Offshore IT and India
François Hucher – CGEY
IDATE – Nov 19th, 2003
India is a large, fast-growing market for providing IT services.
 More than 350.000 people currently working in IT services & outsourcing in
India, expected to pass:
– 1 million before 2008
– 3 millions in 2015
 IT Services exports from India (USD billion):
– 4 in 1999,
– 10 in 2002,
– 18 in 2005
– grown by over 36% on average
“India dominates, and will continue to dominate, the offshore
market, with approximately 80 percent percent of total revenue.”
- Gartner, December 2000
FH – IDATE Nov 19th, 2003
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India leads the off-shore market with a 80% market share
India exports already 4% of NA and 2% of WE IT markets
IT Services - Apr’ 02 to Mar ’03 (Figures in USD Billions)
Region
Total Market India's Exports Market Share
North America
171
7
4%
Western Europe
110
2
2%
Japan
35
0
1%
Asia Pacific
16
1
4%
Rest of the World
18
1
3%
349
10
3%
FH – IDATE Nov 19th, 2003
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Most top companies outsource their software
requirements to India…

General Motors

Coca Cola

Daimler Chrysler

General Electric

Pepsi

Ericsson

United Airlines

Boeing

Philips

Sears

CitiGroup

Wal-Mart

American Express 
Oracle

AT&T

Walt Disney

SAP

Marks & Spencers

Visteon

Integrators...
More than 300 of the Fortune 1000 companies
outsource their software requirements to India…
FH – IDATE Nov 19th, 2003
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Rightshore – Offshore IT services from India
(Source: McKinsey Quarterly, 2001)
Low
Growth in Indian IT Services Exports
(Figures in USD Billions)
12.00
9.88
10.00
2006
+36%
CGAR
7.65
8.00
“By the end of 2004, 10% of IT
resources from US IT vendors
and services providers will be
provided offshore”
•Russie
Russia
?
•Chine
China
?
•Philippines
Philippines
?
?Malaisie
• Malaysia
?Hongrie
• Hungary
Cost
6.22
•Mexique
Mexico
?
6.00
2.00
?Singapour
• Singapore
3.96
4.00
1.76
2.60
OS IM
1%
0.00
1997
1998
1999
?
•Inde
India
2000
2001
TS Packages
6%
•Ireland
Ireland
?
Low
2002
•Israël
Israel
?
High
Quality
High
OS AM
36%
Penetration of Offshore IT Services (Current
Usage or Planned Usage) by Industry
Industry
High-Tech Manufacturing
Communications
Financial Services
Services
Transportation
Healthcare
Other Manufacturing
Utilities
Retail
Wholesale
Total
Penetration of
Offshore
Services (%)
21,1
9,1
7,6
6,0
4,8
4,0
3,9
3,7
2,2
1,1
5,0
Source: Gartner Dataquest (August 2002)
FH – IDATE Nov 19th, 2003
“40% of the annual growth
in the offshore market will
come from Western Europe
by 2004”
TS AD&I
57%
Offshore IT Services
By Discipline
“60% of Fortune 500
companies already work
with Indian offshore
companies”
Region
North America
Western Europe
Source: Gartner Dataquest
(February 2003)
© 2003 Cap Gemini Ernst & Young - All right reserved
IT Services - Apr’ 02 to Mar ’03
(Figures in USD Billions)
Total Market India's Exports Market Share
171,1
6,69
3,91%
109,6
2,10
1,92%
Several factors strengthen the business case for
remote services in India...
 Factor cost differential – Wage costs about 20% of US levels; real estate
costs about 25% of US levels
 Time zone advantage – The nearly 12-hour time zone difference
between US and India enables ‘follow the sun’ 24x7 coverage
 Robust telecom infrastructure – India’s telecom infrastructure today is
world-class and cost-competitive, with various long-distance connectivity
options, high-bandwidth local loop networks and high-speed Internet
access
 Government incentives – The government of India is keenly promoting
offshore services, by setting up technology parks and other
infrastructure, speeding up investment approvals and providing attractive
tax incentives
FH – IDATE Nov 19th, 2003
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…Including the size and quality of its resource pool
CMM qualifications 2001/2002
• Second largest pool of
English-speaking
professionals in the
world
0
• Generates 80,000
engineers each year
FH – IDATE Nov 19th, 2003
1000
1500
2000
1707
+20%
1498
(58 level 5/6)
US
• Currently has 400,000 IT
professionals
• Large base of graduates
(16 million) and postgraduates (5 million)
500
238
India
158
+50% (74 level 5/6)
110
France
103
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We have to disconnect the place where we sell from the
place where we deliver
Average COR per region in 2001
Nordic
55
BE
45
US
100
UK
105
CE
58
France
49
India
23
SE
40
North America COR = base 100
FH – IDATE Nov 19th, 2003
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IT companies Positions
People
Pure India Players
25000
20000
15000
People
Multinational Players
7000
6000
India
Other
10000
5000
4000
3000
5000
2000
1000
0
FH – IDATE Nov 19th, 2003
0
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CGEY in India
Discipline
TS
OS
Total
Staff-strength
Current Status
Dec’ 03
650
700
350
500
1 000
1 200
OS IM
3%
OS AM
31%
Dec’
03
Dec’
04
Force
North America
650
1500
10
Outsourcing Europe
300
1000
UK
150
500
2
France
100
300
2
Netherlands
50
200
1
200
400
UK
150
200
1
Netherlands
50
100
1
100
1
50
100
1
1 200
3 000
20
Region
Dec’ 04
1 500
1 500
3 000
TS
Packages
39%
N Europe & Asia Pacific
AP
Central & Southern Europe
Sales
France
Central Europe
TS AD&I
27%
Italy
Iberia
•
•
•
•
•
•
•
Our Global Delivery Model, Rightshore
Our Global Network of Industrialized Centres: ASEs,
ADCs, AMSCs, IMSCs, BPOs
Our Methodology:
• End-to-End CMM Value Delivery
• Single set of integrated methods, tools and standards
used across FO/BO
Remote Development with Local Execution
Local Intimate Business Know-how
From Initial Creation to Long Term Evolution
Win Centers
FH – IDATE Nov 19th, 2003
Total
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VISTEON
VERIZON
JP MORGAN
DELMAS
TOTAL
Offshore AM Delivery Model
Of course, the split of
responsibilities
between front and
back offices may
change!
Front Office
CGE&Y / Customer
1st level Help Desk
User
Community
2nd and 3rd Level Support
Front Office
Back Office
Functional
Functional
Responsibilities
Responsibilities
Common tool-sets and Process - DELIVERTM
Knowledge Base
Service Management
Quality Management
Technical Infrastructure
FH – IDATE Nov 19th, 2003
Back Office
CGE&Y AMSC INDIA
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External
Agencies
Sample Workflow
CGE&Y Service Delivery Manager monitoring
AM operations
Periodic face to face meetings
Client
Client’s
Business Users
Front Office
Back Office
*
4
1
Log ticket
Client’s Helpdesk
Ticket assigned
to CGE&Y
2
CGE&Y Front
Office
Ticket assigned
to Back office
3
*Even though the client’s business
users are shown along with the
client and the help desk, it must
be noted that these users may be
located anywhere in the world
Client’s Systems
Onsite
FH – IDATE Nov 19th, 2003
Back Office Mumbai
Support Team
Offshore
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CGE&Y Competitor Profile
 CGE&Y faces competition from both local and MNC companies
 The top 5 local competitors include:
 Tata Consultancy Services
 Wipro
 Infosys
 Satyam
 Patni Computer Systems
 The MNC’s currently in the market include:
 Accenture
 IBM/PwC
 EDS/A.T. Kerney
 In this section we will try to profile some of the above companies…
FH – IDATE Nov 19th, 2003
© 2003 Cap Gemini Ernst & Young - All right reserved
TATA CONSULTANCY SERVICES (TCS)
Key Highlights:
Strengths and Weaknesses:
 Projects for over 1000 clients in more than 55 countries
 Strengths:
 More than 100,000 person years of experience in
diverse business domains and technology areas
 Giant size – over 21000 employees
 Ability to cut prices and play on volumes
 Major projects won:
 United Utilities Water; UK  30 million Pounds
 GE  $120 million – largest deal in Indian IT
services history
 Weaknesses:
 Dearth of value added offerings
 Up to 70% of revenues come from on-site work in the
US – too much reliance on one market
Growth Strategy:
Expansion / Acquisition Strategy::
 Price aggression
 Takeover of CMC a local player has enhanced local
presence especially in the Government sector
 Increase in Onsite work
 Geographical diversification by setting up global
development centers in Hungary, Australia, Uruguay,
Japan, Mexico, USA, UK and China
FH – IDATE Nov 19th, 2003
 Company IPO expected to come through shortly – this
will increase the resources available with the company
for further investment / acquisitions
© 2003 Cap Gemini Ernst & Young - All right reserved
INFOSYS TECHNOLOGIES
Key Highlights:
Strengths and Weaknesses:
 Company’s brand name is major plus in both domestic
and international market diverse business domains and
technology areas
 Strengths:
 Over 10,000 IT practitioners and domain consultants
and presence in 14 countries worldwide
 Ranked as No. 1 among Indian IT organizations
 Infosys claims 293 clients with 85% repeat business
 Finacle, BankAway and PayAway – the banking
products of the company, now contribute to 4% of the
company’s Turnover
 Ability to predict and react quickly to market trends
 Ability to cut prices and play on volumes
 Known for reliability and fair business practice
 Weaknesses:
 Low focus on R&D and high-end high value added
work
 Too skewed in favour of the US market
Growth Strategy:
Expansion / Acquisition Strategy::
 Price aggression
 Banking, FSI & Retail verticals will have more focus as
per future strategy
 Focus on offshore delivery model and BPO services to
international clients
 Partnership with leading local companies of the targeted
country
FH – IDATE Nov 19th, 2003
 Building up presence in Europe and Latin America
 Plans to move up the value chain by building its
Management Consulting practice
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WIPRO TECHNOLOGIES
Key Highlights:
Strengths and Weaknesses:
 Ranked 7th among the software services companies in
the world by Businessweek (2002)
 Strengths:
 30 offices worldwide, 13,000 IT practitioners and domain
consultants
 World's first PCMM, CMMi and CMM level 5 company
 More than 300 customers across USA, Europe and
Japan (50 of these are Fortune 500 companies)
 Perceived as a ‘trustworthy’ and ‘fair business practices’
company
 Ability to predict and react quickly to market trends
 Ability to cut prices and play on volumes
 Availability of 13000 skilled IT resources skilled in
international projects
 Weaknesses:
 Constant Organizational Restructuring can hamper
quick decision making
 APAC business has not grown as fast as it should
have
Growth Strategy:
Expansion / Acquisition Strategy::
 Price aggression
 Banking, FSI & Retail verticals will have more focus as
per future strategy
 Increase in Onsite work
 Provide end-to-end IT solution including network,
hardware/Software and SI services
 Partnership with leading local companies of the targeted
country for market entry.
FH – IDATE Nov 19th, 2003
 Entered in Call Center Business through acquisition of
Spectramind Ltd. - this is now one of the major thrust
area
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Investments in the Indian IT Sector
According to a Mckinsey Survey 80 percent of the top 40 global IT
services firms have a presence in India …
 Accenture:


Has announced plans to invest close to $180m over the next four years towards providing Business
Process Outsourcing (BPO) service
Plans to hire another 1,500 employees to make its Indian technology centre a strategic hub, and double its
Indian software and back-office staff to 2,500 within two years
 EDS:

Has announced plans to move about 700 jobs to India. EDS said it will spend $12 million on a new
customer call center in Mumbai, India, next year, resulting in a phased transfer of 700 jobs to that region.
 IBM / IBM Global Services:


IBM Global has over 3000 professionals across 6 development centers in the country. It is aiming at
adding 7000 professionals over the next 3 years
IBM Global Services in Bangalore has bagged a mammoth outsourcing project from AT&T. The work,
pertaining to application development, enhancement and maintenance, has been contracted for a 10-year
period. IBM will increase its workforce dedicated to this project by 250 people by the end of next year.
Eventually, there could be around 5,000 people working on this project.
 Deloitte Consulting

Has now a 450-people centre in India, providing BPO and SAP Support services
FH – IDATE Nov 19th, 2003
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Investments in the Indian IT Sector..(contd.)
 Computer Science Corporation:

Is setting up two development centers in Noida and Hyderabad with manpower strengths
ranging from 300-400 personnel. The company will be creating solutions for segments
such as insurance, financial services, ERP, CRM, e-commerce, and databases.

CSC is also planning to acquire a company in the Southern region, to expand its
operations in that market.
Cognizant:

The company added more than 900 professionals to its existing staff in 2001-02. It had
plans to cross the 5000 mark by end 2002.

Has announced that its fresh round of investments in the Indian market are likely to be
directed towards the InfoTech sector. Software exports from India are expected to rise to $3
billion by 2004 with software outsourcing expected to account for a third of the export
targets

GE has 11,000 employees in 3 centres in India – this is to be expanded to 27,000
employees in 9 centres
GE:
In addition to the above a few others such as Perot Systems, Deloitte & Touche and Groupe
Bull are either sub-contracting work to Indian companies or have formed joint ventures with
local players. Valtech is subcontracting to Hexaware, Deloitte & Touche has a joint venture
with Mastek, and Perot with HCL.
FH – IDATE Nov 19th, 2003
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Consequences
 Off shore production and maintenance for software creates a real risk of
loss of skills and jobs for the most advanced countries :
whereas for manufacturing it’s generally admitted that it takes 10 years for a subcontractor to gain full knowledge and to be able to design by himself, in the
software industry, this times is probably reduced by a factor 3, because there is
almost no boarder between the design and the production itself. Subcontracting
the production then means exporting the know how.
IT Indian companies are now strong global players
Large (US) integrators will take advantage of the off shore IT production
Need for Europe to organize near shore in Eastern Europe
FH – IDATE Nov 19th, 2003
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