Why should you choose India for IT Offshoring?

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Why should you choose India for IT Offshoring?
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Agenda

• Introduction to offshoring
• Key drivers
• Industries market revenues
• Key criteria for offshore selection (10)
• Language
• Government support
• Labor pool
• Infrastructure
• Educational system
• Cost
• Political Economic environment
• Cultural compatibility
• Global and legal maturity
• Data and Intellectual Property Security
• Location ratings
• Comparison Competitors
• Conclusion

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India as an Offshore Services Location

• Largest democracy 1.1 billion population
• GDP growth over 8 Gross GDP - 3 trillion
  fourth largest economy
• Primary offshore destination for largescale,
  process-oriented work, such as application
  development, transactional business process
  outsourcing (BPO) services in which Indias
  "first shift" can provide 24/7 IT support.
• 10 categories (Source Gartner Inc.) that
  organizations should consider when looking at a
  potential location for offshore or nearshore IT
  or business process services.

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Key drivers for Global offshore/ outsourcing as a
strategic alternative

• Increasing global competitiveness
• Access to global talent
• Economies of scale
• Process engineering and enhancements
• Wage arbitrage
• Increased profit margins
• Improvements in quality

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Key Industry Verticals
Telecom Manufacturing Transportation Retailing Uti
lities Automotive Pharmaceuticals Banking
Insurance HR Medical
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Global technology spending
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Revenue Breakup India Offshoring (2009)
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Offshoring Examples (BPO)
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Key Criteria Offshore location selection
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Language

• India is ranked 17th in the IMD global
  competitiveness ranking for English language
  skills.
• India has a strong foundation in the use of
  English, which is the de facto business language
  across the country.

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Government Support

• Recognizes IT as a strong engine of job creation
  within the country
• Endeavors to increase the countrys e-readiness
  by focusing on key emerging technologies.
• Drive improved governance and transparency in
  government interactions with the citizens
• Focus on IT education and IT-based education,
  technologies, systems and applications,
  broadband, smart cards, radio frequency
  identification, and networking technologies.
• Heavy investments establishing Bio IT Parks, IT
  investment regions and the Trans Eurasia
  Information Network

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Labor Pool

• In 2010 India ranks seventh in IT skills by IMD
  Global on the availability of IT skills.
• The size, quality and scale of the Indian labor
  pool continues to differentiate it from all other
  countries
• Employment in the IT industry stands at 2.21
  million, which is the largest pool of offshore
  talent in the world.
• Reverse brain drain back to India has created
  high-end expatriate talent with overseas
  education and work experience

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Talent Dynamics

• Top 5 American employers in India
• General Electric 17,800 employeesHewlett-Pa
  ckard 11,000 employeesIBM 6,000
  employeesAmerican Express 4,000
  employeesDell 3,800 employees
• Top 5 Indian employers
• Infosys 40,000
• Wipro 35,000
• TCS 100,000
• Reliance 120,000
• Satyam 35,000

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Infrastructure

• Govt. is spending 6 of its gross domestic
  product (GDP) on infrastructure (37B)
• proposal to increase spending on infrastructure
  to 1 trillion - highways, ports, airports, power
  plants and other infrastructure through 2016 to
  2017
• Recent overhaul of 3G telecommunications
  infrastructure, boost in power generation
  (nuclear) adding to output

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Educational System

• India ranks 20th in IMD Global's Educational
  System ranking of 2010 that looks at educational
  system's ability to meet the needs of competitive
  economy.
• Ranks 13th on management education and 22nd on
  university education, has second-highest number
  of engineering graduates, after the U.S
• Has one of the largest numbers of higher
  education institutions - 490 universities and
  20,769 colleges
• Private and public sponsorship of R D
  initiatives

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Cost

• Even with salary escalation, India has a
  reasonable cost differential. 
• On an absolute basis, the annual salary of a
  programmer with about three years' experience is
  12,000 to 17,000
• Diversified delivery center locations from Tier 1
  cities to Tier 2 and 3 cities to achieve
  more-competitive labor rates
• Look beyond cost savings as a long-term value
  proposition from India

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The real economics of offshoring
1.45
1
.33

• . . . and makes the global pie that much bigger

• . . . creates new value from reemploying U.S.
  labor . . .

• 1 previouslyspent in U.S.,now offshored to
  India . . .

Estimate based on historical U.S. reemployment
trends Source McKinsey Global Institute
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Political and Economic Environment

• Reasonably stable nation with a progressive
  economic mind-set and a stable government
• Most recent data from Central Statistical
  Organization shows annual GDP growth of 8.8 
• High economic growth continues to attract
  investments in India, thereby fueling the overall
  growth of the industry
• India is ranked 84 out of 180 countries on
  Transparency International's 2009 corruption
  perceptions index

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Economic Outlook
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Cultural Compatibility

• A strong general cultural affinity with most
  English-speaking Western countries.
• India ranks 12th in IMD Global's ranking of
  national culture that ranks countries on their
  openness to foreign ideas - ranks eighth in
  flexibility and adaptability of people
• Has greater bilateral relationships at a
  people-to-people, government-to-government level.
  
• India's growing economic strength, military
  prowess, and scientific and technical capacity,
  as well as the size, population and strategic
  location of the country, all strengthen its
  position

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Global and Legal Maturity

• India has 57 bilateral investment treaties with
  nations, including the U.K., France, Germany,
  Malaysia and Mauritius.
• Has sound legal system and well developed
  financial network to meet international business
  standards.
• The World Bank's "Doing Business 2010" report
  places India 182 out of 183 countries for
  "enforcing contracts."
• Major modifications in current Indian cyber law
• India ranked a joint 45th in the Freedom House
  Global Press Freedom Rankings  and 47th in the
  latest world audit ranking democracy

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Data and Intellectual Property Security and
Privacy

• India has a sound data protection and security in
  place, various acts and laws introduced to
  strengthen IP rights and fight piracy
• PC software piracy in India has declined from 74
  in 2004 to 68 in 2008
• IMD's World Competitiveness Yearbook 2009 ranks
  India 33rd for cybersecurity out of 57 countries

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Asia/Pacific Offshore location ratings
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IT Services Comparison
Main Destination for Offshoring IT Services (until March 2009) Main Destination for Offshoring IT Services (until March 2009) Main Destination for Offshoring IT Services (until March 2009) Main Destination for Offshoring IT Services (until March 2009) Main Destination for Offshoring IT Services (until March 2009) Main Destination for Offshoring IT Services (until March 2009) Main Destination for Offshoring IT Services (until March 2009)
Parameter India Canada Iceland Israel Philippines South Africa
IT Export Industry Size (US, mn) 9,500 3,780 1,920 900 640 96
Active Export Focused IT Professionals 195,000 45,000 21,000 15,000 20,000 2,000
IT Employee Cost (US, per year) 5.000-12,000 36,000 25,000-35,000 25,000 7,000 18,000
No. of CMM level 5 Certified Companies 60 NA 0 0 NA NA
IT Labor Force Low cost, High quality High cost, High quality High cost, High quality High cost, High quality Low cost, Moderate quality Moderate cost, moderate quality
Infrastructure Average Good Good Good Good Good
Main Positives English language skills, highly qualified abundant workforce, robust project management Near-share, highly compatible cultures with UK US Large development centers of tech co's like Microsoft, Dell, Significant offshoring precedent More shrink wrapped software production North America Good English skills cultural capability with experience Language skills
Main Negatives Ordinary infrastructure, some geo political risk High cost of employment High cost Regional unrest Low availability of project manager Nascent BRO industry, lack of precedent
Source Evalueserve, NASSCOM Source Evalueserve, NASSCOM
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Competitors

• China is the most prominent challenger in terms
  of the criteria for infrastructure, education
  system, costs, political and economic
  environment, and government support.
• Philippines, Russia, Thailand and Malaysia are
  also emerging in the global market, posing hard
  competition to Indian offshoring business.

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Conclusion

• India remains first choice offshore destination
• Provides competitive edge cost effective
  services, reduce operating costs and increases
  productivity, quality and efficiency.
• So next time, if there is talk of outsourcing,
  India should emerge as the first destination!