Business Process Outsourcing
and Offshoring (BPO)
Contents
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Defining BPO
Background: South Africa’s window of opportunity
Gaps South Africa need to address
South Africa’s strengths, weaknesses, opportunities and threats
The actions taken
Sector support programme
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Government assistance programme
Talent development
Marketing inititiative
BPO standards
2nd Economy interventions
Telecommunication costs
Defining BPO
Customer care
HR/Administra
tion
Payment
services
Finance and
accounting
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Customer support
Collections
Helpdesk
Telesales and telemarketing
(Inbound/outbound)
Web sales and marketing other SMA
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Recruiting and staffing
Hiring administration
Records management
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Benefits administration
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Payroll services
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Credit/debit card services
Check processing
EDI
Other transaction processing
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Billing services
Accounting transactions
Financial reporting and other
Tax consulting and compliance
Risk management
Treasury/financial management
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Engineering
Design
Animation
Network consultancy
Business
knowledge
services
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Financial analysis (?)
Database marketing and customer
analysis
Biotech research
Other non proprietary research
Administration
/General
back-office
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High end
offshoring
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Data entry
Document management
Claims processing
Tax management
Asset management
Other (correspondence and
report production)
Background: South
Africa’s Window of
Opportunity
– BPO&O global market is expected to grow from $10b to $50-60b by
2008
• 40-50% of the growth in banking and insurance
– Result in an additional 3m jobs worldwide,
• 200-500k will be contested by SA and other ‘tier 2’ players
– SA is well positioned to exploit this opportunity
• create 65-100k jobs,
• attract $90-175m in real FDI,
• GDP contribution of 0.3-0.5%.
• substantial positive effect on BEE, SMME and Geographic
Equity with respect to job creation
Gaps SA needs to
address
•Talent availability: availability of managerial and agent level
talent
•Cost of operation: SA is about $7-8/hour/full time equivalent
agent costlier than lowest cost centers, (e.g., India, Philippines)
•Risk of operation: Perceived issues exist around personnel
security and crime rates in SA
•Set-up assistance: setup assistance and time required to
complete set up requirements
•Regulations: Concerns have been raised by companies on the
flexibility of the labour regulations.
•Third party vendor landscape: Only 4-5 scale players with
experience of migrating international business are available in SA
today
•Marketing activities: Target marketing efforts conducted by
provinces are not competitive in scale and sophistication
Strengths Weakness
Opportunity and Threat
Analysis (SWOT)
• Strengths
– Cultural and language familiarity
– Quality of business infrastructure
– Economic and political stability
– Quality of life and attractiveness of location
– International connectivity
– Adaptability
– Entrepreneurial culture
SWOT Analysis
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Weaknesses
– Cost of operations (labour and telecom)
– Inadequate government support and investment (e.g. tax,
incentives)
– Talent gaps (agent and middle management)
– Quality and cost of transport
– Perceived security risk
– Investor relationship management (marketing effectiveness)
– Lack of scale vendors
– Difficulty of set-up
SWOT Analysis
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Opportunities
– Demand surplus in the traditional BPO&O market as India and
China face supply bottlenecks
– Opportunity to offer specialised services in sophisticated industries
(e.g. Financial Services)
– A foundation of multi-language skills
– A location proposition to regional (Africa-based) players
– An alternative location for captive/vendors already present in 1st
tier locations e.g., India
– Exploitation of country synergies e.g. culture, legal, regulatory
– Exploit existing relationships
SWOT Analysis
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Threats
– Pace of delivery against telecom deregulation agenda
– Risk of union resistance (cf. atypical employment) and constraining
labour regulations (cf. overtime)
– Inability to build a strong, coherent industry body
– Inability to open up lower cost quality talent pools and build
sufficient managerial capacity
– Negative perceptions/uncertainty regarding gating criteria and
issues such as HIV, BEE and crime
– Exchange rate volatility
The actions taken
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to exploit the opportunity have been largely coordinated through a
partnership between the dti and the Business Trust.
under the direction and leadership of His Excellency, the Hon. Minister
Mandisi Mpahlwa, MP. (The Minister of Trade and Industry and Director
of the Business Trust).
The partnership also include key private and public sector decisionmakers, namely:
– Ms Thoko Didiza (Minister of Public Works and Director of the Business
Trust),
– Ms Elizabeth Thabethe (Deputy Minister of Trade and Industry),
– Mr Derek Cooper (Chairman of Standard Bank and Director of the Business
Trust) and
– Mr Eddie Funde (Chairman of the SABC and Chairman of the industry body,
Business Process enabling South Africa-BPeSA).
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Operations are directed by
– Dr. Raymond Ngcobo (Chief Director for Strategic Competitiveness Unit,
Enterprise and Industry Development Division of the dti),
– Mr. Brian Whittaker (CEO of the Business Trust) and
– Mr Mfanu Mfayela (CEO of BPeSA).
Sector Support Programme
– Five work streams were identified:
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Government assistance and Support
Talent development
Marketing
Industry mobilisation
BPO&O standards
– Additional work streams have been identified
• Telecommunications pricing packages for the
BPPO&O sector
• BPO 2nd economy strategy
GAS Programme
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The GAS programme was designed to support the development of the
BPO&O sector, through:
– Providing incentives to enhance the competitive advantage
– Close the cost gap for BPO&O operations when compared to
other BPO destinations such as India and Philippines
– Address market failures that result in the high cost structure
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Approved in December 2006 by Cabinet
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Full roll-out in March 2007
The objective of the investment incentive is to attract BPO&O
investment that creates employment opportunities.
The grant is provided depending on the value of qualifying
investment cost and employment creation.
The grant ranges between R37,000 and R60,000 per seat and is
offered to local and foreign investors establishing projects that aim
primarily to serve offshore clients.
Benefits
• INVESTMENT GRANT
Employment
Created
Qualifying
Investment Costs
Per Seat
Grant Per Seat
200 – 499
At least R74,000
R37,000 – R44,600
500 >
Greater than R89,200
R44,601 – R60,000
200 >
Less than R74,000
R37,000 - R52,300
or 50% of agents’
salary costs for 2yrs,
whichever is lesser
Talent Development
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The most critical element of a distinctive value proposition – the
ultimate basis for competition “TALENT AVAILABILITY”
SA starts with a good foundation of trainable people, however
considerable training is needed to deepen the talent pool
There is a need for substantial government investment through
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Company specific training and
work readiness training
Work Readiness Programme known as Monyetla is an initiative
between the dti and the Department of Labour
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aims to take unemployed matriculants or graduates through a process
of learning work-readiness skills.
in its pilot phase aiming to train 1000 learners at a cost of R15 000 each
The Training and Skills Support Grant is directed towards the cost of
providing company specific training (as opposed to industry wide
training) up to a maximum of R12, 000 per agent.
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The incentive grant is over and above the assistance obtained through
the Sector Education and Training Authorities (SETAs) and is
complementary to the BPO&O Investment Grant.
Previous and proposed
initiatives
DoL previous Initiatives
Services SETA
NSF Skills Development
Support programme (part of
DTI Small & Medium
Enterprise Development
Programme Incentive
Programme
NSF –through DoL Gauteng
South Provincial Office
Totals
No Of
Learners
Estimated Costs
Rand
3200
80,000,000
177
7,873, 000
980
4,357
8,805,000
96,678,000
Previous and proposed
initiatives
DoL proposed initiatives
Gauteng Provincial
Government (Part of NSF
funded Strategic Project)
Western Cape Provincial
Government through Call the
Cape. (Part of NSF funded
Strategic Project)
Services SETA (Fusion)
Services SETA
(DTI/Business
Trust)(Monyetla)
Totals
No of
Learners
Estimated Costs
Rand
5000
20,835,000
200
2,000,000
211
3,165,000
1000
15,000,000
6411
41,000,000
Marketing
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To persuade the best companies to do business in S.A. and remain
in S.A by:
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Understanding and properly communicating the SA Value
proposition.
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Encouraging regional and industrial diversity
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Ensuring a competitive environment ( one stop shop)
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Removing Regulatory obstacles
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The initiative straddles both targeted and broad-based marketing.
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Targeted marketing focuses on attracting and securing selected
high impact foreign investors, who will in turn create a
groundswell of other investor interest.
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Broad-based marketing encompasses the supporting of
government and industry initiatives, to raise South Africa’s
BPO&O global profile, with the aim of securing a dominant Tier 2
position.
BPO&O Standards
• A set of 3 new standards geared towards service quality
• Address Inbound and Outbound Contact Centres and BackOffice Processing Operations standards in four categories:
•Leadership and Customer Service Management
•Human Resource Management
•Operations Management
•Technical Resource Management
• SA Bureau of Standards (SABS) is now turning these into
national standards
• ISO is interested in the standards for the first global standard for
BPO&O
BPO in the 2nd Economy
• Need to shift from concentration in main Metropolitan
areas (JHB, DBN and CT) to ensure equitable distribution
of benefit
• New designated areas have been identified to direct some
investment to depressed communities
• Criteria for selection
– Levels of unemployment and poverty
– Availability of buildings
– BPO potential in terms of local economic development
– Availability of ICT Infrastructure
– Talent availability and development
Identified sites
Identified Site
Area
1. King Sabata FET,
Umtata, Eastern Cape
2. College of C.T. FET, Athlone/Crawford
Western Cape
3. Atlantis Education & Training Institution
Western Cape
4. Esayidi FET
Gamalakhe, KZN
5. Sekhukhune FET
Burgesfort, Limpopo
6. Nkangala FET
Siyabuswa, Mpumalanga
7. Umzinyathi District Municipality
Endumeni LC, KZN
8. Bohlabelo
Bushbuckridge LC, Mpumalanga
9. Kgalagadi (Satelite for Kimberly)
Northern Cape
10. Galeshewe (Kimberly)
11. Mdantsane
Buffalo City, Eastern Cape
12. Ixopo (TBA)
13. East London
Sisonke District, KZN
IDZ
Telecommunication costs
• Working with DoC on infrastructure for
designated areas/ICT hubs
• Negotiating with Telkom for a developmental
pricing framework
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Large offshore clients (>1000 seats)
Domestic clients
SMME’s
Designated areas
• Work is ongoing
QUESTIONS ???