Business Process Outsourcing Presented by Ravi Ranjan

Agenda Introduction History Present Scenario Future Growth Competitors Availability of Factors of Production Location Govt. & Taxation Policy Project Outlay

Introduction

History

Present Scenario

Future Growth

Competitors

Availability of Factors of Production

Location

Govt. & Taxation Policy

Project Outlay

Introduction Business Process Outsourcing The transfer of management and execution of an entire business process to an external service provider, including technology, people, and process. In engaging BPO services, clients are buying access to executed business processes and business outcomes from their BPO providers. (IDC) The delegation of one or more IT-intensive business processes to an external provider that owns, administrates and manages the selected processes that are based on defined and measurable performance metrics. (Gartner) The transfer of a function previously performed (or considered to be performed) in-house to an outside provider. Nearshore Sourcing: sourcing services from geographies within close proximity to the location in which the services are consumed or contracted.

Business Process Outsourcing

The transfer of management and execution of an entire business process to an external service provider, including technology, people, and process. In engaging BPO services, clients are buying access to executed business processes and business outcomes from their BPO providers. (IDC)

The delegation of one or more IT-intensive business processes to an external provider that owns, administrates and manages the selected processes that are based on defined and measurable performance metrics. (Gartner)

The transfer of a function previously performed (or considered to be performed) in-house to an outside provider.

Nearshore Sourcing: sourcing services from geographies within close proximity to the location in which the services are consumed or contracted.

Offshore Sourcing: sourcing services from geographies at a considerable distance from the location in which the services ar consumed or contracted. Global sourcing: a corporate sourcing strategy that identifies and leverages those human resources and assets, regardless of geographic location, most appropriate for meeting the organization’s needs, often coming from both nearshore and offshore locations. Insourcing : sourcing services internally as opposed to through a third-party BPO provider. Often provided in a a centralized shared services environment.

Offshore Sourcing: sourcing services from geographies at a considerable distance from the location in which the services ar consumed or contracted.

Global sourcing: a corporate sourcing strategy that identifies and leverages those human resources and assets, regardless of geographic location, most appropriate for meeting the organization’s needs, often coming from both nearshore and offshore locations.

Insourcing : sourcing services internally as opposed to through a third-party BPO provider. Often provided in a a centralized shared services environment.

World War II Increased international trade 1960s – 1980s Importing turns to outsourcing 1990s – Present Services now outsourced BPO begins History

World War II

Increased international trade

1960s – 1980s

Importing turns to outsourcing

1990s – Present

Services now outsourced

BPO begins

Services Globalization: The New Paradigm Digitization and Telecommunication enabling this reality

Three Strategic Sourcing Questions If the answer to each of these questions is YES then the company should own the operation or asset otherwise, OUTSOURCE. Strategy Does the operation or asset directly contribute to the organization’s competitive advantage, core competency or capability? 1 Finance Does the investment in the operation or asset yield a return that is greater than the cost of invested capital? 2 Performance Is the operating performance of the operation or asset (quality of output, cost and cycle time) measurably superior to relevant industry standards? 3

Present Scenario - Growth in BPO Exports Growth in IT Exports Contribution to GDP Employment Creation $ in Bn % Strong Growth setting the stage for India’s Global Leadership $ in Bn % of GDP Source: Nasscom, Analyst Reports, TCS-GCP Research

Future Growth Prospects Revenues estimated at $25 billion by 2012. Directly employ 2 million people. Industry would comprise 2.5 percent of India's GDP. Expansion to Tier-II and Tier-III cities.

Revenues estimated at $25 billion by 2012.

Directly employ 2 million people.

Industry would comprise 2.5 percent of India's GDP.

Expansion to Tier-II and Tier-III cities.

Competitor Presence: International Source: McKinsey analysis Size of circle corresponds to number of qualified workers Location attractiveness Infrastructure Communications Other basic infrastructure Country risks/FDI incentives Incentives for investments Political environment Time-zone attractiveness People attractiveness Quality, Cost, Qualifications Knowledge of English High Low Low High Australia UK Philippines China Mexico Singapore Ireland India Semitransparent circles denote future projections

Location attractiveness

Infrastructure

Communications

Other basic infrastructure

Country risks/FDI incentives

Incentives for investments

Political environment

Time-zone attractiveness

People attractiveness

Quality, Cost, Qualifications

Knowledge of English

- - Attractiveness Index for Offshore Location Source: AT Kearney, neoIT Global Leadership of India Relative Analysis of India vs. Others Rank Country Attractiveness Index 1 India 7.12 2 China 5.61 3 Malaysia 5.59 4 Czech Republic 5.58 5 Singapore 5.45 6 Philippines 5.45 7 Brazil 5.44 8 Poland 5.33 9 Hungary 5.29 10 Thailand 5.20 Parameter Rank Labor Pool 1 Education System 1 English Proficiency 1 Cost Advantage 1 Infrastructure 2 Government Support 1 Quality 1 Cultural Compatibility 2 Business Environment 1

India – Presence in BPO Sector Content Development/ Digitisation/ Transcription Data entry Data conversion Medical transcription BPO Transfer of business process to external service provider Enabled by IT and Telecom Customer Relation Management Order processing/customer fulfillment Customer support Collection follow-up Telemarketing Finance and Accounting Billing Receivables reconciliation Creditors reconciliation Financial accounting Transaction processing Tax processing Claims processing Cheque processing

Content Development/ Digitisation/ Transcription

Data entry

Data conversion

Medical transcription

BPO

Transfer of business process to external service provider

Enabled by IT and

Telecom

Customer Relation Management

Order processing/customer fulfillment

Customer support

Collection follow-up

Telemarketing

Finance and Accounting

Billing

Receivables reconciliation

Creditors reconciliation

Financial accounting

Transaction processing

Tax processing

Claims processing

Cheque processing

Captive service providers Quality of services, deliverability, Confidentiality GE, e-Serve, WNS, Dell Process specialists Knowledge of process ADP, Exhult, Convergys, Hewitt IT outsourcing companies Specific verticals and outsourcing skills ACS, EDS, CSC Pure BPO vendors Cost advantage and skilled labour Wipro Spectramind, IBM-Daksh, GTL Software companies Cost advantage and process knowledge Infosys, HCL, Mphasis, Satyam Consultants Financial and accounting background Accenture, E&Y, PwC BPO Key BPO Players in India

Current Top 10 Indian players (2008) Genpact WNS IBM Daksh Aditya Birla Minacs TCS BPO Wipro BPO Firstsource Solutions Ltd Infosys Technologies Ltd HCL BPO EXL Service Holdings Nasscom’s top 10 BPO ranking , July 2008

Genpact

WNS

IBM Daksh

Aditya Birla Minacs

TCS BPO

Wipro BPO

Firstsource Solutions Ltd

Infosys Technologies Ltd

HCL BPO

EXL Service Holdings

>1 billion people (growing at 1.7% p.a) at least 20 significant languages three urban concentrations in world top ten history of British presence in India 2.2 m graduates every year 100,000 engineering graduates every year Factors of Production…..

2.2 m graduates every year

100,000 engineering graduates every year

Cost Access to highly- qualified skill pool Established methodologies and processes for better performance Adherence to leading quality practices Robust Communication facilities … . Advantage 50-75 % cost reduction for offshore process Lower labour cost Favourable time lag 24 x 7 service Sharper learning curve effect Quality Productivity

Access to highly- qualified skill pool

Established methodologies and processes for better performance

Adherence to leading quality practices

Robust Communication facilities

50-75 % cost reduction for offshore process

Lower labour cost

Favourable time lag

24 x 7 service

Sharper learning curve effect

Tax holiday under Indian tax law STP / EOU - Tax Holiday available up to financial year 2008-09 . SEZ - export income exempt from tax for 10 years from the commencement of business 100% for first five years and 50% for next 5 years Specified IT enabled services coupled with condition of exports Tax holiday benefits restricted by Tax Authorities in case of geographical expansion of BPO units Considered as extension of existing unit Date of commencement of new unit for tax holiday considered as that of the original BPO unit. Govt. & Taxation Policy

Tax holiday under Indian tax law

STP / EOU - Tax Holiday available up to financial year 2008-09 .

SEZ - export income exempt from tax for 10 years from the commencement of business

100% for first five years and 50% for next 5 years

Specified IT enabled services coupled with condition of exports

Tax holiday benefits restricted by Tax Authorities in case of geographical expansion of BPO units

Considered as extension of existing unit

Date of commencement of new unit for tax holiday considered as that of the original BPO unit.

Location World class captive centers have come up across the country Number of third party providers are offering services Small providers have mushroomed in smaller towns Delhi Bombay Madras Bangalore Pune Gartner Group Dell GECISl American Express Bechtel WNS Efunds Hays Texas Instruments Motorola IBM Microsoft HSBC Ford SCOPE Hyderabad Trivandrum Ahmedabad Concentration of Shared Service Centers Concentration of Service providers Calcutta Chandigarh WNS Jaipur

World class captive centers have come up across the country

Number of third party providers are offering services

Small providers have mushroomed in smaller towns

Delhi

Bombay

Madras

Pune

Gartner Group

Dell

GECISl

American Express

Bechtel

WNS

Efunds

Hays

Texas Instruments

Motorola

IBM

Microsoft

HSBC

Ford

SCOPE

Hyderabad

Trivandrum

Ahmedabad

Concentration of Shared Service Centers

Concentration of Service providers

Calcutta

Chandigarh

WNS

BPO opportunities Billing services Accounting transactions General accounting Tax consulting & compliance Risk management Financial reporting & analysis Financial management Benefits administration Education and training Recruiting and staffing Payroll services Hiring administration Records management Other HR services Credit/Debit card services Cheque processing EDI Other transaction processing Engineering Design Animation Network consultancy and management Biotech research Tax processing Claims processing Asset management Document management Transcription and translation Supply chain management Procurement Database marketing/ customer analysis Telesales/ Telemarketing Inbound call centre Web sales and marketing Customer Care Finance BPO Opportunities HR Payment Services Content Development & Research Supply Chain & Administration

Billing services

Accounting transactions

General accounting

Tax consulting & compliance

Risk management

Financial reporting & analysis

Financial management

Benefits administration

Education and training

Recruiting and staffing

Payroll services

Hiring administration

Records management

Other HR services

Credit/Debit card services

Cheque processing

EDI

Other transaction processing

Engineering

Design

Animation

Network consultancy and management

Biotech research

Tax processing

Claims processing

Asset management

Document management

Transcription and translation

Supply chain management

Procurement

Database marketing/ customer analysis

Telesales/ Telemarketing

Inbound call centre

Web sales and marketing

India BPO - Cost Structure Improved ROI through higher asset utilization and lower operating costs At Par 2-2.5 Times 50-60% Lower Developed countries India Capital Costs Asset Utilization Labour Cost

US$ Cost per FTE (Full Time Employee) Overheads Cost ($) Personnel 6,179 G&A Expense 1,000 Telecom 2,328 Property Rentals 847 Depreciation 1,500 TOTAL EXPENSES 11,854

Revenue per Employee Head Amount ($) Sales generated 14054 Taxes 200 Expenses 11854 Profit per employee $2000 For a unit of 10 people Total Profits $20000

Global Business Leaders - Bullish On India ’ s Potential “ India is a developed country as far as intellectual capital is concerned ” “ India can be a major part of Dell ’ s operations and we are looking to capitalize on India ’ s human capital ” “ We are expanding our presence in India to take advantage of the ample R&D talent available ” “ India is handling the most sophisticated projects in the world..I am impressed with the quality of work ” JACK WELCH, GE JOHN CHAMBERS, CISCO MICHAEL DELL, DELL BILL GATES, MICROSOFT

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