Global Sourcing of IT-based Services and Developing Countries 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 - $1.6 trillion by 2020
Source: (i) NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009. (ii) NASSCOM ‘Industry Trends’ available at http://bit.ly/19tr6j. 2 Selected occupations ranked by Princeton economist Alan Blinder as “highly offshorable”: 8.2 million workers
Number of US Occupations workers
Interpreters and translators 21,930
Number of US Economists 12,470 Occupations workers
Graphic designers 178,530 Computer programmers 389,090
Data entry keyers 296,700 Bookkeeping accounting and 1,815,340 auditing clerks Actuaries 15,770
Microbiologists 15,250 Film and video editors 15,200
Mathematicians 2,930 Financial analysts 180,910 Medical transcriptionists 90,380
Source: ‘Pain from Free Trade Spurs Second Thoughts’, WSJ March 28, 2007 Global distribution of offshore IT and ITES markets
IT services market ITES market
Source: Tholons 2006 Source: NASSCOM-Everest 2008 Exports of IT-based Services from India ($ billion)
Source: NASSCOM, Perspective 2020: Transform Business, Transform India, April 2009. 5 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 Source: NASSCOM-Deloitte, ‘Indian IT/ITES Industry: Impacting Economy and Society’, 2008. 7 Available online at http://bit.ly/1iWSoZ. 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 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 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 mega companies (FDI) Multinational support Enterprise capacity building
Innovation, research and development
Human capital development research centers research
IT industry Real estate Legislative intelligence (infrastructure)
National education system and and system education National 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
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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 Infosys FranklinTempleton IBM Bank of America TCS Oracle Verizon Wipro Computer Associates UBS Visualsoft Convergys Analog Devices Infotech Keane Intelligroup Cognizant Tech Cordys Sierra Atlantic Cadence Motorola Connexant Polaris Nokia Invensys Mentor Graphics NVIDIA Synopsis Qualcomm Intergraph Patni NCR Kanbay 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: [email protected]
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