Global challenges to outsourcing
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Global challenges to outsourcing Presentation Transcript

  • 1. The GlobalOutsourcing Challenge March 21, 2013
  • 2. Global Procurement and Sourcing Intelligence Insightful Research and Analytics Pioneering Economic Model
  • 3. We’re a values-driven FORTUNE 500 global ingredients company thatanticipates and delivers the consistently high-quality ingredients andmarket-shaping innovations our customers need for today andtomorrow. With a legacy of over 100 years, we specialize in nature-based sweeteners, starches and nutritional ingredients — Focused on providing critical ingredients to the food, beverage, industrial, pharmaceutical and personal care industries — A global network of manufacturing facilities, ingredient development centers and sales offices in 40 countries — Over 11,100 talented and experienced employees — $6.5 billion net sales in 2012 — Headquartered in Westchester, Illinois
  • 4. Global Outsourcing Market Size($ Billion, 2011-2015) CAGR: 4.4% 51 CAGR (AO): 49 4.4% 47 45 43 230 220 212 204 CAGR (IO): 197 3.9% 147 154 162 CAGR (BPO): 133 140 5.0% 2011 2012 2013 2014 2015 BPO Infrastructure Outsourcing Application OutsourcingSource: Gartner, Inc.
  • 5. Marketing Operations 29% 15% Sample size: 277 buyers of Analytics and Knowledge Process 29% outsourcing services 20% Legal Process 29% 23% Procurement and Sourcing 29% 26% Industry Specific Processes (Life… 29% 28% Human Resources 29% 36% Finance and accounting 21% 40% Contact centre 25% 48% Development and Print Operations 36% 52% IT Infrastructure 39% 61% 55% 67% 0% 20% 40% 60% 80% Mid Market Buyers ($500 million - $3 billion revenues) Enterprise Buyers ($3 billion + revenues)Source: HfS Research and the London School of Economics Outsourcing Unit, 2011
  • 6. Customer Service ITO ADM Document Management F & A BPO HR BPO (Multi Market Value Creation Process) Procurement BPO Insurance BPO Banking BPO Emerging Industry Marketing BPO (Multi Processes (Utilities, Process) health care) Life Sciences BPO Pioneers Emerging Rapid Growth Reaching MaturitySource: HfS Research and the London School of Economics Outsourcing Unit, 2011
  • 7. Traditional Outsourcing Models  100% Degree of Ownership 0% Assisted  Build–Operate  Completely  Captive Unit  Joint Venture  Outsourced  Captive Unit  –Transfer — Wholly — A wholly owned — Joining — Built and — Fully owned facility forces with managed by managed by subsidiary existing third party third-party — Assistance from player in service— Typically, partner to build local market — Ownership provider offshored and manage transferred key functions — Easier entry to the client— Retains into the control market — Reduced risk
  • 8. World’s Top 10 Outsourcing Destinations 3 Ireland 4 Poland 8 Czech 5 China Republic 1 India 6 Costa 7 Vietnam Rica 2 Philippines 9 10 Brazil MalaysiaNotes:1) Based on Tholons 2013 Ranking: Improving macroeconomic environment and expanding domestic market
  • 9. Data breach and loss of intellectual property Legal Framework Regulatory Infrastructure Availability of Issues skilled labour Language barriersExchange rate volatility Cultural Compatibility Political/Social/ Civil unrest Natural disasters
  • 10. Characteristics— Structured— Multi-faceted— Rigorous— Continuous
  • 11. —Variables influencing operations in COUNTRYALIGNMENT the country and its region —Risk variables influenced by CITYSUITABILITY city-specific considerations —Risk variables influenced by VENDOR FIT supplier-centric issues
  • 12. Macroeconomic Quality of life Geopolitical COUNTRYALIGNMENT Legal Scalability Business Infrastructure
  • 13. India Argentina Strengths— Six Indian cities figure in the list of the top 10 cities — Western world type culture is a good fit for US and for outsourcing EMEA— Receptive economic environment — Same time-zone than US— Significant scale of talent across a range of ITO, BPO — High level of education on college graduates and KPO requirements — Top outsourcing firms have strategic relations with key— Generally developed infrastructure and investment technological universities— Alternate time zone to US — Favourable exchange rate situation (2013) Risks— Potentially high attrition rate – more than 60% in — Buenos Aires fell from #15 in 2011 to #24 in 2012 in specific sectors the top 20 emerging cities for outsourcing— Rising cost of real estate in tier 1 cities — Political and economical instability— Wage inflation in urban areas — Potential language barriers (Spanish is native language)— Bureaucratic considerations — Relative high crime rate may create employee safety concerns
  • 14. India Philippines Strengths— Size of voice based BPO industry: $7 billion — Size of voice based BPO industry: $7.4 billion— Employs 855,000 people in the BPO industry — Employs 600,000 people in the BPO industry— Six Indian cities in the top 10 BPO destinations: — Cultural affinity to western nations Bangalore, Mumbai, Delhi, Chennai, Hyderabad, Pune — Lower attrition rate as compared to India— Emerging tier 2 cities provide immense opportunity — Government support to industry— Leader in both voice and non-voice processes Risks— Loss of tax incentives to BPOs due to discontinuation — Political instability of the Software Technology Parks of India(STPI) — Potential employee safety concerns scheme — Appreciating currency may lead to escalating costs— High attrition rate of more than 60% — Lack of alternative delivery locations--BPO centers— Rising cost of real estate in tier 1 cities concentrated in two cities, Manila and Cebu— Wage inflation in the urban areas — Weather related concerns
  • 15. Macroeconomic Financial Geopolitical CITYSUITABILITY Legal Scalability Quality of life Business Infrastructure
  • 16. Delhi Kolkata Strengths— High infrastructure investment — Low cost of living— Large number of educational institutions — Lowest attrition rate— Availability of skilled labor due to existing — Low real estate costs outsourcing industry in multiple domains–BPO, documentation, KPO and IT— Industry developed across NCR region Risks— Higher crime rate — Communist government–non-supportive to industrialization— Significant wage inflation — Relative lack of infrastructural facilities such as roads,— Higher cost of living STPI, etc.— Higher attrition rates — Scale issues–although large companies have a presence in Kolkata, their offices are relatively small compared to other cities
  • 17. Bucharest Timisoara Strengths— Skilled/experienced workforce–Bucharest is the — Low cost of living and salaries business hub of Romania — Lower attrition rate— Higher number of graduates — Technology Infrastructure— Technology Infrastructure Risks— Higher cost of living — Shortage of specialist capabilities due to smaller size of industry–possible issues for companies looking for— Competitive job market and higher attrition rates large-scale operations— Transportation–traffic congestion — Scale of outsourcing industry
  • 18. Financial Clients People AlliancesVENDOR FIT Service Thought Governance Infrastructure capability leadership
  • 19. Data security risks Process design Training/educating employees on data security risks Resource continuity Vendor needs to design and plan process buffering Ensure backup power delays and disruptions due supply, alternative Internetto city/country-specific risks Location- connections, etc. such as power shortage, centric risks infrastructural risks faced by Managing vendor employee security Hedging natural risks disaster risks Risks due to high crime rate can be Evacuation mechanisms to be put managed by providing secure in place for natural risks such as transportation to employees floods, storms, etc.
  • 20. To recap… —Variables influencing operations in COUNTRY ALIGNMENT the country and its region —Risk variables influenced by CITY SUITABILITY city-specific considerations —Risk variables influenced by VENDOR FIT supplier-centric issues
  • 21. Continuous Structured Data Predictive Reporting and Risk Collection and Assessment Recommendations Assessment Monitoring — Integrate — Use a reporting qualitative and engine to report the quantitative resultant analysis in a analysis data-intensive format — Use a risk — Embed future — Identify actionable assessment model views/forecasts recommendations to identify and — Identify events — Monitor and feedback— Collect data from categorize the risks and predict risk results and variations various public and — Analyze data on trends at a consistently private sources a static and country, city, and— Collect data at the trending basis supplier level country, city, and supplier levels
  • 22. Promote Best Practices: Actively manage risks with Build Relationships: vendor (e.g. secure transport for Manage the outsourced city employees) relationship as a partner and not a vendor Embed Strong Management: Key success Do Your Homework: Actively track risks and Conduct a ‘ground-up’retain knowledge of critical factors for analysis in preparation to processes outsourcing outsourcing Hedge Risks: Plan for the Future: Be prepared to manage Assess requirements risks using contracts, in terms of scale and in-house teams, multi- technical capability before sourcing strategies, etc. outsourcing
  • 23. Contact Omer Abdullah Co-Founder and Managing Director T/ +1 312 880 1301 omer.abdullah@thesmartcube.com thesmartcube.com Connect
  • 24. About The Smart CubeThe Smart Cube is a global professional services firm that specializes indelivering custom research and analytics services to corporations, financialservices, and management consulting firms globally across four key businessareas: Procurement andSupply Chain, Analytics, Strategy and Marketing,and Financial Services. The firm has conducted more than 15,000 studies todate across virtually every major industry, function and region through itsglobal network of over 400 analysts. The Smart Cube is ISO 27001 certifiedand audited by BSI for assurance on data protection and confidentiality.For more information, visit thesmartcube.com. Antwerp / Chicago / Dalian / Detroit / London / Montevideo / New Delhi /New York / Timisoara / Zurich