High economic growth continues to attract investments
in India, thereby fueling the overall growth of the industry
• India is ranked 84 out of 180 countries on Transparency
International's 2009 corruption perceptions index
Economic Outlook
Cultural Compatibility
• A strong general cultural affinity with most Englishspeaking Western countries.
• India ranks 12th in IMD Global's ranking of national
culture that ranks countries on their openness to foreign
ideas - ranks eighth in flexibility and adaptability of
people
• Has greater bilateral relationships at a people-to-people,
government-to-government level.
• India's growing economic strength, military prowess, and
scientific and technical capacity, as well as the size,
population and strategic location of the country, all
strengthen its position
Global and Legal Maturity
• India has 57 bilateral investment treaties with nations,
including the U.K., France, Germany, Malaysia and
Mauritius.
• Has sound legal system and well developed financial
network to meet international business standards.
• The World Bank's "Doing Business 2010" report places
India 182 out of 183 countries for "enforcing contracts."
• Major modifications in current Indian cyber law
• India ranked a joint 45th in the Freedom House Global
Press Freedom Rankings and 47th in the latest world
audit ranking democracy
Data and Intellectual Property
Security and Privacy
• India has a sound data protection and
security in place, various acts and laws
introduced to strengthen IP rights and fight
piracy
• PC software piracy in India has declined
from 74% in 2004 to 68% in 2008
• IMD's World Competitiveness Yearbook
2009 ranks India 33rd for cybersecurity out
of 57 countries
Asia/Pacific
Offshore location ratings
IT Services Comparison
Main Destination for Offshoring IT Services (until March 2009)
Parameter
IT Export Industry
Size (US$, mn)
Active Export
Focused IT
Professionals
IT Employee Cost
(US$, per year)
No. of CMM level 5
Certified
Companies
IT Labor Force
India
9,500
Canada
3,780
Iceland
1,920
Israel
900
Philippines
640
South Africa
96
195,000
45,000
21,000
15,000
20,000
2,000
5.000-12,000
36,000
25,000-35,000
25,000
7,000
18,000
60
NA
0
0
NA
NA
Low cost, High
High cost, High
High cost, High
High cost, High Low cost, Moderate
quality
quality
quality
quality
quality
Infrastructure
Average
Good
Good
Good
Good
Main Positives
English language Near-share, highly Large development
More shrink Good English skills
skills, highly compatible cultures centers of tech co's wrapped software
& cultural
qualified &
with UK & US like Microsoft, Dell, production North
capability with
abundant
Significant
America
experience
workforce, robust
offshoring
project
precedent
management
Main Negatives
Ordinary
High cost of
High cost
Regional unrest Low availability of
infrastructure,
employment
project manager
some geo political
risk
Source: Evalueserve, NASSCOM
Moderate cost,
moderate quality
Good
Language skills
Nascent BRO
industry, lack of
precedent
Competitors
• China is the most prominent challenger in terms
of the criteria for infrastructure, education
system, costs, political and economic
environment, and government support.
• Philippines, Russia, Thailand and Malaysia are
also emerging in the global market, posing hard
competition to Indian offshoring business.
Conclusion
• India remains first choice offshore
destination
• Provides competitive edge – cost –effective
services, reduce operating costs and
increases productivity, quality and efficiency.
• So next time, if there is talk of outsourcing,
India should emerge as the first destination!