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Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
Offshore Outsourcing
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Offshore Outsourcing

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  • 1. OFFSHORE OUTSOURCING NEW DESTINATIONS EMEA & APAC Prem Karthik Pandian
  • 2. Cities of Interest (not in any order) <ul><li>Bucharest, Romania </li></ul><ul><li>Prague, Czech Republic </li></ul><ul><li>Cairo, Egypt </li></ul><ul><li>Cracow, Poland </li></ul><ul><li>Metro Manila, Philippines </li></ul><ul><li>St. Petersburg, Russia </li></ul><ul><li>Ho Chi Minh City, Vietnam </li></ul><ul><li>Dalian, China </li></ul>
  • 3. <ul><li>Criteria that are important for selecting a destination </li></ul>“ Business transformation through services globalization is one of the most important levers that global companies can no longer afford to ignore,” stated Atul Vashistha, CEO, neoIT
  • 4. <ul><li>A high availability of qualified personnel and the city's proximity to Western Europe make it attractive. Even better, prices are 40%-50% lower than in Western Europe </li></ul><ul><li>Cities/Centers of outsourcing: Bucharest </li></ul><ul><li>Companies: Genpact, Wipro, Infosys, Accenture </li></ul>Romania
  • 5. Romania <ul><li>“ There are about 45,000 software developers in Romania and 8,000 graduates enter the field annually&quot;, says Lianu, general director for export promotion at the Romanian Ministry of Economy and Commerce </li></ul><ul><li>Multilingual labor pool (Romanian, Hungarian, German) with very good cultural affinity for European countries </li></ul><ul><li>Transparent corporate tax environments with a simple 16 % flat tax on profits. Ranked as one of the top performers in the World Bank’s “Doing Business Report” </li></ul><ul><li>&quot;Romania has the best human resources in the world for IT,&quot; said Florin , vice president of Aries, the Romanian Association for Electronic and Software Industry, which has some 300 member companies and the avg. salary of an entry level programmer is 24% lower than in the Czech </li></ul><ul><li>Romania have stable geopolitical situations that are conducive to outsourcing and better time zone comfort </li></ul><ul><li>Joined EU in Jan 2007 and this may lead to increase in costs, but neoIT predicts IT labor costs in Romania to remain lower than other EU destinations for the next 6-8 years </li></ul><ul><li>Romania has the least developed communication infrastructure in the region but the conditions are improving last 2 yrs. </li></ul><ul><li>Romania’s physical infrastructure lags behind other countries in the region. </li></ul><ul><li>“ ..Difficult to find good managers in the area..”, Jonathan Schwartz, of Sun Microsystems </li></ul><ul><li>IP protection is a major problem, although piracy rate has decreased recently </li></ul><ul><li>Most existing companies are small —15 to 20 people </li></ul><ul><li>Comparatively less support from government but the conditions are improving </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 6. <ul><li>Capital City with good infrastructure </li></ul><ul><li>Bucharest is the most economically-developed and industrialized city in Romania, producing around 21% of the country's GDP and about one-quarter of its industrial production, while only accounting for 9% of the country's population </li></ul>Bucharest, Romania
  • 7. <ul><li>PRAGUE'S GOOD INFRASTRUCTURE AND PROXIMITY TO WESTERN EUROPE MAKE IT A GOOD PLACE FOR COMPANIES THAT WANT EASY ACCESS TO OUTSOURCING PROVIDERS </li></ul><ul><li>Cities/Centers of outsourcing: Prague </li></ul><ul><li>Companies : Accenture, EDS </li></ul>Czech Republic
  • 8. Czech Republic <ul><li>The Czech Republic churns out 5,000 technical graduates every year, and the IT services market experienced double-digit growth when the global IT services market grew just 6 percent. </li></ul><ul><li>Overall Cultural compatibility is fair with very good foreign language skills especially German </li></ul><ul><li>Good IT and communications infrastructure (Solid investment of 8.5 percent of GDP in the same) </li></ul><ul><li>Country is relatively more stable (low geopolitical risk) </li></ul><ul><li>According to a study by EUROSTAT, the European Union's statistical office, 70% of the Czech population also speaks a foreign language, being especially proficient in German. </li></ul><ul><li>English proficiency is relatively poor in the country </li></ul><ul><li>Low pay scales give talent little reason to stay. </li></ul><ul><li>Little support from the government </li></ul><ul><li>According to Gartner, the IT process maturity is low </li></ul><ul><li>Real estate prices are also rising due to demand for commercial property, further reducing the Czech Republic’s advantage </li></ul><ul><li>neoIT says , the average rate of increase of salary is 5% and as a result, IT specialists are increasingly hiring themselves out as consultants to the highest bidding company </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 9. <ul><li>The city is becoming a site of European headquarters of many international companies. </li></ul><ul><li>Good Infrastructure and Proximity to western Europe </li></ul><ul><li>Capital City </li></ul>Prague, Czech Republic
  • 10. <ul><li>RANKS 12TH IN A.T. KEARNEY’S ATTRACTIVENESS INDEX WITH HIGHLY EDUCATED TECH WORKERS, HISTORICAL EXPOSURE TO WESTERN LANGUAGES AND LOW COSTS. IT IS TRYING TO BE “GATEWAY” FROM WEST TO MIDDLE EAST AND INVESTING HEAVILY IN IT INFRASTRUCTURE </li></ul><ul><li>Cities/Centers of outsourcing: Cairo, Giza, Heliopolis </li></ul>Egypt
  • 11. Egypt <ul><li>Highly educated tech workers, historical exposure to Western languages and low costs </li></ul><ul><li>With over 80,000 technical graduates a year, the country offered a similar cost base to India while boasting a more multilingual workforce </li></ul><ul><li>Tax breaks from the existing 40% current corporate levy for Offshore development Centers that wish to establish in Egypt, regardless of location. ( Egyptian – UK Chamber of Commerce </li></ul><ul><li>These reductions last for a period lasting between 5 to 10 years; Free trade zones are in place for companies to establish operations, which guarantee a tax-free period as mentioned above. </li></ul><ul><li>Government has been very proactive in lowering the corporation tax rates and with Egypt only a four hour flight from most of Western Europe, compared to 16 hours to India. </li></ul><ul><li>IT skills shortage </li></ul><ul><li>Security and political stability concerns </li></ul><ul><li>Projected as a favorable location for call centers than as the software development hub </li></ul><ul><li>Ossama Nazmi, business development manager at Xceed, concedes that Egypt faces an image problem. “The misconception around Egypt’s [geopolitical] stability is an issue,” he said. “I have been asked by one potential US client if we could hear the bombing in Iraq.” However, Nazmi argues that a client list including Oracle and Microsoft could help to improve perceptions. </li></ul><ul><li>Reasonably modern telecom infrastructure. Telecom Egypt, though in the process of deregulation, has little competition and keeps rates high. </li></ul><ul><li>Homes, roads, electricity, telephone services were all suddenly in short supply (&quot;hyper-urbanization.“) in cairo </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 12. <ul><li>One quarter of all Egyptians live there. The majority of the nation's commerce is generated there, or passes through the city </li></ul><ul><li>Cairo has long been the hub of education and educational services for Egypt </li></ul><ul><li>Very good Infrastructure and facilities and also the capital city </li></ul>Cairo, Egypt
  • 13. <ul><li>Educated human resource, world-class quality offerings, and new initiatives of global technology leaders – these are the natural arguments for expanding outsourcing to Poland. Thanks to this fact outsourcing to Poland is not limited to cost-cutting – it is in fact an essential element of strategy of growth. </li></ul><ul><li>Cities/Centers of outsourcing: Cracow, Wroclaw, Warsaw </li></ul>Poland
  • 14. Poland <ul><li>Competent destination in Central and Eastern European (CEE) region next to Czech </li></ul><ul><li>Offers cultural and time zone compatibility for much of Western Europe </li></ul><ul><li>According to Gartner, nearly 400,000 German speakers in the country and also boasts multilingual talents </li></ul><ul><li>Poland is well known for world-class software engineers </li></ul><ul><li>“ the border between Eastern and Western labor markets is quite close and that also lowers costs”, tells Dr. Krystian Pracz, president of Capgemini Polska </li></ul><ul><li>McKinsey, the management consultancy, estimates that in Poland the number of posts in outsourced business services could rise from about 3,000 on 2004 to 200,000 by 2008. </li></ul><ul><li>Lack of IT service maturity </li></ul><ul><li>Relatively small labor pool </li></ul><ul><li>Wages and costs rising </li></ul><ul><li>The country's southern stretch is notoriously polluted </li></ul><ul><li>But Poland’s entrance to the EU has made its labor force more mobile and a significant number of college graduates are leaving the country to find better-paying work in other EU nations – a trend which may lead to labor shortages and increasingly higher salaries in Poland </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 15. <ul><li>Off shoring of IT work from other nations in recent years has become important to the economy of Cracow and Poland in general. The city is the key center for this kind of business activity. </li></ul><ul><li>There are about 20 large multinational companies in Cracow, including centers serving IBM, General Electric, and Motorola, along with British and German based firms. </li></ul>Cracow
  • 16. <ul><li>The Philippines, despite continuing political instability and infrastructure weaknesses, continues to benefit from the global exposure and English-language skills of its workforce </li></ul><ul><li>Cities/Centers of outsourcing: Manila, Cebu, Makati city </li></ul>Philippines
  • 17. Philippines <ul><li>Government incentives include three- to six-year income tax breaks, exemptions from all government fees, licenses, dues </li></ul><ul><li>The Special Economic Zone Act of 1991 established IT parks to support the IT export industry, and the U.S. military left behind a solid telecom structure here </li></ul><ul><li>The English skills of this former U.S. protectorate and its close U.S. ties eliminate language and cultural problems </li></ul><ul><li>A large, skilled labor pool (universities churn out 350,000 technology-related degrees each year) works cheap </li></ul><ul><li>Allows 100% foreign equity participation & Market-oriented foreign exchange policies </li></ul><ul><li>Excellent infrastructure and government support in the National Capital Region (NCR) – Metro Manila </li></ul><ul><li>Telecom and broadband costs are slightly higher’ </li></ul><ul><li>Political instability and corruption </li></ul><ul><li>Project manager supply doesn't meet demand </li></ul><ul><li>Low IT process maturity </li></ul><ul><li>Real estate rentals are increasing in the metro manila </li></ul><ul><li>Higher operational costs in the National Capital Region due to higher wages and rents </li></ul><ul><li>High Piracy rates and on IIPA priority watch list </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 18. <ul><li>Talented Workforce with Strong English speaking skills with 92.4 % literacy rate </li></ul><ul><li>Good cultural affinity with US and good telecom and communication infrastructure </li></ul><ul><li>An attractive cost structure that promises tremendous savings </li></ul>Metro Manila, Philippines
  • 19. <ul><li>DALIAN, A SEAPORT IN NORTHEAST CHINA, IS ALSO TURNING OUT TO BE AN IDEAL CENTER FOR OUTSOURCING, IN LARGE PART BECAUSE OF ITS GEOGRAPHY AND HISTORY </li></ul><ul><li>Cities/Centers of outsourcing: Dalian </li></ul><ul><li>Companies: Genpact, Accenture, IBM Global Services </li></ul>Dalian, China
  • 20. Dalian, China <ul><li>Dalian's labor costs are lower than in Japan, so it's become a center for application development for Japanese companies. U.S. firms outsource some technology work there as well. </li></ul><ul><li>Dalian has roughly 26,000 experienced software engineers, and its 22 universities and technical institutes churn out 3,800 software engineering grads annually </li></ul><ul><li>The local government at Dalian offers generous incentives, including a two-year tax holiday on profits and an 80% reduction in value-added taxes.. </li></ul><ul><li>Dalian has spruced up telecommunications and roads, and in 2000 opened the Dalian Software Park, now home to more than 50 foreign companies </li></ul><ul><li>The biggest challenge will be recruiting talent and increasing computer skills to compete </li></ul><ul><li>There are certainly challenges for companies that wish to outsource to China, including the potential theft of intellectual property </li></ul><ul><li>&quot;Software engineers and programmers are easy to recruit, but it's difficult to find project managers and leaders,&quot; says Zhang Limin, chief technology officer of Hi-Think. </li></ul><ul><li>Poor language skills and least talent management skills </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 21. <ul><li>Dalian, a seaport in northeast China, is also turning out to be an ideal center for outsourcing, in large part because of its geography and history </li></ul><ul><li>Projected as favorable location for Japanese clients because of good talent pool and low wages. Catching up with the US and European clients </li></ul><ul><li>. Outsourcing to the mainland grew by 50% in 2004 and could reach $4.7 billion by 2009, IDC figures </li></ul>Dalian, China
  • 22. <ul><li>LABOR IS CHEAP HERE, COSTING EVEN LESS THAN IN INDIA, AND WORKERS ARE ADEPT AT PERFORMING LABOR-INTENSIVE IT SUPPORT SERVICES. </li></ul><ul><li>Cities/Centers of outsourcing: Ho Chi Minh City </li></ul><ul><li>Companies: Glass Egg Digital Media, TMA Solutions, First Consulting Group, FPT Software </li></ul>Vietnam
  • 23. Vietnam <ul><li>Rock-bottom wages </li></ul><ul><li>Real estate costs are much lower than in china </li></ul><ul><li>Anheuser Busch, Bayer, Cisco, IBM, Nortel Networks and Sony outsource software development projects to Vietnam </li></ul><ul><li>Vietnam joins as the 150 th member of the World Trade Organization on 11 th January, 2007 </li></ul><ul><li>Vietnamese government is making a big push to expand their economy out of deep impoverishment at the end of the American/Vietnam war; encouraging significant investments in education, transportation, housing, and technology </li></ul><ul><li>Another key attribute fueling Vietnam’s growth, is its multiple language fluency. As is common in much of Asia, many Vietnamese speak multiple languages fluently, and English is often a second (or third) language of choice </li></ul><ul><li>Vietnam is putting considerable effort into modernization and expansion of its telecommunication system, but its performance continues to lag behind that of its more modern neighbors </li></ul><ul><li>Less government support but conditions are improving </li></ul><ul><li>&quot;One disadvantage of being here is that some people think we work in rice paddies and little grass huts,&quot; says Glass Egg Chief Operating Officer Charles Speyer. </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 24. <ul><li>Hanoi University of Technology is established in 1956 and it is the first of its kind. About 30000 students graduate every year </li></ul><ul><li>Geo political risk is a major issue in Vietnam </li></ul>Ho Chi Minh City, Vietnam
  • 25. <ul><li>Informationweek.com says that “for American IT companies are almost impossible to find good developers and even so, they cost a fortune. Unlike India and East Europe has access to thousand programmers, most of them with solid knowledge in Java and other internet technologies and they are available for $20-50 per hour.” </li></ul><ul><li>Cities/Centers of outsourcing: St. Petersburg, Moscow </li></ul><ul><li>Companies : IBM Global Services, Luxoft, EPAM </li></ul>Russia
  • 26. Russia <ul><li>The average annual programmer’s salary in Russia ranges from $5000 to $9000. Rocket scientists for nearly rock-bottom prices. Russia has the third-highest number of scientists and engineers per capita, according to the World Bank </li></ul><ul><li>Vast talent pool from top Russian military conglomerates with solid experience (av. 5-15 years) </li></ul><ul><li>Communication cost: (app) 8,000-12,000 $/month </li></ul><ul><li>Russian work ethic and culture are European </li></ul><ul><li>Income tax applies, but total customs duty exemption and no VAT for IT services export & No import duty on IT equipment </li></ul><ul><li>According to RUSSOFT there are approximately 250,000 IT professionals in the country </li></ul><ul><li>Russian corporate tax rate in 2005 is 24%. </li></ul><ul><li>Compounded growth ‘05–’09: 21% (source: Forrester Research) </li></ul><ul><li>Limited language skills </li></ul><ul><li>Limited understanding of foreign markets and no government support for industry </li></ul><ul><li>Image of instability and corruption and insufficient protection of intellectual property </li></ul><ul><li>Talented people flee out of country </li></ul><ul><li>Ranked 39th out of 40 on business environment metrics, according to A.T.Kearney </li></ul><ul><li>Project management skills are low </li></ul><ul><li>Relative geopolitical instability and Travel restrictions to and from Russia make Russia not so attractive for consulting as it is for R&D and high end development of IT services </li></ul><ul><li>communication costs are getting higher in St. Petersburg and Moscow </li></ul><ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  • 27. <ul><li>Large technically competent workforce to perform high-end engineering services and R&D </li></ul><ul><li>Maturing IT industry and the government support in the region for IT industry is raising </li></ul><ul><li>Rated in “Top 50 Outsourcing Cities” by Global services media </li></ul>Moscow / St. Petersburg, Russia
  • 28. Global Outsourcing Report (Going Global Ventures Inc.)
  • 29. Global Attractiveness Index (A.T.Kearney)
  • 30. Salary index by neoIT
  • 31. Offshore Location Attractiveness Index (A.T.Kearney)
  • 32. Attractiveness Report (neoIT)
  • 33. Overall Rating (A.T.Kearney)
  • 34. Ratings based on Labor Force (A.T.Kearney)
  • 35. Ratings based on Cost (A.T.Kearney)
  • 36. EMEA Ratings (A.T. Kearney Index)
  • 37. EMEA Growth (Forrester)
  • 38. Final Recommendations <ul><li>EMEA </li></ul><ul><ul><li>Romania - Bucharest </li></ul></ul><ul><ul><li>Poland - Cracow </li></ul></ul><ul><li>APAC </li></ul><ul><ul><li>China - Dalian </li></ul></ul><ul><ul><li>Philippines - Manila </li></ul></ul><ul><li>Other Noteworthy Mentions </li></ul><ul><ul><li>Czech Republic - Prague </li></ul></ul><ul><ul><li>Vietnam - HoChiMinh City </li></ul></ul>
  • 39. Other Cities in China
  • 40. Other Cities in Philippines

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