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Strategy 101

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Title: Strategy 101


1
Turning Chile Into The Nearshore Platform of
Choice For Indian ITS Companies Presentation
to January 15, 2007
2
OUR OBJECTIVES FOR THIS MEETING
  • Learn firsthand about HCL
  • Quickly summarize for you Chiles advantages as a
    place to do business
  • Explain why Chile stands out as a offshoring
    platform in its region
  • Share some interesting news
  • Discuss how we can move forward the real reason
    for us being here

3
AGENDA
  • The Chilean Business Environment
  • Chile The Nearshore Platform of Choice
  • HCL and the Chilean Nearshore Opportunity

4
AGENDA
  • The Chilean Business Environment
  • Chile The Nearshore Platform of Choice
  • HCL and the Chilean Nearshore Opportunity

5
CHILE'S BUSINESS ENVIRONMENT STANDS OUT IN LATIN
AMERICA AND BEYOND
  • The most stable and competitive economy in Latin
    America
  • Ranked 1st by WEF in World Competitiveness Index
    2005
  • Ranked as Best Place to do Business by Economist
    Intelligence Unit 2005
  • 4th among emerging countries and 19th in global
    ranking
  • Lowest country risk in the region
  • Strong, transparent institutions and regulatory
    framework are an example for the region
  • Ranked 1st by Transparency International in
    Corruption Perception Index
  • tied with U.S. in 20th place in global rankings
  • followed by Uruguay (28th) and Costa Rica (55th)
  • Ranked 1st by World Bank among Latin countries
    in Ease of Doing Business
  • and 28th worldwide
  • Positioned as a gateway to the world
  • Free trade agreements with strong intellectual
    property protection
  • Low tax burden and extensive network of double
    taxation treaties
  • Favorable foreign investment regime (DL 600) in
    force since 1974

6
CHILE AT A GLANCE
Vital Statistics (2006)
  • Population 16.3 M
  • GDP US 145 B
  • GDP per capita US 8.9K
  • Annual inflation 2.6
  • Unemployment 8
  • Adult literacy rate 96
  • Corporate tax 17
  • Tariffs
  • General 6
  • Hardware 0
  • 95 of imports pay no tax
  • FTAs

Time zone alignement
Overnight flights to the U.S.
Sources World Bank, EIU, IMF, A.T.Kearney 2006
7
CHILE A GLOBALLY COMPETITIVE, HIGHLY DYNAMIC
AND TRANSPARENT BUSINESS ENVIRONMENT
  • GDP Growth
    Rate
  • (CAGR , 1986-2006)

Chile
  • Circle size proportional to score
    in EIU survey on
    Best Place to Do Business 2006-10

Uruguay
Argentina
Brazil
  • Color coding indicates corruption levels index
    (TI CPI index, 2006)
  • Global Competitiveness Index (WEF 2006)
  • Index 0.0 3.3
  • Index 3.4 6.7
  • Index 6.8 10.0
  • Integrar con Best place to do business EIU

Sources WEF, TI, World Bank
8
CHILES FAVOURABLE BUSINESS CLIMATE IS REFLECTED
IN MODERATE TAX BURDEN AND FLEXIBLE LABOR LAWS
  • 2,600
  • 67
  • 60
  • 42
  • 40
  • 40
  • 38
  • 33
  • 33
  • 24
  • 71.1
  • 20
  • 20
  • 552
  • 49
  • 432
  • 37.1
  • 26.3
  • 23
  • 10
  • 0
  • Number of tax payments
    per year
  • Man hours required to file taxes
  • Total tax rate
  • ( of profits)
  • Difficulty of hiring
  • Rigidity of work hours
  • Difficulty of firing
  • Overall index
  • Brazil
  • Mexico
  • Chile

Source World Bank (www.worldbank.org) 2006
9
CHILE IS A GATEWAY TO THE WORLD OFFERING
MAJOR ADVANTAGES TO GLOBAL PLAYERS
Web of trade agreements provides access to 90
of OECD economies
Web of double taxation agreements covers XX of
OECD economies
Switzerland Lichtenstein
Iceland
Norway
Canada USA
South Korea
Japan
European Union
Mexico
China
El Salvador
Brunei
India
Panama
Singapore
Australia
Uruguay Paraguay Argentina Brazil
New Zealand
In negotiation
In negotiation
  • OJO Hay cosas que corregir y completar

Source www.ideaincuba.cl/new_inc/CONTENT/bio4.htm

10
A FOREIGN INVESTOR FRIENDLY ENVIRONMENT
  • Legal framework guarantees foreign investors a
    full bill of rights
  • Inhibits government from adversely changing
    legal environment
  • Over USD 75 B invested under DL 600 regime
  • 89 of that since 1990
  • Chile second after Singapore in 2005 FDI
    inflows as GDP ??
  • Simple to set up and run a business
  • No joint venture requirements
  • foreign companies may have 100-owned
    subsidiaries
  • Minimal bureaucracy and no bribes involved
  • It takes less than a month to start a business
  • - no Latin American country does it faster
  • Easy to repatriate capital and dividends
  • May enter most of the funds invested as a loan
  • Can repay loan without any obstacles or taxes

Most companies dont know how easy it is to do
business in Chile Country Manager, Evalueserve
  • OJO Hay cosas que validar

11
CHILE OFFERS A UNIQUE QUALITY OF LIFE AT A VERY
REASONABLE COST
  • Mercer Cost of Living Index 2005
  • Chile among lowest in the world
  • Personal safety and overall quality
    of the environment are big benefits
  • Rank

Personal safety (homicides /100m hab.)
0
  • Santiago
  • Monterrey
  • Tokyo Dearest
  • Moscow
  • Stockholm
  • Madrid
  • Miami
  • Boston
  • Mexico City
  • Sao Paulo
  • Santiago
  • Asunción Cheapest
  • 1
  • 4
  • 18
  • 46
  • 57
  • 70
  • 95
  • 114
  • 128
  • 144
  • Montevideo
  • Buenos Aires
  • Miami

10
  • Bogota

20
  • Sao Paulo

30
40
  • Rio de Janeiro

50
60
Low
High
  • UNDP Human Development Index

Source América Economía Magazine
(www.americaeconomia.com), 2006, UNDP
(www.undp.org), 2006, Mercer Human Resource
Consulting (www.mercer.com), 2005
12
IMAGES OF SANTIAGO
  • OJO Hay cosas que corregir y completar

13
IMAGES OF CHILE
  • No incluida para aligerar

14
STRONG GOVERNMENT COMMITMENT TO TURN CHILE INTO
A GLOBAL IT SERVICES PLATFORM
  • Increasing productivity also means innovation I
    want this to be a country that not only exports
    copper, but also mining software not only fruit,
    but also techniques to pack and preserve foods
    not only salmon, but also vaccines to prevent
    diseases in fish.
  •  
  • The public sector will increase its spending on
    research and development by 50. Our goal is for
    our country to spend more than 1 of GDP on
    research and development by its Bicentennial in
    2010.
  •  
  • We will increase our efforts to make Chile a
    platform for the export of services.
  •  
  • Michelle Bachelet, President of Chile,
  • State of the Nation Address 2006

15
AGENDA
  • The Chilean Business Environment
  • Chile The Nearshore Platform of Choice
  • HCL and the Chilean Nearshore Opportunity

16
A NEARSHORE BASE IN LATIN AMERICA HELPS INDIAN
OFFSHORING LEADERS RESOLVE KEY CHALLENGES
Rising labor costs and attrition rates due to
breakneck pace of IT industry growth create need
for alternate talent pools Increased customer
interaction required in higher value-added
IT services that Indian offshoring firms are
targeting
Growing concerns about over-dependence
on India due to geopolitical risks Mounting
restrictions for work permits to
Indian nationals for security reasons
  • U.S.A.
  • India
  • Chile

Ample access to IT professionals
at costs soon comparable to Indias Chile
is on same time zone as Eastern U.S. during much
of the year and 3 hours away from the U.K. during
remaining months
Easy overnight flights to the U.S
and direct flights to Europe Chile has
declared the development of nearshore
facilities a national priority
17
A.T. KEARNEY RANKS CHILE AMONG THE 10 MOST
ATTRACTIVE COUNTRIES FOR SERVICES OFFSHORING
8
Gap between India and Chile shrunk 40
between 2003 and 2005
7
6
5
Cost
4
3
Environment
2
1
0
People
India
Czech Rep.
Mexico (17)
Singapore
Malaysia
Canada
Chile
Brazil
Philippines
Thailand
China
Economist Intelligence Unit also ranks Chile 1st
in Latin America among
future leaders in global offshoring
Source A.T. Kearney Global Services Location
Index (2003, 04, 05), EIU Offshoring Rankings,
in CEO Briefing Corporate Priorities for 2005
(2005)
18
CHILES LABOR COSTS ARE COMPETITIVE
Annual Compensation in US 000
Mandatory employee-paid benefits
Cash compensation
Source Mercer Human Resource Consulting
(www.mercer.com), 2006
19
CHILE OFFERS TOP TALENT FOR OFFSHORE OPERATIONS
  • IMDs World Competitiveness Yearbook ranks Chile
    high among 60 countries
  • Times World University Rankings Chiles
    Universities Among Best in Region
  • Availability of finance skills 1st
  • Absence of Brain Drain 2nd
  • Attitudes toward globalization 2nd
  • Credibility of managers 2nd
  • Availability of qualified engineers 3rd
  • Labor market conditions 7th
  • Education in finance 8th
  • Information Technology skills 11th
  • Standards of university education 11th
  • Overall Position 19th
  • Autonomous University of México
  • Catholic University of Chile
  • University of Buenos Aires
  • University of Chile
  • University of Sao Paulo
  • Universidad Austral
  • Federal University of Rio de Janeiro
  • Catholic University of Peru
  • State University of Campinas
  • Torcuato di Tella University
  • Adolfo Ibañez University
  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11

Source International Institute for Management
Development (www.imd.ch), 2005 The Times World
University Rankings (2006)
20
CHILES NETWORK OF HIGHER LEARNING INSTITUTIONS
SPANS THE ENTIRE COUNTRY COMPLETAR
  • OJO Hay cosas que corregir y completar

21
CHILES TELECOM INFRASTRUCTURE IS LEADING EDGE
2,5
2,5
Optical fiber networks
Mobile networks
  • Chile ranks 11th worldwide in mobile phone
    penetration, with 62 subscribers per 100
    inhabitants
  • 100 digital
  • Chile leads in Latin America
    with 28 subscribers
  • and XX broadband connections
    per 100 inhabitants

EMERGIA
Submarine Arica to Valparaíso
Land-based Valparaíso to Argentina 40
Gbps (1,92 Tbps) GLOBAL CROSSING
Submarine Lurín to Valparaíso
Land-based Valparaíso to
Santiago-Argentina
40 Gbps (1,28 Tbps) SILICA NETWORKS
Santiago to Argentina 2,5 Gb
5,0
Fixed telephony
0.62
5,6
Internet
Satellite networks
12,6
0,1
270 Mbps
12,5
Microwave networks 140 MBps
15,0
7,5
15,0
2,5
Source Subtel, Chilean Ministry of Transport
and Telecommunications
22
DOMESTIC DEMAND IS AGAIN EXPANDING RAPIDLY
Annual sales (M)
  • Larger players may well be strong partners
    and SMEs provide access to top talent
  • 500 IT companies active in Chile
  • Over 75,000 people employed
  • Size distribution ( employees)
  • 50 or more 12
  • 10 to 49 44
  • Less than 10 44

Hardware
Software
Services
Source ACTI AG, 2005
23
A RECORD OF SUCCESS AS AN OFFSHORE BASE Some
Representative Examples
24
  • Banco Santander established a regional offshore
    center for IT services in 200X
  • Focus on software development and maintenance
  • Serving 10 BSCH banks in 10 countries
  • Invested some US 8M to get it up and running
  • Experience proved highly successful
  • Chilean GM led the process
  • Quickly achieved high productivity and quality
    standards
  • CMMi 5 by 2005
  • Costs 60 lower than in Europe
  • Developing into a major player Chiles IT
    industry
  • Over 500 employees
  • 2005 exports of US 60M
  • OJO Hay cosas que corregir y completar

25
  • OJO Hay cosas que corregir y completar

26
Our Long Term Agenda
  • To turn Chile into the nearshore platform of
    choice within Latin America
  • Best academic center for IT professionals within
    the region
  • Most attractive place for Latin IT professionals
    to live and work
  • as well as non-Latin offshoring professionals
  • A highly cosmopolitant, vibrant offshoring hub
  • A strong web of partnerships between global and
    Chilean firms
  • To generate 100,000 offshoring jobs within 5
    years
  • Te reach US 5,000 million in offshoring
    ITS/BPO/KPO exports by 2012

27
AGENDA
  • The Chilean Business Environment
  • Chile The Nearshore Platform of Choice
  • HCL and the Chilean Nearshore Opportunity

28
MANY WINWIN OPPORTUNITIES FOR CHILE AND HCL
  • HCL nearshore facility in Chile serving U.S. and
    Latin American clients
  • HCL product development partnerships with Chilean
    companies
  • New products/services/capabilities to feed your
    offshore clients
  • HCL commercial partnerships
  • New clients developed in partnership with Chiles
    companies
  • across all of Latin America
  • Easier access to both the U.S. and the EU markets
  • Staying at parity or better with HCLs leading
    competitors in building a global business model

29
CHILES GOVERNMENT IS PREPARED TO HELP YOU
SET UP YOUR
NEARSHORE OPERATIONS
  • Single point of contact within public sector for
    Indian ITS firms ? CORFO
  • Full range of information and investment support
    services
  • Well developed set of incentive programs for
    offshoring operations
  • pre-investment studies
  • support during early project stages
  • personnel training
  • fixed assets and long term leases
  • investments in RD
  • Three specific CORFO support programs to help
    offshoring firms in Chile
  • Support for immigration of foreign IT
    professionals
  • visas, rellocation expenses, tax credits
  • Internationally competitive incentives for
    industry-specific expenses
  • recruiting, training and purchase of specialized
    assets
  • Ad hoc regulatory relief and enhancements
  • facilitation of customs procedures and data
    security guarantees

30
CIVIL SOCIETY AT LARGE ALSO READY TO SUPPORT YOUR
ACTIVITIES IN CHILE
  • ACTI as your industry association in Chile
  • Negotiating collaboration agreement with NASSCOM
  • CPC as the umbrella business organization in
    Chile
  • Actively pursuing initiatives to turn Chile into
    an offshoring platfom
  • Leading universities ready to develop tailored
    programs
  • Catholic University is designing a new
    undergraduate engineering program
  • and wants your input
  • Adolfo Ibañez Universitys new Engineering School
    keen to collaborate
  • Network of regional universities can train the
    required professionals
  • University of Chiles Engineering School may
    champion the effort
  • Technical institutes eager to meet your specific
    needs, including
  • INACAP tailored technical training programs (eg.
    with Caterpillar)
  • DUOCs successful English-language courses
  • Pro Innovation Forum is a major champion of your
    industry and stands behind you

31
CHILE IS RESPONDING TO SPECIFIC REQUIREMENTS
EXPRESSED BY INDIAN OFFSHORING FIRMS
  • New visa regime for Indian businessmen
  • Exemption from limits on the hiring of foreign
    nationals
  • Program to support immigration of IT
    professionals from other countries
  • 1400 L-1 visas available for Chilean
    professionals to work in the U.S. under Chile /
    USA Free Trade Agreement
  • 90 currently go unused
  • Free trade zone in Northern Chile interested in
    offshoring tenants
  • Offshoring one of the major thrusts in new
    public/private Digital Agenda 2.0

32
SUGGESTED NEXT STEPS
  • Reflect on any issues raised by HCL and take
    appropriate action if required
  • Support your in-depth country assessment process
  • Follow-up meetings in Santiago or abroad
  • HCL can apply to the relevant incentive programs
    from CORFO

33
How can we move forward?
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