Management of IT Services

Rangan Mohan

Overall Course Contents

Business Model and Delivery Issues
for Onsite / Offshore Outsourcing
Business Analysis and Development
for IT / BPO Enterprises
Project Estimation and Management
for IT Projects.

Agenda

Introduction and Statistics

Classification of the Industry
Factors impacting the Industry
Competitive landscape
People, Technology and Processes
Business Models, Pricing and Contracts
Trends Picking the Winners
Conclusion
4

Introduction and Statistics

Introduction Current Statistics

Worldwide spend on Technology products and related services
US$ 3.1 Trillion in 2011 growth of 3.3%
Hardware, Software, Products, IT and BPO US$ 1.7 Trillion
growth of 5.3% - 63% Software and balance Hardware
Indian IT Industry US$ 100 Billion in 2012
Indian IT Indian software and BPO US$ 88 B in 2011, exports
US$ 69 Billion. Exports to grow by 18% in 2012.1
BPO Exports at US$ 14 Billion in 2012, Domestic BPO US$ 2.5
Billion 60% to USA, 41% from BFSI, 20% from Telecom.
Horizontal offerings such as CIS, F&A and HR is 70% of market
and about 25% is vertical specific.2

6
1

Source Nasscom Strategy Report 2009

Nasscom Everest Study

Market Performance Offshore IT

Services
40

Total Market Size

($ B)
2002

17.6

2005

29.9

2008

51.8

0.5

External Environment

1.2

16
6

9
Source: neoIT

Market Performance Offshore BPO

Total Market Size
($ B)
2002

8.1

2005

19.8

2008

42.2

2012

60

External Environment

16

10

10
Source: neoIT

India well positioned to leverage the KPO

opportunity
Revenues (India) for 2011 - 2012:
IT Outsourcing
BPO
KPO

Knowledge Process
Outsourcing

= USD 50 Billion
= USD 16 Billion
= USD 2.5 Billion

Business Process
Outsourcing

This involves advanced

analytical and technical
skills as well as some
decision making

This involves offshoring of

low-end (contact center kind
of) work
IT Outsourcing
This involves offshoring of IT
services, offshore software
development and support

1990s

1998

2000

11

Classification of the Industry

12

IT and BPO Services

Started with IT Services

Initially Body Shopping

Then Offshore Body Shopping.
Then Projects Offshore
Now Products / complete outsourcing

BPO a later development

Voice and Data based BPO
Front and Back Office based BPO
Evolution of KPO Domain, Tools and
People
13

Factors impacting the Industry

14

Factors affecting the Business

Shortage of quality manpower.

High attrition rates.
Fear of a demand slowdown.
Emergence of other countries as alternative locations.
Erosion of margins due cost pressures and/or the
factors stated above.
Quality investors on board.
Presence across diversified geographies is helping
the company.
Mix of onshore, near shore and multiple offshore
delivery facilities is a key differentiator.
Identification of focus area and ability to attain
maturity of service offerings.
15

Factors affecting the Business

Declining demand due to a slowdown in the
primary markets of the U.S. and Europe is
paramount.
Malaise in the Financial sector also leading
to a pessimistic view.
Other factors like shortage of quality
manpower, attrition rates, wage hike due to
cost pressures, base effect, etc. have come
up in the discussions.
16

Competitive Landscape

17

Global Competition landscape

POLAND
IT Services Exports (2012): $800M
BPO Services Exports (2003): $10M
CANADA
IT Services Exports (2012): $ 16B
BPO Exports (2003): $7B

INDIA
IT Services Exports (2012): $40B
BPO Exports (2012): $14B
CHINA
IT Services Exports (2012): $2.5B
BPO Exports (2012): $500M

MEXICO
IT Services Exports (2012): $2B
BPO Exports (2012): $800M
CZECH REPUBLIC
IT Services Exports (2012): $500 M
BPO Services Exports (2012: $150M
HUNGARY
IT Services Exports (2012): $220M
BPO Exports (2012): $40M

External Environment

PHILIPPINES
IT Services Exports (2012): $1B
BPO Exports (2012): $8B
RUSSIA
IT Services Exports (2012): $2B

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Competitor Landscape
Advantages
11

Philippines

21

Ireland

31

41

51

61

Australia

Canada
South Africa

Brazil / Mexico

Macroeconomic Imputs

Limitations

Understands the US culture, large

scale technical training: software

skills; voice work; low attrition;
excellent telecom infrastructure
High understanding of the US; high
end skills; has a good brand equity
in US and excellent regulatory
framework & quality standards;
Large English speaking population;
favorable time zone
Mature BPO industry; Competitive
pricing; near-shore capabilities
culture - similar to the US; good
infrastructure;
Time zone similar to Europe; easy
accessibility to Europe and its
English speaking population 25%
cost saving, good for niche work
30% cheaper than the US;
proximity to the US; huge
investments in IT and telecom

small talent pool large

ramp ups are an issue; no
disaster recovery or multilocation facilities
High manpower costs
(compared to India); lack of
a large human resource pool

High manpower costs

(compared to India); lack of
a large human resource pool
High manpower costs
(compared to India); lack of
a large human resource pool
High manpower costs
(compared to India); lack of
a large human resource pool
Skill shortage
Skill levels are very low
(good only for low-end
jobs); proficiency in English
is poor; scalability
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Indias leadership position in based on

a number of factors
Abundance of Skilled Manpower

Lower Costs & Higher Productivity / Quality

Second largest English speaking workforce in the

world (30 million)
The largest higher education system in the world,
outside the US, with 250 universities and 12,000
colleges and research Institutes.
Approx. 500,000+ people employed in the BPO
sector, 900,000+ in IT

Productivity and quality levels are higher in Indian

outsourcing operations due to a more educated
profile of employees who view IT / BPO as a longterm career
Manpower costs in India are significantly lower than
those in developed markets

Improvements in Telecom Infrastructure

Favorable Government Policies

Telecom costs have reduced drastically over

the last few years
Bandwidth availability has improved
significantly
Mature Offshore Industry
The Indian outsourcing industry has grown
rapidly, reflecting the increasing confidence of
global corporations
300+ BPO service providers in India today

Investment friendly Government policies such as

tax concessions, infrastructure benefits and
telecom deregulation

Strategic Location
Time zone difference with Europe, US and the
Asia Pacific region enables companies to create
effectively a 24 hour support operation thus
reducing delivery lead times
20

Key Success factors

Knowledge Transfer
Team build-up
Training
Knowledge
retention
Concurrency Control
Visibility across sites
Configuration management
Project Control
Project management
Seamless communication
People management
Control and
Governance

Offshore Facility
Communication link
Replicate customers
environment
Security
Quality Management
Define process
Implement-ReviewImprove
CMM / COPC /eSCM
Productivity

Identify factors
Define metrics
Monitor and improve

Customize metrics that measure whats important to the client end to end
Ensure a competitive process and high-level price validation

Involve the service provider and client project executives in the transaction
Service
structuring process
Levels
Price
Scope
21

50 locations in India categorized on a typical four

stage development path
Location Classification
Increasing Location Attractiveness

Leaders

Notes:

Bangalore
Chennai
Hyderabad
Kolkata
Mumbai
NCR(1)
Pune

Challengers

Ahmedabad(2)
Bhubaneshwar
Chandigarh(3)
Coimbatore
Indore
Jaipur
Kochi
Lucknow
Madurai
Mangalore
Nagpur
Thiruvananthapuram
Tiruchirappalli
Vadodara
Visakhapatnam

Followers

(1) National Capital Region (NCR) includes Delhi, Noida, Gurgaon and
Faridabad
(2) Ahmedabad includes Gandhinagar
(3) Chandigarh includes Mohali and Panchkula

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

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Leader locations will attract players, they need to

resolve infrastructural issues & continue attracting
and
retaining
theto promote
best talent.
Primary
requirements
Requirements for industry growth in

FOCUS DEVELOPMENT INITIATIVES

immediate industry growth

the medium to long term

1 Address key infrastructure and

living environment issues

3 Develop long-term positioning and

promote location

2 Manage increasing labor costs &

high attrition
Career growth plans, work-life
balance, alternate compensation
structures etc.

5 Develop a conducive applicationoriented education system fostering

innovation

Expanding business centres beyond the

e.g., Mumbai can leverage its strength in capital
current areas - Create radial
markets and banking to position as the dominant
infrastructure / satellite locations around
finance oriented BPO hub
Create
clusters of learning and
the core leader
4
Decongest traffic - improved local
innovation by ensuring integration
connectivity
across sectors and stakeholders
Enhance power, hotel and airline capacity
E.g., Bengaluru focused on Knowledge economy
(IT, BPO, Bio-technology)

Provide research on relevant areas for

development of BPO industry
Support development of R&D infrastructure and
ecosystem through educational institutes

6
Priority

Continue development of talent, up-gradation of social & living

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environment to support economic growth continuousSustainability
monitoring on relevant indicators

People, Technology and

Services

24

Myths
Outsourcing means hiring workers from
another country to take jobs away from our
workers on a permanent basis.
Only big businesses can afford to outsource.
Small companies would not gain any benefits
from this practice.
Outsourcing is bad for America. The
McKenzie report wherein of every US$ 1
outsourced, 67 cents is saved, 33 cents goes
to the outsourcer out of which 8 cents comes
back to America,
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Steps in the Outsourcing Process

Evaluate your Business Processes.

Identify outsourcing opportunities in Processes.
Select Vendors/ Suppliers / Partners.
Negotiate successful contracts.
Establish successful working relationships with vendors.
Manage a multiple vendor relationship.
Turnaround a failing vendor relationship or replace a vendor
when required.
Govern Vendor relationships on a day to day basis.
Implement and track Service Level Agreements (SLAs).
Anticipate and avoid problems or solve them when they arise.
Ensure success.
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Major Benefits of Outsourcing

Increase Sales Opportunities

Improve corporate image and public relations.
Prevent missed opportunities.
Reduce annual costs almost immediately.
Enable business to focus on core competencies.
Reduce or eliminate customer complaints.
Increase customer loyalty.
Lower costs of projects and events.
Beat competition.
Make time and resources available.
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Transformational Outsourcing Vs
Traditional
Outsourcing.

Business Focus
vs Operational Focus.
Creating Value Vs Cutting Costs.
Assisting in managing uncertainty rather then
enhancing control.
Aligns with changing Business Processes rather
then existing business processes.
Based on a new set of network of vendors rather
then superior IT specialists.
Looks at business costs and re-engineering to
further enhance cost reduction.
28

Tactical Outsourcing Vs Strategic

Outsourcing.
Tactical is namely
Generate immediate cost savings
Eliminate the need for future investments.
Realize a cash infusion from the sale of
assets.
Relieve the burden of staffing.

29

Reasons for Outsourcing

Outsourcing allows companies to focus on core
competencies.
Outsourcing allows companies greater efficiencies
without having to invest in Technology or People.
Outsourcing allows companies to become more
profitable.
Outsourcing leads to better service levels and
implementation of service levels as internal departments
tend to be less amenable to service levels.
Outsourcing helps companies maintain competitive edge.
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Trends Picking the Winners

31

Trends going ahead

Time to go Lean

Tighter attrition management

Broader management spans
Increased utilization, tighter forecasting and scheduling
Transport and telecommunication costs
Eliminate all unnecessary expenses.

Focus on newer markets

Western Europe
Australia
Japan
Domestic market driven
32

Trends going forward Contd.

Greater focus on the mid market opportunity
Cost arbitrage to Value Addition
Newer opportunities, newer services
Sale of captives
Consolidation the Gartner report
Cloud sourcing and on demand outsourcing
End to end services business processing integrated to other
services
Increased governance in Outsourcing Contracts
Financial
Security
Business Continuity
Prior experience

33

 Drift from
Trends
driving
domesticoutsourcing
to global economy.
Drift from manpower to Technopower.
Shift from company led to customer driven market
forces.
Shift from Industrial economy to knowledge economy
Transformation of employer / employee relationship
New relationships and governance concerning
vendors and customers.

34

Role of Future BPO Players

Third Party Providers
Global Leaders large, integrated, full service multicountry
providers
BPO specialist Domain driven transformational services in
a select vertical
Diversified BPO Player undifferentiated services for
opportunistic verticals and horizontals
Segment Specialists end to end services for one or two
domains
Captive BPO Providers
Global Centers of Excellence Deep domain and high end
work for parent
Innovation Incubators driving innovation and using cutting
edge tools and technologies
Low cost aggregators cost competitive delivery units to
parent
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Questions.

Thank
Thank You
You
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