Global Sourcing of ITbased Services and Developing Countries

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Global Sourcing of IT-based Services and
Developing Countries
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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.
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Selected occupations ranked by Princeton
economist Alan Blinder as highly offshorable
8.2 million workers
Source Pain from Free Trade Spurs Second
Thoughts, WSJ March 28, 2007
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Global distribution of offshore IT and ITES
markets
ITES market
IT services market
Source Tholons 2006
Source NASSCOM-Everest 2008
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Exports of IT-based Services from India (
billion)
Source NASSCOM, Perspective 2020 Transform
Business, Transform India, April 2009.
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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 Indias
  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.
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Source NASSCOM-Deloitte, Indian IT/ITES
Industry Impacting Economy and Society, 2008.
Available online at http//bit.ly/1iWSoZ.
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The Future? Black Swans?

• But in all my experience, I have never been in
  any accidentof 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
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The Crisis Resilience of Services Trade
U.S. Monthly Imports and Exports of Goods and
Services, January 2006February 2009
Year-on-Year Growth Rates of U.S. Monthly Imports
of Goods and Services, January 2007February 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.
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Year-on-Year Growth Rates of U.S. Quarterly
Imports of Other Private Services January
2006December 2008
The Crisis Resilience of Services Trade
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.
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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.
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India has about 30 of global supply of low-wage
labor for IT/ITESLikely to have a talent
shortfall of 0.8 million to 1.2 million by 2012
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Total Addressable Market for Global Sourcing and
Domestic Outsourcing, 2020 ( billion)
Core markets 2008
Growth in Core markets

• New
• verticals in
• developed
• Countries
• Public sector
• Healthcare
• Media
• Utilities

• New
• customer
• segments
• SMBs

• Outsourcing
• market in
• new
• geographies
• Brazil
• Russia
• China
• India

Source NASSCOM, Perspective 2020 Transform
Business, Transform India, April 2009.
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Source McKinsey on Business Technology, Number
16, Summer 2009
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Gartners Hype Cycle for Business Process
Outsourcing, 2009
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Skills Development Components
CMMi
COPC 6 sigma
Companies
Mangmt Training
TSP/PSP
Domain Training
RD
Software Developer Certification/CERT
Foundational BPO Training
Universities
Skill assessments
Knowledge Hub
IT Enabled Services
IT Services
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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

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New Parks

• 22_at_Barcelona
• 115 blocks at Poblenou
• 4000 housing units
• 145,000 square meters of facilities
• South Koreas Digital Media City
• Located at Sangamdong (135 acres)
• Experimental video 40X20
• Parque de Investigación e Innovación Tecnológica
  (PIIT) Monterrey
• Multidisciplinary approach

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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 (US658) 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 (US54 billion) for technology advancement
  in 2009

Source Gartner, Analysis of China as an
Offshore Services Location, October 2009.
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Fast Movers
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Holistic approach ITIDAs Strategy Framework
Source ITIDA
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Andhra Pradesh
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State with 80 million people
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Cyberabad 1995
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The New Face of Cyberabad
IT Parks 200,000 SFT in 1998, now 40 million
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Imagine theres no heaven

• Increasing competition
• Pressures mounting for better, faster, cheaper
  service delivery

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Its 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

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No hell below us

• No red tape, no bureaucracy
• APFIRST will be single point of contact
• Time bound clearances

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Above us only sky
March
March
Exports of IT/ITES in million dollars
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Imagine all the people

• 23 of Indias software engineers from Andhra
  Pradesh
• 32 engineering colleges in 1995, now 527
• 8,000 graduating engineers in 1995, now 173,032
  every year

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Living for today

• Entry level agent salary Less than 2,000 a year
• Software developer Less than 7,000

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Imagine theres no countries

• World class education
• Indian School of Business Faculty from Wharton,
  Kellogg, London Business School, Stanford,
  Chicago, Duke and Texas

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It isnt hard to do

• Microsofts largest Development Center outside
  the US is in Hyderabad

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Nothing to kill or die for

• Enough talent available
• Lowest attrition rates

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And no religion too

• Software development
• Engineering design
• Business Analytics
• Animation
• Financial services, Call centers

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Imagine all the people

• 350,000 graduates every year
• 140,000 English speaking

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Living life in peace

• Dedicated workforce
• IT Enabled Services declared essential services
• No strikes or labor unrest

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You may say Im a dreamer

• Andhra Pradesh has a Vision 2020 for the State

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But Im not the only one

• The people of Andhra Pradesh share the vision

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I hope some day youll join us

• In celebrating Andhra Pradeshs success

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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

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Imagine no possessions

• Real Estate Developers
• Offices as per your specifications
• Third party service providers
• Nipuna, 24X7, Firstsource, Deloitte, ADP Wilco

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I wonder if you can

• Co-brand training programs with us
• Participate in industry linkage program with
  Universities
• Provide us with your wish list

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No need for greed or hunger

• Andhra Pradesh is Power Surplus
• Hyderabad is the cleanest city in India
• Cyberabad Asias new IT hub

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A brotherhood of man

• Hyderabad has the lowest crime rate among
  metropolitan cities
• Growing expat community
• Hyderabad a truly cosmopolitan city

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Imagine all the people

• Private sector training institutions available
• NIIT, APTECH, Hero Mindmine, QAI
• Head hunting agencies like Mafoi

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Sharing all the world

• New International Airport at HyderabadFlights
  to Amsterdam, Bangkok, Colombo, Dubai, Kuala
  Lumpur, London, New York, Sharjah, Singapore
• Hyderabad is the national hub for Air Sahara

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You may say Im a dreamer

• We hope to make Hyderabad a major Technology hub
  in Asia.

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But Im not the only one

• CSC
• Honeywell
• Infosys
• TCS
• Wipro
• Visualsoft
• Infotech
• Intelligroup
• Sierra Atlantic
• Polaris
• Mentor Graphics
• Qualcomm
• NCR
• Google

• HSBC HDI
• FranklinTempleton
• Bank of America
• Verizon
• UBS
• Analog Devices
• Cognizant Tech
• Cadence
• Connexant
• Invensys
• Synopsis
• Patni
• Sonata

• Microsoft
• IBM
• Oracle
• Computer Associates
• Convergys
• Keane
• Cordys
• Motorola
• Nokia
• NVIDIA
• Intergraph
• Kanbay

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I hope some day youll join us

• We look forward to having you with us.

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And the world will live as one

• Geography is History!

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Randeep SudanLead ICT Policy SpecialistGlobal
ICT DepartmentThe World BankEmail
rsudan_at_worldbank.org