Perspectives on Delivery Center Locations for BPO – Latin America
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Location Optimization February 2008 – Preview Deck Topic: Perspectives on Delivery Center Locations for BPO – Latin America Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Table of contents Everest and Location Optimization overview Research report overview 2 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Everest supports Global 2000 organizations through three lines of business Unique portfolio of services across sourcing life cycle Comprehensive Deep sourcing functional expertise and the advisor of choice consulting for complex, sourcing transformational programs services Combination of quantitative and qualitative, proprietary sourcing Sourcing research data industry Facts on market maturity research Size/type of opportunities Understanding of economic and non-economic factors Supports overall education of the industry through an informative Web site, which posts white papers, articles, and surveys on current Sourcing information industry topics and trends repository 3 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Location Optimization is a key service offering of the Everest Research Institute Syndicated research Description HRO Annual Report FAO Market updates PO Strategy day GS (Global Sourcing) Analyst access ITO Webinar presentations Service offerings Description Transaction Intelligence Tracking of key transaction-based analyses: process, industry, geography, supplier, buyer Supplier Intelligence Functional and vertical capability assessment, geographic locations, profiling, function specific Location Optimization Develop function-specific location strategies (cost, benchmark different locations, sustainability/maturity of different offerings) Risk Assessment Multi-dimension risk profiling by city to allow for optimal decision- making; risk-reward trade-off analyses Custom Research Customer-specific research to obtain specific insight 4 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 We currently track over 125 cities globally across multiple functions Over 40+ projects completed Experience includes serving global majors across industry verticals – energy, pharmaceuticals, banking and financial services, technology, and outsourcing suppliers Source: Everest Research Institute (2008) 5 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Our ability to deliver insight on locations is based on extensive and continuing market research… Captive location database Parent industry vertical Time since IT (ADM Engineering Comments on FTE estimates No. Company name (primary) inception and Infra) BPO KPO CC , R&D services offered (date variable) Software 1 3Com Telecom and hi-tech <3 yrs 9 100 development Software 2 ABB Manufacturing 3-5 yrs 9 500 development & 3 ABN Amro BFSI 3-5 yrs 9 9 9 Banking 2000 transaction 4 Adobe Telecom and hi-tech >5 yrs 9 R&D 600 Application and 5 Agilent technologies Telecom and hi-tech <3 yrs 9 9 1000 SOC Chip design, 6 Airwide solutions Telecom and hi-tech <3 yrs 9 100 Akzo Nobel Car Develop products 7 Others 3-5 yrs 9 NA Finishes and color 8 Allianz Cornhill BFSI 3-5 yrs 9 9 9 IT application 500 development and Engineering and 9 Alsthom Manufacturing <3 yrs 9 1,000 design services, Software 10 Amazon Telecom and hi-tech <3 yrs 9 9 NA Development, Team of eight 11 AMD Telecom and hi-tech <3 yrs 9 Design 120 12 American Express BFSI >5 yrs 9 9 9 F&A back-office 3,000 analysts HR processing, Contact center , 13 AOL Telecom and hi-tech 3-5 yrs 9 9 1,650 focused on software Location City database Supplier location database Optimization 125+ cities currently host offshore delivery centers City profile: Bangalore - Call centre >5 suppliers Salary costs (US$ p.a.) 2-5 suppliers 1 supplier Base salary-call center agent 3,043 Gross salary-call center agent 3,408 Base salary-call center supervisor 5,180 Gross salary-call center supervisor 5,802 Base salary-call center manager 21,725 Gross salary-call center manager 24,332 Base salary-call center COO 73,021 Gross salary-call center COO 81,783 Number of cities with supplier presence1 27 16 Education 12 8 998 10 10 335 2 1 221 0 North America Latin America W. Europe E. Europe Middle East & Africa Asia 1 Based on analysis of delivery center locations for 42 suppliers Number of university graduates pa 71,335 Note: Map not to scale Source: Everest Research Institute 1 Number of high-school graduates pa - Proprietary & Confidential. © 2006 Everest Partners, L.P. 6 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 …and a wide network of relationships Russia Sweden Finland Denmark Scotland Estonia Northern Ireland Poland Slovakia Czech Republic India China Mexico Jamaica Romania Turkey Philippines EL Salvador Thailand Costa Rica Malaysia Brazil Singapore Chile Argentina South Africa Uruguay 7 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Everest engages with clients in multiple ways to assist with location-selection decisions Increasing specificity/sophistication City profiles Location prioritization Location strategy Objective Objective Objective City overview for specific Relative attractiveness and Development/review of functions prioritization of cities across company-specific delivery functions center strategy and/or location selection Illustrative deliverables Illustrative deliverables Illustrative deliverables Demographics Comparison of cities on Evaluate best-fit location Functional skills costs, labor pool, based upon alignment with Costs language/functional skills, company strategy and Market landscape market activity, and risks business plans Labor Short-list most attractive Evaluate alternate delivery options and highlight cost- models risk trade-offs in making Due diligence location choices This report is a standard location prioritization analysis that has not been customized to a specific organization’s objectives or needs 8 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Table of contents Everest and Location Optimization overview Research report overview 9 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Table of contents (page 1 of 2) Topic Page no. Section I: Executive summary 7 Section II: Latin America market overview 12 Size and growth of the Latin American market 13 Examples of supplier and captive presence 14 Location/city options for delivery centers 15 Key factors driving complexity in decision-making 16 Report contains Section III: Drivers and approach to location selection over 90 pages of 17 detailed analysis Everest risk-reward framework 18 and information Approach/methodology used for location prioritization 22 Section IV: Relative attractiveness of Latin American cities for BPO 24 How to read this document 25 Assessment on environment- and infrastructure-related factors 28 z Environment-related factors: stability, security, risk of natural hazards 29 z Infrastructure-related factors: connectivity, infrastructure support 34 Labor pool analysis 40 z Tertiary educated labor pool 43 z Level of language skills 45 10 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Table of contents (page 2 of 2) Topic Page no. Section IV: Relative attractiveness of Latin American cities for BPO (continued) Cost-risk analysis 51 z Total operating costs per FTE 53 z Risk analysis: environment risk, time-to-market risk, labor-availability risk 54 z Trade-off analysis: cost-risk trade-offs in selection of cities for BPO 57 Summary of assessment and prioritization of cities 58 Section V: Additional considerations for location selection Report contains 59 over 90 pages of detailed analysis Section VI: City snapshots of prioritized cities 64 and information Appendix 79 Overview of Everest Location Optimization capabilities 80 Details of assessment of cities across environment-and infrastructure-related factors 86 Details of availability of language skills by country/city 97 Other reports in this series 103 11 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Background and objective of the research The economic growth of Latin America has attracted a number of outsourcing suppliers Background to the region to serve the growing domestic demand In addition to this, suppliers are also using the region to serve U.S. customers, especially in light of the growing Hispanic population in the United States Lower costs, physical proximity, and cultural affinity are other factors driving the growth of outsourcing market in the region As a result, the location landscape in Latin America is rapidly expanding to new countries/cities. Leading global suppliers/captives have set up delivery centers in numerous cities in the region However, these locations have different leverage points across multiple factors relevant for location selection (e.g., costs, labor pool, functional, language skills). The presence of multiple city options with significantly different characteristics drives complexity in location-selection decisions in Latin America This research provides perspectives on the relative attractiveness of Latin American locations for Business Process Outsourcing (BPO) Provide perspectives on the relative attractiveness of Latin American locations for a Objective BPO center Prioritize 8-15 locations from multiple city options based on their relative attractiveness The focus of this report is on prioritizing a set of potential location options. However, the report is not aimed at selecting the best-fit location for a company-specific situation. In order to further make location choices, additional