1. © 2012 Duke CGGC OFFSHORE SERVICES GLOBAL VALUE CHAIN Conferencia Deslocalización de servicios y cadenas globales de valor: ¿Nuevos factores de cambios estructurales en América Latina y el Caribe? Santiago, Chile 18-19 de Octubre de 2012 1 Karina Fernandez-Stark Center on Globalization, Governance & Competitiveness (CGGC) Duke University

2. © 2012 Duke CGGC Duke University Center on Globalization Governance & Competitiveness OFFSHORE SERVICES Offshore Services Global Value Chain: Costa Rica Upgrading Regional Competitiveness in the Latin America Offshore Services Value Chain. In The Oxford Handbook of Offshoring and Global Employment. Oxford: Oxford University Press. "The Offshore Services Value Chain: Upgrading Trajectories in Developing Countries." International Journal of Technological Learning, Innovation and Development. The Offshore Services Value Chain: Developing Countries and the Crisis. In Global Value Chains in a Postcrisis World. Washington DC: World Bank. Engineering Services in the Americas. The Offshore Services Industry: A Global Value Chain Approach. The Offshore Services Industry: Upgrading Through Workforce Development. Workforce Development in Chile's Offshore Services Industry. The Offshore Services Industry: A New Opportunity for Latin America. Durham: Center on Globalization, Governance & Competitiveness. Report for the Inter-American Development Bank. 2 Global Value Chain analysis  understand the dynamic of global industries and how countries can capture higher value (Upgrading)

3. © 2012 Duke CGGC Infrastructure Software Network Management Applications Management Applications Development Applications Integration Desktop management CRM (Customer Relationship Management) HRM (Human Resource Management) ERM (Enterprise Resource Management) Marketing & Sales Finance & Accounting Procurement, Logistics and Supply Chain Management Training Payroll Recruiting Contact Centers/Call Centers Talent Management Content/ Document Management Content/ Document Management ITO Information Technology Outsourcing BPO Business Process Outsourcing KPO Knowledge Process Outsourcing Horizontal Activities Vertical Activities a Industry specific b Banking, Financial Services and Insurance (BFSI) Ex. Investment research, private equity research, and risk management analysis Banking, Financial Services and Insurance (BFSI) Ex. Investment research, private equity research, and risk management analysis Telecommunications Ex. IP transformation, Interoperability testing and DSP and multimedia Telecommunications Ex. IP transformation, Interoperability testing and DSP and multimedia Manufacturing Ex. Industrial Engineering and sourcing and vendor management Manufacturing Ex. Industrial Engineering and sourcing and vendor management Retail eComerce and Planning, merchandising and demand intelligence Retail eComerce and Planning, merchandising and demand intelligence Health/Pharma Ex. R&D, clinical trials, medical transcript Health/Pharma Ex. R&D, clinical trials, medical transcript Others Travel & Transportation Revenue management systems, customer loyalty solutions Travel & Transportation Revenue management systems, customer loyalty solutions Business Consulting Business Analytics Market Intelligence Business Consulting Business Analytics Market Intelligence Legal Services Energy Ex. Energy Trading and Risk Management, and Digital oil field solutions Energy Ex. Energy Trading and Risk Management, and Digital oil field solutions ERP (Enterprise Resource Planning): manufacturing/operations, supply chain management, financials & project management Infrastructure Management IT Consulting Software R&D Value Added LOW HIGH Offshore Services Global Value Chain 3

4. © 2012 Duke CGGC Offshore Services: Global Supply and Demand 4 Demand for Offshore Services (%) 51.1% US & Canada 30.6% EU-15 16.2 % Asia- Pacific 50 30 15 2 2.1% Rest of the World Source: CGGC based on Everest & Datamonitor 45% of the industry market Same number of call centers employees than India

5. © 2012 Duke CGGC The Size of the Offshore Services Industry (estimates) Difficult to quantify the industry  no accurate data & limited country level tracking Industry growing & evolving rapidly New activities -most dynamic not included, such us innovation Difficult to quantify the industry  no accurate data & limited country level tracking Industry growing & evolving rapidly New activities -most dynamic not included, such us innovation US$ billions OECD US$ 252.4 bill BCG US$ 281,3 bill NASSCOM US$ 117.5 bill Source: CGGC based on OECD 2008, NASSCOM 2009, Boston Consulting Group 2007.

6. © 2012 Duke CGGC Offshore Services Potential Activities previously reserved for rich nations or in-house Creating more jobs, specifically in developing countries One of the world’s fastest growing industries  Reduce company costs and find new talent Almost unlimited potential  Services from any industry Activities previously reserved for rich nations or in-house Creating more jobs, specifically in developing countries One of the world’s fastest growing industries  Reduce company costs and find new talent Almost unlimited potential  Services from any industry

7. © 2012 Duke CGGC Examples of Upgrading Trajectories 7 Entry into the value chain Upgrading within the BPO segment Broad Spectrum Services Upgrading to KPO Activities Industry Specialization

8. © 2012 Duke CGGC Offshore Services Upgrading: India, Philippines and Chile 8

9. © 2012 Duke CGGC Human Capital: Essential Element for Upgrading in Offshore Services Human capital has been found to be a key determinant of value creation, competitiveness, and success in service exports from developing countries One of the most important factors MNCs take into consideration when relocating services operations is to ensure the labor market has cost competitive, qualified workers Developing countries must work hard to supply the necessary human capital to sustain industry growth today while also preparing the future labor force to upgrade the industry. 9

10. © 2012 Duke CGGC 10 Upgrading and Workforce Development BPO KPO IT TECHNICIAN SOFTWARE PROGRAMMER IT CONSULTANT SOFTWARE R&D ENGINEER CALL CENTER OPERATOR F&A ANALYST MARKETING & SALES ANALYST QUALITY ASSURANCE MANAGER LEGAL ANALYST BUSINESS ANALYST FINANCE ANALYST ITO Skill Level Value Chain Segments Job Profiles Job Profiles and Upgrading

11. © 2012 Duke CGGC Upgrading Trajectory: Entry into the Value Chain 11

12. © 2012 Duke CGGC Interpersonal and language skills are highly valued in this sector High competition for talent has resulted in shift from individual spending on education and training to firm-based training Tax incentives and public subsidies for education are increasingly used to attract offshore operation centers 12 GVC Upgrading & Workforce Development: Select Findings

13. © 2012 Duke CGGC Center on Globalization, Governance & Competitiveness- Duke University http://www.cggc.duke.edu http://www.cggc.duke.edu Karina Fernandez-Stark Senior Research Analyst karina.stark@duke.edu THANK YOU FOR YOUR ATTENTION!