A Dedication to Service
Emerging Global BPO Sectors
Moving up the Value Curve
Presented by: Larry Jones,
CEO StarTek, Inc.
October 2009
B PA / P O u t s o u r c i n g S u m m i t October 2009
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Discussion Topics
• Background
• Trends in BPO Industry
• Impact of Current Economy Downturn
• The Emerging KPO Sector
• Future BPO Mega-Trends
• How Can the Philippines Remain Competitive?
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Overview
Founded in 1987 Customer Care & BPO
• Sales & Sales Support
Headquarters in Denver, CO, USA • Consumer & Business Care
20 Delivery Centers in the U.S., Canada, • Receivables Management
Philippines, and Costa Rica • Technical & Field Support
• Order Management &
Employees: 9,000 Provisioning
Publicly Traded since 1997 (NYSE: SRT) • Account Management
2008 Revenue: $273 Million
11% Revenue Growth in 2008 and 2009 Industry Focus:
Communications
Denver, Colorado & Technology
Headquarters
• Telco & Wireless
• Cable/Broadband/Satellite
• Content Provider Services
• Consumer Electronics
• Software, Systems & Internet
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A Dedication to Service
Trends in the BPO Industry
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The Evolution of Outsourcing
Outsourcing Enablers
Mainframe Low Cost Telco Software Offshore Labor
Computers PBX Switch Platforms Global Connectivity
Logistics & Computing Call Back Knowledge
IT
Fulfillment Services Centers Office Process
Services
(BPO) (KPO)
1960s’ 1970’s 1980’s 1990’s 2000’s 2003 2009
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The Outsourcing “Value Stack”
Intellectual
Intellectual Intellectual
Process Process
Process Process
Process Technology
Technology
Technology
Technology Labor Technology
Technology
Labor Labor Labor
Labor Labor
Facilities
Facilities Facilities Facilities Facilities Facilities
Logistics & Computing Back Knowledge
Call IT
Fulfillment Services Office Process
Centers Services
(BPO) (KPO)
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Sector Comparisons
Onshore Call Offshore Offshore Offshore Offshore
Center Call Center BPO IT KPO
Voice and
Functions Voice Voice Non-Voice Non-Voice
Non-Voice
Work Time Day Night Day or Night Day Day
US Philippines India India India
Key
Canada Latin Am. Philippines Philippines
Locations India East Europe
Wages ($US) $8-10 $3-4 $2-4 $5-7 $15+
Attrition 80-120% 50-60% 25-35% 15-20% 15-25%
Computer Accent Intuitive Technical
Skills Conversational Grammar Process Analytical
Required Tech or Care Conversational Engineering
Tech or Care Programmer
Education High School College College College/MBA MBA
Source: Company Reports, Baird & Co.
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BPO Trends - Client Perspective
In light of the economic downturn, we are observing:
1. Less transaction volume (sector specific)
2. Increasing % of outsourcing (for cost savings)
3. Accelerating migration to offshore (for cost savings)
4. Increased focus on revenue generation (selling skills)
5. Eliminating non-performing vendors
6. Slower decision cycles (risk averse)
7. Deploying technology to offset labor costs
8. Heightened concern about risk (disaster recovery)
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BPO Trends - Vendor Perspective
1. Chasing new labor markets
– Less Canada and Europe; More use of at home agents in U.S.
– Accelerating use of traditional offshore
– Larger vendors expanding into emerging markets
2. Focused on profitability
– Client retention
– Selective price increases
– Operating efficiencies
– Use of Shared Services to reduce SG&A costs
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BPO Trends - Vendor Perspective
3. Focus on growing verticals sectors
– Healthcare is new hot sector
– Communications continues to grow
– Financial Services needs cost savings
4. Moving up the value stack (improved margins)
– Less labor and facilities focus
– Better use of technology (client driven)
– More process (BPO)
– More intellectual (KPO)
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A Dedication to Service
Knowledge Process Outsourcing …
The Hot Spot!
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What is KPO?
The KPO term was coined by Evalueserve’s Chief Operating
Officer, Ashish Gupta, in September 2003, in an effort to
differentiate between his firm’s services and those of the
established BPO firms
BPA/P defines KPO as: an extension of BPO involving greater
business complexity and focusing on knowledge-intensive
business processes that require significant domain expertise.
Knowledge workers delivering these services are highly
educated and trained, and trusted to make important
decisions on behalf of their clients.
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KPO vs. BPO
KPO has more:
• Complex processes that provide guidelines but not rules
• Agent judgment rather than rule driven
• Higher agent level skills (MBA vs. BA)
• Higher agent wages ($15 vs. $4)
• High interactivity with other corporate teams and
processes
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KPO Functions
• Investment research; financial modeling
Equity and Financial • Company and industry reports
• Credit risk analysis
Research and Analytics • Valuation of companies
• Equity and Capital Market analysis
Business and • Market research and analysis
Marketing Research • Data mining and report preparation
and Analytics • Customer analytics
• VLSI and chip design
Engineering and Design • Simulations
Services • Product design support
• Prototype development
Pharmaceutical • Offshore drug discovery
Research Outsourcing • Clinical research
Source: TPI
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KPO Services Segments
Projected 2010 KPO Usage by Segment
Animation &
Other Data Research,
Simulation
9% Integration &
Services
Management
8%
29%
R&D
12%
Remote
Education &
Publishing Biotech &
12% Engineering and Pharma
Design 18%
12%
Source: NASSCOM.
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KPO Growth and Delivery
The KPO market is growing at 34% CAGR
India dominates the KPO Sector and will do so for the near future
Other markets are rapidly expanding into KPO
Global KPO Industry Global KPO Industry
Total Sales $4.4 Billion Total Sales $16.7 Billion
Other 30% Other 33%
India 70% India 67%
2006-07 2010-11
Source: “India’s KPO Sector: Origin, Current State, and Future Directions”
by Alok Aggarwal, Chairman, Evalueserve (2008)
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KPO Value Proposition
• Functional and industry knowledge
Intellectual • Patents and IP
• Proprietary processes
• Process portability
Process • Integration with onshore operations
• Basic technology infrastructure
Technology • Advanced analytical tools
• Significant labor savings
Labor • Access to scarce labor markets
• Selection and training
Facilities • Real estate cost savings
• Minimal value
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KPO Vendor Challenges
• Availability of Skills
• Training Requirements (and associated costs)
• Portability of Processes (complex and not well defined)
• Lack of Economies of Scale
• Protecting Intellectual Property Rights
• Legal and Licensing Issues
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KPO Wrap-up
• KPO represents the next stage in the evolution of the
business process outsourcing market
• The KPO market continues to grow in maturity and adoption
• Offshore delivery (primarily India) still dominates KPO
• Clients will continue have concerns over the outsourcing of
core business functions
• Many vendors are aggressively moving up the value curve
into KPO segments
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A Dedication to Service
Future BPO
Mega-trends
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The Evolution of Outsourcing
Outsourcing Enablers
Mobile Devices/PDAs
Low Cost Telco Software Offshore Labor Home Connectivity
PBX Switch Platforms Global Connectivity Cloud Computing
Global Issues: Energy, Health
Call Back Knowledge What’s
IT
Centers Office Process Next?
Services
(BPO) (KPO)
1980’s 1990’s 2000’s 2003 2010 2015
1. Technology over Labor
Three Mega-Tend 2. At Home Agents
Predictions
3. New Vertical Industry Growth
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1. Technology over Labor
Technology (not labor) will drive BPO “value-added”
– Self-help via user friendly technology
– Technology assisted agents (email, chat, social networking)
– Analytics (customer, market, operational, sales)
TODAY FUTURE
PDAs & Kiosks
Email, IM, Chat
Social Networks
Phone Care Self Help
Phone Agents Multi-Channel
Support Agent Assisted Chat
Web Information
Access
Data Analytics
Cloud Computing Business
Intelligence
Research Reports
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2. At Home Agents
Home agents will compliment center based delivery
– Why build a call center if agents can work at home?
– Reach new labor pools that are not near a call center or able to commute
– Rapid adoption in US today; minimal impact for offshore due to connectivity
– Requires a lot of technology and a whole new way of managing the workforce
– Same technology can automate existing call center processes
TODAY FUTURE
Home Connectivity
VoIP
At Home
Screen Takeover Agent
eRecruiting
eTraining
Furniture Real Estate Agent Portal
Phones Chat
PCs Social Networks
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3. New Vertical Industry Growth
Certain verticals will lead the growth
– Global issues will drive investments: Health & Wellness; Energy
– Bio-tech, Healthcare, Clean-Tech, Utilities, Organic Food, Water
TODAY FUTURE
Global Issues
Health & Wellness
Financial Natural Resources
Services Pharma BioTech
Communications
Customer Care
BPO
KPO Utilities CleanTech
Retail
Organic Food Healthcare
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A Dedication to Service
How Will the Philippines
Remain Competitive?
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The Philippines Today
• Strengths
– Viewed as #1 for customer care call center
– Abundant labor pool of English literate college graduates
– Open and team based culture
• Weaknesses
– Lagging in BPO, IT and KPO to India
– Lack of ample Engineering and MBA talent
– Business continuity (weather and Telco)
– Mid-management leadership skills (lack of assertiveness and
accountability)
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Recommendations
1. Address the continuity issue
– Market to the “perception” issue
– Build Redundant infrastructure
2. Address Educational issues
– High-end degrees with industry specific skills
– Leadership skills (assertiveness and accountability)
– Technology literacy
3. Market to the high growth industries
– Less about BPO, IT or KPO
– More about industry excellence
4. Develop Philippines as a “customer care technology” center
– University focus
– Adopt call center automation technologies
– Develop Infrastructure for next generation technology
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A Dedication to Service
Thank You
asklarry@startek.com
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