Why should you choose India for IT Offshoring? - PowerPoint PPT Presentation

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Why should you choose India for IT Offshoring?

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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 ... – PowerPoint PPT presentation

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Title: Why should you choose India for IT Offshoring?


1
Why should you choose India for IT Offshoring?
2
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

3
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.

4
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

5
Key Industry Verticals
Telecom Manufacturing Transportation Retailing Uti
lities Automotive Pharmaceuticals Banking
Insurance HR Medical
6
Global technology spending
7
Revenue Breakup India Offshoring (2009)
8
Offshoring Examples (BPO)
9
Key Criteria Offshore location selection
10
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.

11
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

12
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

13
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

14
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

15
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

16
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

17
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
18
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

19
Economic Outlook
20
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

21
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

22
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

23
Asia/Pacific Offshore location ratings
24
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
25
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.

26
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!
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