Software, It and BPO - Industrial Real Estate Perspective

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A presentation in Supply Chain Young Talent Road Show 2012 in Ho Chi Minh City, Vietnam

Presenter: Mr. Hieu Le, Senior Manager, CBRE

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Software, It and BPO - Industrial Real Estate Perspective

  1. 1. Software, IT and BPO Industrial Real Estate Perspective Presented by: Hieu Le, Senior Manager, Industrial & Logistics Services September 20th, 2012CBRE | Market View | Sept 2012
  2. 2. AGENDA OPPORTUNITIES WHO / WHERE / WHY TRENDS DRIVING FACTORS Q&ACBRE | Market View | Sept 2012
  3. 3. CONCENTRATION MAPIndustrial Park – Export Processing Zone - Hi Tech Park – Economic ZoneCBRE | Market View | Sept 2012 Page 3
  4. 4. BPO – IT OUTSOURCINGOpportunity Migration of business functions occur for numerous reasons; increased confidence in pairing high value operations with domestic labor is high among numerous industry sectors Sample Business Functions Right-Shoring Rationale • Accounting • Better utilization of labor • Human Resources • Lower labor costs and • Administration (e.g. labor availability Payroll) • Favorable tax rates and • Information tax incentives Technology • Cultural affinity to base • Customer Support company (e.g. Call Centers) • Quality of training and • Product Development education • Research and • Strong government Development support • Production • Stable business / • Marketing political environmentCBRE | Market View | Sept 2012 Page 4
  5. 5. BPO – IT OUTSOURCINGOpportunity Onshore Nearshore OffshoreCBRE | Market View | Sept 2012 Page 5
  6. 6. BPO – IT OUTSOURCINGMarket ShareCBRE | Market View | Sept 2012 Page 6
  7. 7. BPO – IT OutsourcingVelocity and Volume GrowingCBRE | Market View | Sept 2012 Page 7 Growing fast Origin of the biz
  8. 8. BPO – IT OUTSOURCINGRanking A.T.Kearney Top 20 countries in 2011 • Government support / financial incentives / grants play important factor in creating a conducive environment. • Labor market and language skill drive location decision • Salary costs once the primary driving factor behind offshore location decisions; increasingly this is balanced with skill set and language availability • Asia dominates the top 10 positions on the GSLI. The different strengths of these countries vary from India, with a deep and broad skill base, to Vietnam, which ranks as the most financially competitive country in the Index.CBRE | Market View | Sept 2012 Page 8
  9. 9. BPO – IT OUTSOURCINGRankingHochiminh City ranks 17 and Hanoi ranks 21 inTholons ‘s report on top 100 global outsourcing cities Source: Vietnam ICT Outlook 2012CBRE | Market View | Sept 2012 Page 9
  10. 10. BPO – IT OUTSOURCINGRanking – Financial attractiveness Source: A.T. Kearney Global Services Location Index, 2011CBRE | Market View | Sept 2012 Page 10
  11. 11. BPO – IT OUTSOURCINGRanking – People skill & availability Source: A.T. Kearney Global Services Location Index, 2011CBRE | Market View | Sept 2012 Page 11
  12. 12. BPO – IT OUTSOURCINGSectors – Financial and Insurance Key Drivers Key Functions being outsourced Cost minimization to remain competitive Data Management Cheaper cost of capital Financial Modeling & Analysis Efficient management of data Human Resources The need to increase productivity (e.g. Risk work can be performed across time-zones) Legal Closer integration with targeted markets Results Cost effectiveness Centralization of function Right labor pool and availability Lower attrition rate Diminished portfolio exposureCBRE | Market View | Sept 2012 Page 12
  13. 13. BPO – IT OUTSOURCINGSectors – IT and High Tech Key Drivers Key Functions being outsourced Cutting costs to remain competitive Human Resources Risk management Research & Development Management of talent Support Centers Hyper-competition Training Facilities Results Improved focus on core operations Support business growth Economies of scale Right labor pool and availability Improved financial flexibilityCBRE | Market View | Sept 2012 Page 13
  14. 14. BPO – IT OUTSOURCINGSectors – IT and High Tech – Vietnam BPO Digital Outsourcing Content Data Services Software Telecom Spill over effects: BPO and IT Outsourcing projects, especially from financial and insurance sectors, create demand for dataCBRE | Market View | Sept 2012 Page 14 center owners and builders and other related industries.
  15. 15. BPO – IT OUTSOURCINGImplications – FDI Inflow Makati Quezon City Eastwood City Taguig City (Bonifacio Global City & McKinley Hill)CBRE | Market View | Sept 2012 Page 15
  16. 16. BPO – IT OUTSOURCINGImplications – Jobs Creation ForecastsCBRE | Market View | Sept 2012 Page 16
  17. 17. WHO / WHY / WHERECapgemini, from Europe to Vietnam •Now moving to Vietnam to: - Gain from low cost labor supply - Gain from attractive offers from government • (2009) India – 19,000 people as of June 2009 • (2011) Hochiminh – Phase 1: 150 staff, IT & BPO outsourcingCBRE | Market View | Sept 2012 Page 17
  18. 18. WHO / WHY / WHEREHewlett Packard, from US to Vietnam •Now moving to Quang Trung Software City in Hochiminh City, Vietnam to - Gain from low cost labor supply - Gain from attractive offers from government • Two R&D centers in China and India • (2010) Hochiminh – investment cap: $US18 million, 1,000 people, testing & global servicesCBRE | Market View | Sept 2012 Page 18
  19. 19. WHO / WHY / WHERERockwell Automation, from US to Vietnam •Now moving to Saigon Hi-Tech Park in Hochiminh City, Vietnam to • - Capture opportunities for automation software - Gain from attractive offers from government • 15 centers in Asia. Strong in China & Singapore • (2012) Hochiminh – 50 people, software & global servicesCBRE | Market View | Sept 2012 Page 19
  20. 20. WHO / WHY / WHEREAricent, from US to Vietnam •Now moving to Tan Thuan EPZ in Hochiminh City, Vietnam to - Tap on skilled labor with language competency - High growth on telecoms & network software • 7 centers in Asia (India, China, Japan, Korea, Sing, Taiwan) • (2011) Hochiminh – 300 people, software developmentCBRE | Market View | Sept 2012 Page 20
  21. 21. WHO / WHY / WHEREBosch, from Europe to Vietnam •Now moving to E-Town in Hochiminh City, Vietnam: • - Synergy with manufacturing plant in Dong Nai to service customers in Japan & Asia • - Young labor force • - Attractive government incentives • 4 R&D centers in Asia. India, China, Japan, Singapore • (2011) Hochiminh – investment cap: $US4.5 million, 1,000 people, software & embedded system servicesCBRE | Market View | Sept 2012 Page 21
  22. 22. TRENDSHCMC still captures the lion shareCBRE | Market View | Sept 2012 Page 22
  23. 23. TRENDSBinh Duong & Dong Nai rises • Perfect Office Solution in Binh Duong • High specs • Competitive rental Breathtaking and Stunning FaçadeCBRE | Market View | Sept 2012 Page 23
  24. 24. TRENDSDecentralized & business parks MapletreeOffice Building Incubation @ TT EPZ TMA @ QTSCCBRE | Market View | Sept 2012 Sacom @ SHTP E‐town @ Tan Binh Centerpoint @ Phu Nhuan Page 24
  25. 25. DRIVING FACTORS Specs Well-Planned Building Design & Specifications 39 x office units 62.3 m ~ 190 to 250 sqm each 15.6 m Column-Free Space ~ 2,000 sqm per floor Highly Efficient Layout 39 m Tall Ceiling Height: 4.5m Ample Natural Light Floor Loading: 500kg Mapletree Floor LayoutCBRE | Market View | Sept 2012 Typical office floor Layout Page 25
  26. 26. DRIVING FACTORS Rents • Possible short-term bottom in office rents • Average business parks office rent below $20/m2/month. • In par with office rent in Business parks office rent HCMC’s peripheral area and Da Nang (~$12/m2/month) • 60% saving on rental vs. downtown buildings Source: CBRE Market View Q2/2012CBRE | Market View | Sept 2012 Page 26
  27. 27. DRIVING FACTORS Strong supports / Fast track services Approval & issuance of investment CertificatesLicenses & Permits One Stop Service Availability of tax incentives HR support CBRE | Market View | Sept 2012 Page 27
  28. 28. DRIVING FACTORS Strong supports / One stop services SOFTWARE UP 10% ($US1.17 bil.) 79,000 people DIGITAL UP 25% CONTENT ($US1.16 bil.) 60,000 people ELECTRIC & UP 101% ELECTRONIC ($US11.3 bil.) PRODUCTS 167,000 people Source: Vietnam ICT Outlook 2012 Steps in the right direction • Information technologies and telecom are consider the primary infrastructure to enable Vietnam’s development. e.g. High Tech Law, Information Technologies Law. • PM Decision 50/2009/QD-TTg on 4/29/2009, "Regulation on Management & Development Program of the software industry and the development program of the digital content industry in Vietnam" in order to remove obstacles and promote the implementation of development programs and software industry. • IT-related industries are entitled to high tech incentives. • MOF Circular 96/2011 extending Tax Incentives for supporting industries in (1) Electronics and (2) IT • Personal income tax reduction for IT workers is in serious considerationCBRE | Market View | Sept 2012 Page 28
  29. 29. www.cbrevietnam.com 109 Europe Offices 55 Asia Offices 187 U.S. and Canada Offices 25 Middle East and Africa 14 Latin Offices America Offices 30 Australia & New Zealand OfficesCBRE | Market View | June 2012 Thank you for your attention. Page 29

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