Nasscom vision about IT and BPO India-Latam
- 1. The Indian IT-BPO Industry and Latin America April 2010 Ameet Nivsarkar, Vice President
- 2. Key topics • Indian IT-BPO Industry – Trends and Performance • Looking ahead • The Latin America experience 2
- 3. In the face of a global economic slowdown, the IT-BPO exports industry displayed resilience to grow by 5.5 per cent in FY2010 Indian IT-BPO sector-Export * revenues (USD billion) 49.7 •India continues to take centre stage in 5.5% – 51% of total sourcing market 47.1 • Industry accounts for 25% of India’s 10.0 exports; 10.5% of services revenues 9.6 • Over 900 captives in India 12.4 accounting for USD 10.6 billion; 650+ 11.7 are Engineering design •Engineering design services and Product Development clocking USD 10 billion 25.8 27.3 •Transformation, new business models, driving organization wide efficiencies FY09 FY10E IT Services BPO S/W prod and Engg * Excluding Hardware Source: NASSCOM Strategic Review 2010
- 4. Domestic Market is at an inflection point- healthy growth of 12% in FY10 Indian IT-BPO Domestic revenues* (INR billion) 662 590 12% •60+ Large transformational deals in 131 telecom, Retail, BFSI, e-governance 123 •BPO continues to be the fastest 108 growing segment at 22% 89 •IT services to grow by 12% •Government IT spend estimated at INR 150 billion in 2009 •USD 9 billion business opportunity in e- 423 Governance over next 3 years 378 FY09 FY10E IT Services BPO S/W products * Excluding Hardware Source: NASSCOM Strategic Review 2010
- 5. The industry continues to be an export led sector, with foreign providers accounting for over 30 percent of the total market Sourcing model IT Indian Providers 73.1 Foreign Captives USD billion Services 79.4 Foreign Providers 62.9 23.0 14 21.9 14 47.9 22.0 72 16.2 BPO 47.5 50.1 30 40.9 50 31.7 20 Engg Design &Prod Devpt FY2007 FY2008 FY2009 FY2010E 37 Domestic Exports 55 7 Source: NASSCOM
- 6. The Industry added 90,000 jobs in FY10 Direct Employment (‘000), FY09-FY10 • Industry directly employs nearly 2.3 4% 2,200 2,290 mn professionals • Greater efficiencies at play – 4% 500 525 employee growth for 5.5% revenue growth in exports and 12% in domestic 738 768 • 70%+ workforce within 18-30 yrs • Rapidly expanding into Tier 2 / Tier 3 cities – currently operating out of 958 993 45+ locations • 58% employee workforce originating from tier 2/3 cities FY09 FY10E IT Services exports BPO exports IT-BPO Domestic Source: NASSCOM Strategic Review 2010
- 7. IT-BPO EXPORTS- GEOGRAPHY & VERTICAL North America continues to be dominant market; the BFSI segment registered significant uptick in demand IT-BPO exports by geography, FY2010E IT-BPO exports by Vertical, FY2010E MPE Const & RoW Other 2% Utilities T&T Europe 2% 2% 3% 3% (exclud ing UK) APAC Healthc 12% 7% are 4% BFSI Retail 41% 9% UK Manufa 18% US cturing 61% Hi- 16% tech/Tel ecom 20% 100% = USD 49.7billion 100% = USD 49.7bn •While emerging market grew, North America •Global banking M&A’s have led to significant uptick continues to be dominant and witnessed increased in demand of IT-BPO services from the BFSI growth in FY 2010 segment this year Source: NASSCOM 7
- 8. Key topics • Indian IT-BPO Industry – Trends and Performance • Looking ahead • The Latin America experience 8
- 9. INDIA VALUE PROPOSITION India continues to hold on to its position as the leading provider of talent at lowest cost Operating costs per FTE in major offshoring S. AMERICA COMP- 3X EASTERN EUROPE destinations relative to India, India=100 COMPETITION- 2X 316 ASIAN COMPETITION- 1.3X 232 211 189 163 121 137 100 105 India Philippines Malaysia China Mexico Romania Hungary Czech Brazil India Talent Outturn, FY06-10E, 000’ India Talent Outturn Profile, FY10E yr Engg 3 3685 Post diploma/ 3243 3454 Graduate 3000 MCA, 4.2 2936 s, 6.90% 0% 4 yr Engg, 9.3 2940 3114 0% 2557 2600 2789 Arts, 40.7 Other 0% Graduate Commerc s, 9.60% 379 400 454 514 571 e Science Graduate Graduate FY06 FY07 FY08 FY09 FY10 s, 15.60 s, 13.70 Technical Non Technical % % Source: NASSCOM, AICTE
- 10. INDIA VALUE PROPOSITION Government and private enterprises working in tandem to create a robust infrastructure ecosystem Growth in number of STPI units, 2003-09 43 Tier 2/3 cities emerging; reducing pressure on 8,455 leading locations; on an average, 28% costs less than 7,543 7,214 leader cities 5,806 6,321 4,644 4,379 3,544 FY2003 FY2005 FY2007 FY2009 Operating Units Exporting Units Growth in number of IT SEZs, 2008-10 532 345 303 FY2008 FY2009 FY2010 Source: STPI
- 11. OUTLOOK-GLOBAL Going forward, rebound expected in Worldwide IT-BPO spend Worldwide IT spending Growth (%) Worldwide BPO spending Growth (%) 5.6% 12.5% 5.1% 5.5% 7.4% 3.3% 7.0% 3.1% 7.3% 5.9% 2.4% 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 December 2009 Forecast -3.3% December 2009 Forecast IT indices, contracted in 2009, showing signs of stabilization, and even some modest, early signs of recovery in latter part of 2009; Positive 2010 forecasts Source: IDC
- 12. Taking a longer term view, global linkages and irreversible demographic/economic shifts at play Macroeconomic and demographic trends 1 Shifting centers of economic activity–GDP of Asia and Europe will converge 2 Working age population shrinking in key developed countries (e.g., Japan, Italy, US) Social and environmental trends 3 Increased Internet and mobile connectivity transforming the way people live and interact 4 Demand- supply gap in key natural resources creating need for resource efficient solutions Business and technology trends 5 Global economic crisis leading to major shift in industry structures and regulatory control 6 Corporate boundaries being redefined 7 Technology radically transforming the way traditional corporations and governments function
- 13. Going forward, economic and demographic shifts may lead to acute talent shortage in the western economies Regional share of global GDP Comparison of population shifts Per cent Est. GDP CAGR Working age (15-60 years) Retiree (60+ years) Per cent, 1990-2025 100 207 38 Middle East and Africa 4.2 US Latin America 222 54 90 3.4 Asia (except Japan) 80 40 Actual 9 6.3 workforce UK 41 requirement 13 70 in the US to Japan 1.4 39 achieve 2.5% 12 60 GDP growth 37 Italy year-on-year - 14 50 234 mn in Europe 2.1 55 16 2020 40 Germany 53 18 30 83 27 20 Japan North America 3.0 75 35 10 750 60 India 0 1990 1995 2000 2005 2010 2015 2020 2025 920 92 2008 2020 Significant shift Public sector /government-influenced entities will become a priority customer base, to provide for ageing populations in developed economies
- 14. The global sourcing industry in India is likely to reach USD 175 billion, while the domestic outsourcing industry is expected to reach USD 50 billion in revenues by 2020 Growth multiple CAGR India’s technology and business services export s and domestic market – 2020 Projections EXPORTS, USD billion DOMESTIC, USD billion 50 4.4x 13% 175 4.2x 12.6% 12 40 India global sourcing India global sourcing market 2008 market 2020 India domestic India domestic outsourcing market outsourcing market 2008 2020
- 15. Key topics • Indian IT-BPO Industry – Trends and Performance • Looking ahead • The Latin America experience 15
- 16. Latin America • The global crisis and the consequent local resource and credit crunch have made Latin American importers to look more towards less expensive sources such as India • The crisis has opened a new window of opportunity for Indian companies to create long lasting partnerships • There is a perceptible change in the mindset of the Latin Americans towards India. • The economies of the region have withstood the shock of global crisis with only moderate adverse impact because of their stronger macroeconomic fundamentals and resilience. • The Latin American market has undergone a paradigm shift coming out of its boom and bust cycles and volatility. It is now set on a sustainable course of stability and growth. • It is a large market of 20 countries, 550 million people, 4.4 trillion dollars of GDP, 8000 dollars per capita income and trade of 1.7 trillion 16 dollars.
- 17. India and LAC - partnership Indian presence in LAC • More then 10 leading firms (IT) already have a presence in LAC or are planning to start operations in the coming year. • Indian IT companies are employing over 10000 employees in the LAC region. • Leveraging local market as well as 12/12 business model How can Indian IT work with LAC? • Its proximity with North America, India’s major market. • Very good near shore option • Abundance of trainable human resources • Cost structure that is comparable to India • Multi lingual capabilities • Spanish • Portuguese • Decent infrastructure • GDC for serving European markets • Good markets for some competitive home grown software products (Infy – Finnacle, i-Flex) Areas of partnership for Indian and firms with LAC companies • Customize our end products & services as per needs of LAC customers • Invest in increasing local operations • Create local ‘brand’ that customers can associate with 17 • Emphasis on having as many locals fill in very many positions
- 18. Some concerns that need to be addressed HR issues • Business visa & Work permits – have cumbersome & time consuming process. In some cases it takes 2-3 months of processing time • Rigid labour laws that lead to increase on cost of employee • Resourcing – finding right people in new territory • Training & Development costs Infrastructure issues • Simplifying Development Center (DC) set up. Connectivity • Coverage across continent • Expensive • Time consuming • Frequent power and water supply issues Taxation issues • Withholding taxes • Totalisation treaty between nations Cultural issues 18
- 19. Thank You