Globalization of Services
Igniting The Futurized Corporation
Presenting at
Atul Vashistha
Chairman, neoIT
CEO, NeoGroup
www.neoIT.com
Seminar Content
Globalization
Services
Globalization of
of Services
The Futurized Corporation
2
© 2008 Atul Vashistha
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1
Globalization of Services
The Rise of “The Offshore Nation”
Consuming Borderless Services
7 Secrets of Successful Globalizers
3
© 2008
© 2006
Atul neoIT
Vashistha
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The Old Era of Globalization
4
© 2008 Atul Vashistha
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2
Starting On The Journey
5
© 2008 Atul Vashistha
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The Global Services Economy
Not since the industrial revolution has
the global economy experienced such
dramatic, transformational changes
Wh t started
t t d with
ith sourcing
i low
l
t
What
cost,
low value services has matured to
include what companies considered
core just 4-5 years ago.
Labor
Availability
Demand
Drivers
Services
Maturity
As traditional low-cost locations mature
towards higher value added work,
emerging low-cost locations fill-in for
the lost capacity in a virtuous cycle –
impacting economies and societies
Cost
Drivers
Skill
Sets
Less than $80B of the $500B
potential in services trade has been
exploited annually
© 2008 Atul Vashistha
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3
The Rise of “The Offshore Nation”
Started with manufacturing
U.S. Trade Deficit
with China
Jan - Aug 2006:
$143,305.5 mil
2005:
$201,544.8 mil
Source:
U.S. Census Bureau
Imports from China - $20-22 bn
(2005)
1/10th of US trade deficit with China
(2005)
8th largest trading partner
Other large importers include
Home Depot, Target Corporation,
Lowe’s, Motorola, Honeywell etc.
Imports from China Greater than GDPs of:
$
billion – Kenya, Costa
C
Rica,
$15-20
Latvia, Uruguay, Trinidad and Tobago,
Panama, El Salvador
$10-15 billion – Ghana, Bahrain, Jordan,
Estonia, Tanzania
$5-10 billion – Zambia, Nepal, Bolivia,
Jamaica, Brunei, The Bahamas
© 2008 Atul Vashistha
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7
Demand Factors
US IT/BPO Offshore
expenses: ~ $40B $50B
Competition within vertical
industries in demand markets
continues to intensify
EU IT/BPO Offshore
expenses:
~ $12B - $16B
Speed to market is becoming
a critical competency for
companies across high tech,
healthcare mfg
healthcare,
mfg, financial
services and CPG among
others
Wall Street continues to
reward efficient performers
and punish high cost public
companies
The talent crunch is real –
whether it’s IT, R&D,
g
g or finance
Engineering
Demand
Offshore Supply
Nearshore supply
Source: neoIT
Companies constantly reevaluating what is core and
what can be done better,
faster, cheaper by others
Uncertain economic
conditions forcing
companies to rethink their
portfolio
© 2008 Atul Vashistha
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4
Supply Factors – Emergence of CoEs
Infra
outsourcing
Local language
skills
Nearshore
BPO, R&D
for Europe
Engineerin
g Services
Embedded
SW Dev.
Customer
support,
F&A
Spanish
Spanish
BPO
BPO
Custom development
development,
customer contact
centers, Spanish
language skills, shared
services
Nascent Location
IT Application
Outsourcing
Infra outsourcing
BPO, KPO, R&D
Emerging Location
Established
Location
Demand
© 2008 Atul Vashistha
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Source: neoIT
The Rise of “The Offshore Nation”
Now starting to see it in services
Centers of Excellence Emerging
India: IT, Back office and analytics
Central
Ce
t a & Eastern
aste Europe
u ope
Poland, Czech Republic,
Hungary, Russia
Philippines: Customer Support
China: Embedded software
Poland: European back office
Hungary: European back-office
Latin America
Mexico,
Costa Rica,
Brazil
Asia Pacific
India, China,
Philippines,
Malaysia
Russia: Engineering services
Mexico: Spanish language skills
Brazil: ERP support & maintenance
Costa Rica: Shared services
Singapore: Data Center
Emerging Centers of Excellence
10
Large enterprises will
increasingly be concerned about
de-risking their operations
through global diversification
© 2008 Atul Vashistha
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5
The Rise of “The Offshore Nation”
India and China – Booming talent pool
Rivals talent pool in the USA
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11
The Rise of “The Offshore Nation”
12
R - $2.15 bn
MC - $21.95 bn
R - $885.8 mn
MC - $10.23 bn
Romance with
Wall Street
8
6
4
2
Market Cap / Revenue
10
R - $2.52 bn
MC - $22.17 bn
R - $4.18 bn
MC - $25.03 bn
R - $2.38 bn
MC - $16.19 bn
R - $202.8 mn
MC - $1.01 bn
R - $5.72 bn
MC - $20.8 bn
R - $2.49 bn
MC - $8.09 bn
R - $4.82
$4 82 bn
MC - $16.4 bn
R - $470.3 mn
MC - $528.6 mn
R - $91.1 bn
MC - $124.5 bn
R - $17 bn
MC - $17.7
$17 7 bn
R - $19.7 bn
MC - $12.67 bn
R - $104.3 bn
MC - $154.9 bn
R - $434.1 mn
MC - $630.1 mn
0
R - $24.33 bn
MC - $23.42 bn
Revenue
202.8M
434.1M
885.8M
2.15B
2006
12
2.38B
2.52B
17B
19.7B
91.1B
2008
© 2008 Atul Vashistha
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6
Trends in India & China: Currency
CHINA
INDIA
13
© 2008 Atul Vashistha
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Trends in India & China: Inflation
CHINA
INDIA
14
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7
Content
The Rise of “The Offshore Nation”
Consuming Borderless Services
7 Secrets of Successful Globalizers
© 2008
© 2006
Atul neoIT
Vashistha
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15
Consuming Borderless Services
UK,
IRELAND,
SCOTLAND
EASTERN
EUROPE
CANADA
RUSSIA
UNITED
STATES
CHINA
ISRAEL
PHILIPPINES
LATIN
AMERICA
16
SOUTH
AFRICA
INDIA
© 2008 Atul Vashistha
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8
Consuming Borderless Services
Non core activity
BPO
Core activity
ITO
BPO
Compensation design
Business research
Financial planning & Analysis
NON
CORE
CORE
HR Support Functions
Finance/Accounting
Procurement
C
Customer
S
Support
Telemarketing
Tech Support
Back Office Processing
Product Development
Sales & Marketing
Compliance
Animation and graphic design
Clinical trials
ITO
Equity research
Systems Management
Systems Migration
Remote Monitoring
Custom Development
Software Maintenance
ERP customization
Project Management
IT Training
g
g design
g
Engineering
Requirements Analysis
© 2008 Atul Vashistha
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17
Consuming Borderless Services
Denmark
C
Canada
d
Scotland
Captive
FTE – 1000+
Services – Customer
care, Bi-lingual technical
support,
Ireland
Morocco
Locations – Edmonton,
Ottawa
Panama
Argentina
18
Captive - Nordic
Business Center
FTE – 650+
Services - F&A,
Marketing, Local
language support
L
Locations
ti
– Copenhagen
C
h
Germany
Slovakia
China
Captive
FTE – 5500+
Services – Customer care
care,
Technical support, Sales, Product
development
Locations – Dalian, Xiamen
Czech
Republic
India
Captive
Third Party – Wipro BPO, EXL
Services, The Sutherland Group,
SITEL
FTE – 10,000+
Services – Customer care,
Technical support, Sales, Financial
back office, IT programming and
Application support
Locations – Bangalore, Hyderabad,
Chandigarh, Gurgaon
Philippines
Captive
Third Party – e-Telecare,
SITEL Ambegris
SITEL,
Ambegris,
Teleperformance USA, ICT
Group, Client Logic
FTE – 3000+
Services – Customer care,
Technical support, Sales
Locations – Pasay City
© 2008 Atul Vashistha
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9
Consuming Borderless Services
Realized 35% reduction in total cost of IT
operations
Improved nimbleness and agility to
INDIA
effectively respond to business cyclicality
Resulted in optimization of technology
Bangalore
leading to cost efficiency
ADMS
Innovative engagement model with flexibility
Chennai
IT Infra
to scale / shrink requirements
Strategic partnership approach providing a
platform for global roll-out
© 2008 Atul Vashistha
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19
Consuming Borderless Services
Offshoring Model
Model:
M
d l 3rd Party
P t Sourcing
S
i
Type of Services:
• ADM / ASM
• Migrations
• Technical Architecture
• Production support
Location(s): Pune
IT
BPO & KPO
Strategic Objectives
China
• Diversify risk by offshoring business processes
to multiple service providers
• Employ a variety of business models to
maintain control, diversify risk
• Foster competition among service providers to
ensure continued process improvement
• Move majority of processes (across the value
chain) to low cost destinations
India
Model: 3rd Party Sourcing
Type of Services:
• ADM
• Migrations
• Consulting
• DBA
• Project Management
Location(s): Bangalore
20
Model: 3rd Party Sourcing
Type of Services:
• ADM
• Production support
• Testing and data warehousing
• Process consulting
Location(s): Chennai, Pune,
Kolkatta
Model: 3rd Party Sourcing
Type of Services:
• Various projects (90) in e-Biz
area
• ADM/ASM
Location(s): Bangalore,
Mumbai
Model: Captive
Type of Services:
• Credit
C dit research
h & analysis
l i
• Equity research
• Transaction Processing:
Foreign exchange trades
Credit derivatives contracts
Loan Processing
Customer care
Location(s): Mumbai, Shanghai
© 2008 Atul Vashistha
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10
Content
The Rise of “The Offshore Nation”
Consuming Borderless Services
7 Secrets of Successful Globalizers
21
© 2008
© 2006
Atul neoIT
Vashistha
All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Secret #1: Embrace Globalization
22
1
Embrace globalization across
the business
2
Ask why it cannot be done elsewhere
3
Mandate it
4
Keep an eye on the future
© 2008 Atul Vashistha
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11
Secret #2: Welcome It As A Transformation Lever
Leadership
Commitment
1
Process
Redesign
Organization
Design &
Structure
2
6
3
5
Education &
Development
Change
Management
4
Communications
Source: neoIT
23
© 2008 Atul Vashistha
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Secret #3: Adopt A Lifecycle Approach
24
© 2008 Atul Vashistha
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12
Secret #4: Align Business and Globalization Objectives
Control
Industry Activity
Ownership
preference as
influenced by risk
& culture factors
Offshore actions of
competitors
and industry
players
strategy drives services
globalization
Company
Culture
Quality
Need for consistent
quality and service levels
Affinity for outsourcing
& globalization
including past
experiences
Globalization
Strategy
&
Readiness
Framework
Corporate
Strategy
Ensure that business
globalization?
What part of your
business strategy does
it help you execute?
Cost Savings
Need for reducing cost or
fundamentally altering
business model
Business plan, goals and
results expectedacquisition, cost structure,
growth, flexibility, risk
aversion, profitability, cash
etc.
Why are you looking at
What are you going to
do?
Social
Responsibility
Issues related to job
loss, globalization,
employee upheaval,
etc.
Is the organization
Risk
Manage stability,
security, privacy,
volatility, etc.
ready for this?
Source: neoIT
25
© 2008 Atul Vashistha
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Secret #5: Assign The Best People
26
•
The best that fit are selected and
assigned to launch and manage the
program
•
Strong participation from the CEO
and C-Level Executives
•
Attention and recognition by senior
management makes it attractive to
lure the best talent
•
Team Secrets strategic learning
© 2008 Atul Vashistha
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13
Secret #6: Implement A Strong Governance Model
4
1
5
2
3
neoIT M5 Framework
© 2008 Atul Vashistha
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27
Secret #7: Embrace A Continuous Improvement Mind-Set
Are our globalization efforts
h lth ?
healthy?
Onsite Operations
Strategy
Offsite Operations
•
People
Programs such as
Six Sigma are part of
the ongoing
operations
Operations
Technology
Compliance
Industry
28
© 2008 Atul Vashistha
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14
The 7 Secrets
1
Embrace Globalization
2
Welcome It As A Transformation Lever
3
Take a Lifecycle Approach
4
Align Business And Globalization Objectives
15
Assign The Best People
6
Implement a Strong Governance Model
7
Embrace A Continuous Improvement Mind-set
Source: Atul Vashistha & Eugene Kublanov, neoIT
© 2008 Atul Vashistha
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29
The Futurized Corporation
The Futurized Corporation
Roadmap to becoming a “Futurized Corporation
Case Study
Key Takeaways
30
© 2008 Atul Vashistha
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15
Listening to the Pundits
© 2008 Atul Vashistha
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31
The Corporation in 2015
Unprecedented division of services labor… leveraging centers of excellence…
managed as a global portfolio
¿
R&D
¿
R&D
¿~
R&D
IT
¿
¿~
Procurement
HR
IT
Captive Center
¿~
¿ 3rd Party Outsourcing
F&A
R&D
¿
Contact Centers
BOT
HR
~ Joint Ventures
¿
Contact Centers
¿~
Contact Centers
IT
…taking into account capabilities, human capital, infrastructure, political risk, currency
fluctuations, cost of labor, productivity, taxation, security and legal environment
……to produce the optimum, networked services value chain.
32
© 2008 Atul Vashistha
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16
Evolution of the Futurized Corporation
Past
Present
Future
Location of Talent
Approach to core competencies
Approach to partnerships
Business architecture
Intellectual Property (IP) leverage
Key strategic skills
Key operational skills
P
Parameters
t
ffor diff
differentiation
ti ti
and
d competitive
titi advantage
d
t
Sourcing attitude
33
© 2008 Atul Vashistha
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The Building Blocks of The Futurized Corporation
Core
VISION
STRATEGIC EXECUTION
The Concept of SOBA ………..
34
© 2008 Atul Vashistha
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17
Redefining Core
Non core activity
BPO
Core activity
ITO
BPO
Compensation design
Business research
Financial planning & Analysis
NON
CORE
CORE
HR Support Functions
Finance/Accounting
Procurement
C
Customer
S
Support
Telemarketing
Tech Support
Back Office Processing
Product Development
Sales & Marketing
Compliance
Animation and graphic design
Clinical trials
ITO
Equity research
Systems Management
Systems Migration
Remote Monitoring
Custom Development
Software Maintenance
ERP customization
Project Management
IT Training
g
g design
g
Engineering
Requirements Analysis
© 2008 Atul Vashistha
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35
Service Oriented Business Architecture (SOBA)
Services A
From SP X
Services B
From SP X
Services C
From SP Y
Services D
From SP Z
Services E
From own Captive
36
© 2008 Atul Vashistha
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18
Service Oriented Business Architecture (SOBA)
Supermarket Aisle
© 2008 Atul Vashistha
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37
Value Chain of The Futurized Corporation
Evolution of Business Functions
38
Customer
Service (example
for a Bank)
Teller
ATM
Online Banking
IT (example for a
Consumer Goods
company)
IT Department
Contract Labor
Managed Services
Time and Material
Software as
a Service
HR (example for a
Telco)
HR Department
Some HRO
Employee Portal
Mass Customization
Self Service
Virtual HR Function
Finance (example
for a Manufacturer)
Finance Department
Some FAO
ERP Component
Virtual Finance
Department
© 2008 Atul Vashistha
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19
Value Chain of The Futurized Corporation
Evolution of Business Functions
39
Investment Analytics
for an Investment
Bank
In House
Research
R
h
KPO
Online Expert
Research as a
Service
Game Development
for a Gaming
Company
In House
Development
Outsource Testing &
Art Asset Development
In House:
Conceptualization
& Design Only
© 2008 Atul Vashistha
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Execution – Complete Alignment
40
© 2008 Atul Vashistha
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20
Content
The Futurized Corporation
Roadmap to becoming a “Futurized Corporation
Case Study
Key Takeaways
41
© 2008
© 2006
Atul neoIT
Vashistha
All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Roadmap to Becoming Futurized
Leverage Economic Value of
the Service Network
Virtualize the Services Supply Chain
Restructure as a Utility Operational
Model
Develop
p a Services Globalization Competency
p
y
Assess SOBA Readiness
42
© 2008 Atul Vashistha
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21
Content
The Futurized Corporation
Roadmap to becoming a “Futurized Corporation
Case Study
Key Takeaways
43
© 2008
© 2006
Atul neoIT
Vashistha
All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Case Study: Virgin Mobile
Service A
Service B
Non core
Non-core
Service C
Service D
Brand
Customer
Service
Core
44
© 2008 Atul Vashistha
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22
Future of Procurement???
© 2008 Atul Vashistha
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45
Content
The Futurized Corporation
Roadmap to becoming a “Futurized Corporation
Case Study
Key Takeaways
46
© 2008
© 2006
Atul neoIT
Vashistha
All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
23
Key Takeaways
Embrace Globalization
Leverage Talent Globally
Learn how to work globally
Agility is key to long term success
47
© 2008 Atul Vashistha
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Contact Information
Atul Vashistha
Chairman, neoIT
atul@neoIT.com
925.355.0557
CEO, NeoGroup
neoIT Global Headquarters
2603 Camino Ramon, 2nd Floor
San Ramon, CA 94583 USA
Bangalore, India
No 16 & 16/1, 5th Floor
Phoenix Towers, Museum Road
Bangalore 560 025, India
atul@neogroup com
atul@neogroup.com
415.839.8050
NeoGroup Headquarters
6200 Stoneridge Mall Road, Suite 300
Pleasanton, CA 94588 USA
48
© 2008 Atul Vashistha
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www. neoIT.com
www.neogroup.com
24
