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MNC Landscape in India - Make vs Buy vs Partner


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MNC Landscape in India - Make vs Buy vs Partner

  1. 1. MNC Landscape in India- Make vs Buy vs Partner
  2. 2. Agenda 1 1 IT Landscape in India
  3. 3. Indian IT-BPO industry overview 2 2.7 mn IT-BPO employees 55% India’s share of the global sourcing market 5,000+ Number of companies offering IT services, BPO, Engineering services and Software Products Number of Multi National Corporation(MNC) centres in 750+ India ~66 Number of countries serviced by India 30 Number of Languages supported
  4. 4. 3 Est Export revenue in USD of GICs • 350 ER&D GICs and~ 14Bn 328 Hybrid GICs • 40 pure play Shared Services Contribution of GICs to incremental GICs & 40 pure play ~1% GDP growth in India IT GICs • 76% of the GICs Share of Exports from GICs in have headquarters India ‘s total Software and in North America ~22% Services exports • 108 GICs have talent pool in excess Number of GICs in India; 350 in of 1000 ER&D space; 200 GICs 760+ established in last 3 years • Bangalore and NCR accounts for 60% of Talent pool Estimated workforce deployment by~450k GIC • 3% of Talent pool in tier 2/tier 3 cities
  5. 5. 4Current snapshot of industry IT-BPO revenues, USD bn •520+ global delivery centers; •6% share in India’s GDP and 14% in total exports Domestic •80% of Fortune 500 43 30 companies and 20 of world’s Hardware largest banks are clients; Engg 16 1 •70% share in global BPO Knowledge services 10 Services outsourcing industry • Services delivered from 50+ locations • Foreign providers – over 30% of the total market
  6. 6. Agenda 5 2 IT Captive Landscape
  7. 7. The evolution of the captive landscape in India has been supported by critical drivers such as 6 abundant talent, low costs, supportive infrastructure and business environment Drivers and Challenges in the Evolution of Captive Landscape in India 1. Critical: Cost arbitrage Drivers 1. Increased Infrastructure facilities 2. Operational Efficiency 1. Enhanced value addition and 2. Talent pool with relevant domain 3. Correction in attrition innovation knowledge Challenges 2. Closer to emerging markets 3. Increased value addition 4. Access to new markets ~$ 11.1 Bn Value and Scale of Operations 1. Increased awareness about ~$ 10.6 Bn outsourcing 2. Peer Pressure ~$ 9.6 Bn 3. Globalization drive 1. Lack of experienced global leadership 4. Enhanced scalability in operations 1. Economic meltdown 2. Quality of talent pool 2. Lower productivity 3. Cost escalation 1. Cost escalation 4. Infrastructure facilities 2. Attrition 1. Cost arbitrage 3. Lower 2. Huge talent pool Productivity availability 1. Cultural differences 2. Quality, SLA’s and <$ 3.0 Bn 1. Lack of Knowledge Productivity about outsourcing 3. Talent pool with domain 2. Poor infrastructure expertise 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Note: Market sizes represent estimated values based on a sample of companiesSource: Zinnov Analysis of the interviews from Country Managers of 40 captives across different domains in India; Secondary Research
  8. 8. As a result, the captive landscape is starting to show signs of maturity across multiple activities, 7 attracting more and more companies to explore opportunities going forward Globalization Adoption Curve* Across Functions Application Development & Maintenance Engineering HIGH Services/ Technical Support/ Software Product Customer Support Development Infrastructure Globalization Rate Management Services Professional Services – IT Finance & Consulting, System Accounting Infrastructure Sales & Knowledge Marketing Based Services Procurement & Logistics Human Resource LOW Emerging Rapidly Growing Mature MaturityNote: *Directional OnlySource: Zinnov Analysis of the interviews from Country Managers of 40 captives across different domains in India; Secondary Research
  9. 9. Successful captive units have migrated along two, often overlapping paths- enhanced value or 8efficiency
  10. 10. 9R&D centers increasingly moving up value chain… • Indian centers Example NewHigh drive research IBM India technology in new drives cloud research technologies research • Indian teams Example Product start conceiving, Amdocs develops development developing & 50% of its products managing new in India productsCompetency required • Research for Example Higher end products & Adobe develops and services Remote product manages global management products out of India • Non critical Example Non-critical functions (e.g. Oracle established functional data mining) run center to support responsibility completely out of product development India • Leverage local Example Cost talent at low prices Dell established arbitrage • Low end customer relationship center engineering and center Low back office Low Value Addition High Source: Interviews, Secondary Research, A.T. Kearney analysis
  11. 11. Captive centers in India are aggressively being leveraged to provide Infrastructure Management 10 Services to the parent organization Roadmap of Indian IMS Industry • Huge cost savings • Medium-high complexity • Requires experienced people • Low complexity • Requires infrastructure e.g.. routers, panels, others • Hardware Support – Network Infrastructure • Most common support • Serves as a good test case • Hardware Support – Server support • Readily available talent – Network Infrastructure – Information security • Hardware Support – Packaged application – Network Infrastructure support support – Server support – Information security • IT Desk Services – Server support – Architecture design – Task scheduling – Data backup & recovery • IT Desk Services – Fail over setup – Task scheduling • IT Desk Services – Task scheduling – System planning • Hardware Support – Data backup & recovery – Network Infrastructure – Data backup & recovery – Fail over setup • Application Management support • Application Management – Level I, II, III, IV – Level I & II – System planning • IT Desk Services – Task scheduling • Application Management – Level I, II & III EvolutionNote:Source: Zinnov Analysis of the interviews from Country Managers of 40 captives across different domains in India; Secondary Research
  12. 12. Agenda 11 3 Captives journey so far and ahead Landscape
  13. 13. 12Expanding Portfolio of Services…Last five years • Started with initial IT Services delivery around Application Development and Maintenance IT SERVICES • Grew with expansion into Testing and Remote Infrastructure Management Services • Moving to Consulting and System Integration • Started with initial voice based and transactional services for the BFSI and telecom segment BPO • Grew with increased depth of services across verticals • Moving to India as a hub for F&A and knowledge based services - captives currently account for 50% of total knowledge based revenues from India • Started with work around product maintenance ER&D • Grew with development support and design • Moving to complete product ownership, competency creation, and innovation for emerging markets
  14. 14. 13Captives in India – 5 years from now! 13 • Hybrid models that include program management capabilities, collaboration with third party vendors • Parent company deriving full “value”; building an ecosystem of trust • Empowered local management with local decisions • Shared vision with parent company on driving transformation and enterprise- wide cost efficiency • Expansion into newer services – increase breadth and depth • Emerging as “Centres of Excellence” - to drive innovation; build specific geographic expertise • Emerging as “value players” - mature processes, strong internal measurements and controls, a high degree of standardization and automation
  15. 15. Focus areas from Captives 14  Development of Value Addition – Innovation framework that constantly adds value to the Global parents in terms of leadership talent, process excellence, productivity  Building framework for Location Strategy that best manages cost, service and risk considerations in addition, what should be the footprint within a large location like India  Talent Model – How to retain and develop distinctive talent especially given increasing maturity and declining headcount growth in many GICs?  Governance – How should the operating model and governance evolve given increasingly higher GIC value proposition and diversified footprint?  Cost Arbitrage – What is the expected trajectory on cost arbitrage especially given continuing wage inflation  “Make vs. Buy vs. Partner” – Building a partner eco system that will constantly provide inputs for developing best practices in the GIC  Operational Excellence & Continuous Improvement – How will GICs deliver more with less every year and the best practices to deliver world-class quality?  Financial/transactional issues on Transfer pricing, Service tax and others
  16. 16. Broad trends in in India out sourcing 151. India continues to have cost and talent arbitration advantages.2. India centres integrated with Global shared services with focus on innovation, cost take outs, shadow PNL capability and global leadership talent pool3. Most captives are working to improve managing multiple providers or resource centres across multiple geographies, assessing and managing risk, and performing location assessments4. The clear top initiative cited for organizations in 2012 is to drive down operating costs.  Global companies investing in new and improved IT, such as enterprise systems, business intelligence, cloud, and social media.  Building Flexible work force plan  Leverage subcontractors for low end of the work  Common transportation system  Investing in reporting and analytics to make better business decisions faster  Example : Target, Fidelity, Accenture, GE
  17. 17. Broad trends in in India out sourcing 165. Global companies in India have adopted three tier model  Core design processes retained in-house by the GICs  Partnership with Third party design labs in India for non core design work  IT management jobs outsourced to third party service providers  Example : Texas Instruments, GE, and all of Telecom R&D companies6. There is a rebound in interest in near captives in India- India+ strategy  Develop hub and spoke model  India being the hub and other destinations in ASIA region as the spoke  Assess another site in India as a BCP site to de risk operations  Example : Hi tech design R&D centres like computing and storage companies, Deutsche Bank, Bosch7. Global companies continues to are driving productivity in their organizations  Developing metrics comparing global parameters, in-country best practices, in-centre parameters and third party labs/service providers  Development of portal for service providers to get feedback and self improvement  Example : Dell, Texas Instruments
  18. 18. Broad trends in in India out sourcing 178. Global companies in India are increasingly leveraging peer companies and Co-opetition is the new engagement models followed by GICs9. Peer companies and trade bodies more extensively leveraged to address :  Talent development and mentorship related matters  Working with academic institutes to build talent pool  Regulatory related matters  Common transportation and security related matters  Example : Texas Instruments, GE, and all of Telecom R&D companiesExperiences of GIC in India- improvement areas1. Profiling of people deployed on the project. Increased recruitment frauds reported and non adoption of Industry standard National Skills Registry2. Inflexible service contracts with third party and partner service providers3. In ability to exchange views / data on operational parameters that will help benchmark the operational excellence4. Ability to adopt flexible workforce plan