Global Sourcing of IT-based Services and Developing Countries - OECD.org

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Global Sourcing of IT-based Services and Developing Countries - OECD.org
Global Sourcing of IT-based Services
     and Developing Countries
Global Sourcing of IT-based Services and Developing Countries - OECD.org
The Market

 • Between 2004 and 2008,
   the global sourcing market
   grew three times to reach
   $89 to $93 billion

 • Addressable market likely
   to increase from $500
   billion in 2008, to $1.5 -
   $1.6 trillion by 2020

 Source: (i) NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.
         (ii) NASSCOM ‘Industry Trends’ available at http://bit.ly/19tr6j.
                                                                                           2
Global Sourcing of IT-based Services and Developing Countries - OECD.org
Selected occupations ranked by Princeton economist Alan
  Blinder as “highly offshorable”: 8.2 million workers

                                                                           Number of US
                                            Occupations
                                                                             workers

                                            Interpreters and translators          21,930

                            Number of US    Economists                            12,470
Occupations
                              workers

                                            Graphic designers                    178,530
Computer programmers              389,090

Data entry keyers                 296,700   Bookkeeping accounting and
                                                                                1,815,340
                                            auditing clerks
Actuaries                          15,770

                                            Microbiologists                       15,250
Film and video editors             15,200

Mathematicians                      2,930   Financial analysts                   180,910
Medical transcriptionists          90,380

   Source: ‘Pain from Free Trade Spurs Second Thoughts’, WSJ March 28, 2007
Global Sourcing of IT-based Services and Developing Countries - OECD.org
Global distribution of offshore IT and ITES
markets
    IT services market              ITES market

      Source: Tholons 2006        Source: NASSCOM-Everest 2008
Global Sourcing of IT-based Services and Developing Countries - OECD.org
Exports of IT-based Services from India ($ billion)

    Source: NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.

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Global Sourcing of IT-based Services and Developing Countries - OECD.org
Industry Impact in India

   • Economic
         – Direct employment of 2.23 million, indirect ~8 million
         – 5.8 percent of GDP
         – Has offset close to 65 percent of India’s cumulative net oil
           imports

   • Social
         – Over 30 percent of employees are women

   • Educational
         – Top 7 states that account for 90 percent of industry exports
           have founded six to seven times more colleges than other
           states
 Source: (i) NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.
         (ii) NASSCOM ‘Industry Trends’ available at http://bit.ly/19tr6j.
                                                                                           6
Global Sourcing of IT-based Services and Developing Countries - OECD.org
Source: NASSCOM-Deloitte, ‘Indian IT/ITES Industry: Impacting Economy and Society’, 2008.   7
Available online at http://bit.ly/1iWSoZ.
Global Sourcing of IT-based Services and Developing Countries - OECD.org
The Future? Black Swans?

    “But in all my experience, I have never been in any
    accident…of any sort worth speaking about. I have seen but
    one vessel in distress in all my years at sea. I never saw a
    wreck and never have been wrecked nor was I ever in any
    predicament that threatened to end in disaster of any
    sort.”
                                           E.J.Smith, 1907
                                                              Captain, RMS Titanic

    Source: Nassim Nicholas Taleb, ‘The Black Swan, The Impact of the Highly Improbable’, Random
    House, 2007

                                                                                                   8
Global Sourcing of IT-based Services and Developing Countries - OECD.org
The Crisis Resilience of Services Trade

U.S. Monthly Imports and Exports of                       Year-on-Year Growth Rates of U.S.
       Goods and Services,                              Monthly Imports of Goods and Services,
    January 2006–February 2009                               January 2007–February 2009

      Source: Ingo Borchert and Aaditya Mattoo, ‘The Crisis Resilience of Services Trade’, World Bank PREM note,
      April 2009. Available at http://bit.ly/H4CF3.

                                                                                                                   9
Global Sourcing of IT-based Services and Developing Countries - OECD.org
The Crisis Resilience of Services Trade
                       Year-on-Year Growth Rates of U.S. Quarterly
                           Imports of “Other Private Services”
                              January 2006–December 2008

 Source: Ingo Borchert and Aaditya Mattoo, ‘The Crisis Resilience of Services Trade’, World Bank
 Policy Research Paper, April 2009. Available at http://bit.ly/4Dxx5q.                             10
Sub-Sectors of “Other Private Services”

 Source: Ingo Borchert and Aaditya Mattoo, ‘The Crisis Resilience of Services Trade’, World Bank
 Policy Research Paper, April 2009. Available at http://bit.ly/4Dxx5q.                             11
India has about 30% of global supply of low-wage labor for IT/ITES
Likely to have a talent shortfall of 0.8 million to 1.2 million by 2012
Total Addressable Market for Global Sourcing and
Domestic Outsourcing, 2020 ($ billion)

          Core markets Growth in    New                New            Outsourcing
          2008         Core markets verticals in       customer       market in
                                    developed          segments       new
                                    Countries          • SMBs         geographies
                                    • Public sector                   • Brazil
                                    • Healthcare                      • Russia
                                    • Media                           • China
                                    • Utilities                       • India

    Source: NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009.
                                                                                          13
14
Source: McKinsey on Business Technology, Number 16, Summer 2009
Gartner’s Hype Cycle for Business Process
Outsourcing, 2009

                                            15
Skills Development Components

Companies                    CMMi COPC
                                  6 sigma
                                    Mangmt
                      TSP/PSP       Training
                                      Domain
                      R&D
                                      Training
             Software Developer     Foundational BPO
             Certification/CERT         Training
                                                              Universities

             Knowledge Hub              Skill assessments

             IT Services                IT Enabled Services
Broadband

• Finland has become
  the first country in
  the world to make
  broadband internet
  access a legal right

• South Korea will
  provide access to
  1Gbps bandwidth to
  citizens by 2012

• New submarine cable
  systems for Africa

                         17
New Parks

  • 22@Barcelona
     – 115 blocks at Poblenou
     – 4000 housing units
     – 145,000 square meters of facilities

  • South Korea’s Digital Media City
     – Located at Sangamdong (135 acres)
     – Experimental video 40’X20’

  • Parque de Investigación e Innovación
    Tecnológica (PIIT) Monterrey
     – Multidisciplinary approach

                                             18
Policies

  • “Thousand – Hundred – Ten” project launched in October 2006.
    Ten cities expanded to 20 in November 2008

  • Taxation: From January 2009 to December 2013, outsourcing
    providers charged only a 15% tax rate

  • Training Subsidies: IT services providers receive 4,500 yuan
    (US$658) for every college graduate hired

  • Guaranteeing benefits: Encouraging banking and insurance
    companies to create loan products and insurance packages to
    guarantee an outsourcing company's benefits

  • Capital injection: China has allotted 370 billion yuan (US$54
    billion) for technology advancement in 2009

    Source: Gartner, ‘Analysis of China as an Offshore Services Location’, October 2009.
                                                                                           19
Fast Movers

              20
Holistic approach: ITIDA’s Strategy Framework

                                  Local market     Export growth
                                  demand                              In-sourcing and
  National education system and

                                                                      mega companies
                                                                      (FDI)

                                                                                             Multinational support
                                  Enterprise capacity building
        research centers

                                  Innovation, research and development

                                  Human capital development

                                  IT industry     Real estate
                                                                     Legislative
                                  intelligence    (infrastructure)
                                                                     environment

                                  Telecommunications infrastructure                Unique focus
                                                                                placed on ensuring
                                                                               vibrant links with the
 Source: ITIDA                                                                   education system
                                                                                                                     21
Andhra Pradesh
State with 80 million people
Cyberabad 1995
The New Face of Cyberabad

IT Parks:
200,000 SFT in
1998, now 40
million

                            25
Imagine there’s no heaven

                    Increasing competition

Pressures mounting for better, faster, cheaper service delivery
It’s easy if you try

                  We will support you

    Rebate on cost of land (~$450 per job per acre)

Free infrastructure for power, water, sewerage, and roads
No hell below us

     No red tape, no bureaucracy

APFIRST will be single point of contact

       Time bound clearances
Above us only sky

March                                           March
        Exports of IT/ITES in million dollars
Imagine all the people

  23% of India’s software engineers from Andhra Pradesh

         32 engineering colleges in 1995, now 527

8,000 graduating engineers in 1995, now 173,032 every year
Living for today

Entry level agent salary: Less than $2,000 a year

     Software developer: Less than $7,000
Imagine there’s no countries

                  World class education

 Indian School of Business: Faculty from Wharton, Kellogg,
London Business School, Stanford, Chicago, Duke and Texas
It isn’t hard to do

Microsoft’s largest Development Center outside the US is in
                          Hyderabad
Nothing to kill or die for

Enough talent available

  Lowest attrition rates
And no religion too

Software development
Engineering design
Business Analytics
Animation
Financial services, Call centers…
Imagine all the people

350,000 graduates every year

 140,000 English speaking
Living life in peace

             Dedicated workforce

IT Enabled Services declared essential services

           No strikes or labor unrest
You may say I’m a dreamer

Andhra Pradesh has a Vision 2020 for the State
But I’m not the only one

The people of Andhra Pradesh share the vision
I hope some day you’ll join us

In celebrating Andhra Pradesh’s success
And the world will be one

         High speed links to the world

SEA ME WE: South East Asia to Western Europe
      FLAG: Fiber Link Across the Globe
          I2I: Chennai to Singapore
Imagine no possessions

Real Estate Developers:
Offices as per your specifications

Third party service providers:
Nipuna, 24X7, Firstsource, Deloitte, ADP Wilco…
I wonder if you can

           Co-brand training programs with us

Participate in industry – linkage program with Universities

              Provide us with your wish list
No need for greed or hunger

  Andhra Pradesh is Power Surplus

Hyderabad is the cleanest city in India

    Cyberabad: Asia’s new IT hub
A brotherhood of man

Hyderabad has the lowest crime rate among metropolitan cities

                 Growing expat community

             Hyderabad a truly cosmopolitan city
Imagine all the people

Private sector training institutions available:
    NIIT, APTECH, Hero Mindmine, QAI…

     Head hunting agencies like Mafoi
Sharing all the world

       New International Airport at Hyderabad

Flights to Amsterdam, Bangkok, Colombo, Dubai, Kuala
    Lumpur, London, New York, Sharjah, Singapore

     Hyderabad is the national hub for Air Sahara
You may say I’m a dreamer

We hope to make Hyderabad a major Technology hub in Asia.
But I’m not the only one

                                CSC
                                Honeywell            HSBC HDI
   Microsoft                                         FranklinTempleton
   IBM                         Infosys
                                TCS                  Bank of America
   Oracle                                            Verizon
   Computer Associates         Wipro
                                Visualsoft           UBS
   Convergys                                         Analog Devices
   Keane                       Infotech
                                Intelligroup         Cognizant Tech
   Cordys                                            Cadence
   Motorola                    Sierra Atlantic
                                Polaris              Connexant
   Nokia                                             Invensys
   NVIDIA                      Mentor Graphics
                                Qualcomm             Synopsis
   Intergraph                                        Patni
   Kanbay                      NCR
                                Google               Sonata
I hope some day you’ll join us

We look forward to having you with us.
And the world will live as one

    Geography is History!
Randeep Sudan
  Lead ICT Policy Specialist
   Global ICT Department
       The World Bank
Email: rsudan@worldbank.org

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