Presentation on theme: "ABC India! …Outsourcing to India! Siddhant Bhansali"— Presentation transcript:
1ABC India! …Outsourcing to India! Siddhant Bhansali MBA, Indian School of BusinessB. S., University of Illinois
2Overview ABC US - Vision Outsourcing – popular perceptions... Outsourcing – changing perceptions...What is outsourcing?Types of offshoringOutsourcing to India – Present realityWhy Outsource Work?Why outsource (statistics)Outsourcing – Clear AdvantagesWho outsources work to India?Why should ABC US outsource?What can ABC outsource right away?Why India?Offshore location: India offers the best packageChecklist for setting up in India
3ABC US - VisionVision: To provide the most complete XYZ solution available for all stakeholders.ABC India Vision: to further the ABC US vision and to contribute to increasing ABC’s reach to global markets through most efficient utilization of internationally available resources.
4Outsourcing – popular perceptions… "America's pain, India's gain", The Economist, Jan 2003"Is your job next ?", BusinessWeek, Feb 2003"Study sees 406,000 U.S. jobs shifted overseas in 2004", Financial Times, Oct 2004A 2003 McKinsey Global Institute study estimates that outsourcing by US companies is likely to increase by 30 to 40 percent over the next five years and this will result in the loss of about 200,000 jobs a year in services over the next decade.
5Outsourcing – changing perceptions… … but a growing economy creates new jobs…Over a 10 year period from , McKinsey expects that 2 million service jobs will be lost through offshore outsourcing,but…22 million new jobs will also be created.Technology and medicine are expected to be major drivers for job creation.Headlines are changing…"Stop Blaming Bangalore For Our Jobs Problem", Fortune, Apr 2004"UBS Study Finds Outsourcing Not Big Hit to U.S. Jobs Market", The Wall Street Journal, Oct 2004
6What is outsourcing?Outsourcing - transfer of an organizational function to a third party.Offshore outsourcing – when this third party is located in another country.Offshoring – Technically, “offshoring,” represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not.“Captive outsourcing”In house work being done for the parent organizationThis form is preferred by Microsoft for its India Development Center and many others like Google, Yahoo, Dell, Citibank, etc…
8Outsourcing to India – Present reality India has 700,000+ engineers with starting salaries of $5,000.S. Ramadorai, chairman of Nasscom and CEO of Tata Consultancy Services, said in a statement: "Today the Indian IT and BPO industry is estimated to be $22 billion. The industry is in a strong position to leverage the global software opportunity and establish India as the premier IT destination in the world.“McKinsey predicts global offshore outsourcing spend to hit $110 billion by 2010.How much is the total market (by 2010)? $300BIndia is set to capture more than 50 percent of the market if it overcomes its challenges --McKinsey.India has fewer than 3,000 software services companies.At least 15 of these have more than 2,000 workers.Some, including Infosys Technologies, Tata Consultancy Services and Wipro Technologies have "garnered international recognition and a global clientele.“
9Why Outsource Work?ABCBecause you don't have the time to do it yourself.You may have got a product to develop and you've got to get it into the market before your competitor does. Even if you have the time, getting it outsourced may be more efficient utilization of resourcesBecause you don't have the money to do it yourself.Your business is growing exponentially but your resources can't cope with the growth.Because you'd rather focus on mission-critical issues.You're not interested in frittering away time and energy on non-core functions.Because you don't have the skills to do it yourself.You need the best talent in the world, but it's scarce/out of reach/ just not available or just too expensive.Because its cheaper.You want to save on costs while keeping the long term perspective also in view.
11Outsourcing – Clear Advantages YesCost advantage?Scalability option?Increased focus on customers?But, Outsourcing can be a strategic move!!24 hour work cycleExtend product offerings for the customer (eg. greater support hours)Make previously uneconomical tasks economicalEnable non-US market entry, particularly developing countriesYesYes
12Who outsources work to India? America OnlineAmerican ExpressDellDelta AirlinesGEIBMMicrosoftOracleSunAMD Advanced Micro DevicesAT & TAccentureAlbertsonsBell SouthCiscoCitibankDelphi AutomotiveEDSFingerhut Direct MarketingFirst Consulting Group (FCG)Fluor DanielGE CapitalGateway ComputersGlaxo Smith KlineHewlett PackardHyperionIRS Electronic ReturnsJCPenneyMcKinsey & CompanyOraclePerot SystemsPrudentialQwestRand McNallySchlumbergerState of TennesseeThe Home DepotThe Sutherland GroupTransUnion…
13Some more… AETNA, ALCOA, AOL Travel/Travelocity, Anheuser-Busch, Avon, Bluelight, CIGNA, Capital One, Carlson Companies, Caterpillar,Charles Schwab, Citizen Communications, Computer Sciences Corporation,Dana Corporation, Delta Air Lines, Dish Network, Dupont, Eaton Corporation,Electronic Arts, First American Title, Focus Infomatics, Glaxo Smith Kline,Google, H.E.B. Grocery Company, Home Depot, Intel, Intuit,Johnson and Johnson, Juno, LaSalle Bank - formerly ABN AMRO,Level 3 Communications, Lexmark, MBNA credit cards, Nestle Purina PetCare,Network Solutions, Netzero, Nike, Northwest Surgical Specialists,Norton Symantec, Option One Mortgage (HR Block), Pioneer Hi-Bred Int'l. Inc.,Providian Card Services, Renac Computer Corp - Medical Billing,Sage Software (ACT), Sallie Mae SBC, Shell, St. Paul Travelers, Sun Microsystems,Sunterra - Timeshare company, Target, Tenet Healthcare, US Bank, US Government,United Airlines Reservations Call Center, United Health Group, Veritas Software,Wachovia, Walmart Connect Internet, Washington Mutual, Western Digital Corp, White & Case, LLP
14Why should ABC US outsource? Direct cost savings (lower resource costs, lower recurring costs)Teams working in parallel - greater organizational flexibilityAs ABC India evolves, faster turnaround on assigned areas (because they have built expertise in those) Allows ABC US toconcentrate on core, customer facing functionsfocus on bringing in additional clients Translates into lower development costs which can translate into savings for customers as well!
15What can ABC outsource right away? Ideally, fairly “independent” workWork that can easily be “separated”Non-critical, non-customer facing work (for starters)Customer support over (for starters)
16Why India? Tried and tested model / Most of Fortune 500 here already Large resource pool of talented engineers with decent English communication skillsApproximately 700,000 in the IT and BPO sectorsStarting pay for IT engineer = $6,500*With 1-2 years experience = $8,000*Improving infrastructure enabling better telecommunicationsSupported by Govt interventions and economic policies* varies by city, skills and experience
18Checklist for setting up in India Determine requirements from ABC USNarrow choice of cities / locationIncorporate ABC IndiaSetup office premises / setup infrastructureHire developers and staffTraining and developmentIMPORTANT