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Business Process Outsourcing and Offshoring (BPO)
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Contents Defining BPO Background: South Africa’s window of opportunity
Gaps South Africa need to address South Africa’s strengths, weaknesses, opportunities and threats The actions taken Sector support programme Government assistance programme Talent development Marketing inititiative BPO standards 2nd Economy interventions Telecommunication costs
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Defining BPO Customer care High end offshoring HR/Administration
Customer support Collections Helpdesk Telesales and telemarketing (Inbound/outbound) Web sales and marketing other SMA Customer care High end offshoring Engineering Design Animation Network consultancy HR/Administration Recruiting and staffing Hiring administration Records management Benefits administration Payroll services Business knowledge services Financial analysis (?) Database marketing and customer analysis Biotech research Other non proprietary research Credit/debit card services Check processing EDI Other transaction processing Payment services Administration/General back-office Data entry Document management Claims processing Tax management Asset management Other (correspondence and report production) Finance and accounting Billing services Accounting transactions Financial reporting and other Tax consulting and compliance Risk management Treasury/financial management
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Background: South Africa’s Window of Opportunity
BPO&O global market is expected to grow from $10b to $50-60b by 2008 40-50% of the growth in banking and insurance Result in an additional 3m jobs worldwide, k will be contested by SA and other ‘tier 2’ players SA is well positioned to exploit this opportunity create k jobs, attract $90-175m in real FDI, GDP contribution of %. substantial positive effect on BEE, SMME and Geographic Equity with respect to job creation
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Gaps SA needs to address
Talent availability: availability of managerial and agent level talent Cost of operation: SA is about $7-8/hour/full time equivalent agent costlier than lowest cost centers, (e.g., India, Philippines) Risk of operation: Perceived issues exist around personnel security and crime rates in SA Set-up assistance: setup assistance and time required to complete set up requirements Regulations: Concerns have been raised by companies on the flexibility of the labour regulations. Third party vendor landscape: Only 4-5 scale players with experience of migrating international business are available in SA today Marketing activities: Target marketing efforts conducted by provinces are not competitive in scale and sophistication
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Strengths Weakness Opportunity and Threat Analysis (SWOT)
Cultural and language familiarity Quality of business infrastructure Economic and political stability Quality of life and attractiveness of location International connectivity Adaptability Entrepreneurial culture
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SWOT Analysis Weaknesses Cost of operations (labour and telecom)
Inadequate government support and investment (e.g. tax, incentives) Talent gaps (agent and middle management) Quality and cost of transport Perceived security risk Investor relationship management (marketing effectiveness) Lack of scale vendors Difficulty of set-up
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SWOT Analysis Opportunities
Demand surplus in the traditional BPO&O market as India and China face supply bottlenecks Opportunity to offer specialised services in sophisticated industries (e.g. Financial Services) A foundation of multi-language skills A location proposition to regional (Africa-based) players An alternative location for captive/vendors already present in 1st tier locations e.g., India Exploitation of country synergies e.g. culture, legal, regulatory Exploit existing relationships
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SWOT Analysis Threats Pace of delivery against telecom deregulation agenda Risk of union resistance (cf. atypical employment) and constraining labour regulations (cf. overtime) Inability to build a strong, coherent industry body Inability to open up lower cost quality talent pools and build sufficient managerial capacity Negative perceptions/uncertainty regarding gating criteria and issues such as HIV, BEE and crime Exchange rate volatility
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The actions taken to exploit the opportunity have been largely coordinated through a partnership between the dti and the Business Trust. under the direction and leadership of His Excellency, the Hon. Minister Mandisi Mpahlwa, MP. (The Minister of Trade and Industry and Director of the Business Trust). The partnership also include key private and public sector decision-makers, namely: Ms Thoko Didiza (Minister of Public Works and Director of the Business Trust), Ms Elizabeth Thabethe (Deputy Minister of Trade and Industry), Mr Derek Cooper (Chairman of Standard Bank and Director of the Business Trust) and Mr Eddie Funde (Chairman of the SABC and Chairman of the industry body, Business Process enabling South Africa-BPeSA). Operations are directed by Dr. Raymond Ngcobo (Chief Director for Strategic Competitiveness Unit, Enterprise and Industry Development Division of the dti), Mr. Brian Whittaker (CEO of the Business Trust) and Mr Mfanu Mfayela (CEO of BPeSA).
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Sector Support Programme
Five work streams were identified: Government assistance and Support Talent development Marketing Industry mobilisation BPO&O standards Additional work streams have been identified Telecommunications pricing packages for the BPPO&O sector BPO 2nd economy strategy
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GAS Programme Approved in December 2006 by Cabinet
The GAS programme was designed to support the development of the BPO&O sector, through: Providing incentives to enhance the competitive advantage Close the cost gap for BPO&O operations when compared to other BPO destinations such as India and Philippines Address market failures that result in the high cost structure Approved in December 2006 by Cabinet Full roll-out in March 2007 The objective of the investment incentive is to attract BPO&O investment that creates employment opportunities. The grant is provided depending on the value of qualifying investment cost and employment creation. The grant ranges between R37,000 and R60,000 per seat and is offered to local and foreign investors establishing projects that aim primarily to serve offshore clients.
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Qualifying Investment Costs Per Seat
Benefits INVESTMENT GRANT Employment Created Qualifying Investment Costs Per Seat Grant Per Seat 200 – 499 At least R74,000 R37,000 – R44,600 500 > Greater than R89,200 R44,601 – R60,000 200 > Less than R74,000 R37,000 - R52,300 or 50% of agents’ salary costs for 2yrs, whichever is lesser
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Talent Development The most critical element of a distinctive value proposition – the ultimate basis for competition “TALENT AVAILABILITY” SA starts with a good foundation of trainable people, however considerable training is needed to deepen the talent pool There is a need for substantial government investment through Company specific training and work readiness training Work Readiness Programme known as Monyetla is an initiative between the dti and the Department of Labour aims to take unemployed matriculants or graduates through a process of learning work-readiness skills. in its pilot phase aiming to train 1000 learners at a cost of R15 000 each The Training and Skills Support Grant is directed towards the cost of providing company specific training (as opposed to industry wide training) up to a maximum of R12, 000 per agent. The incentive grant is over and above the assistance obtained through the Sector Education and Training Authorities (SETAs) and is complementary to the BPO&O Investment Grant.
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Previous and proposed initiatives
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Previous and proposed initiatives
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Marketing To persuade the best companies to do business in S.A. and remain in S.A by: Understanding and properly communicating the SA Value proposition. Encouraging regional and industrial diversity Ensuring a competitive environment ( one stop shop) Removing Regulatory obstacles The initiative straddles both targeted and broad-based marketing. Targeted marketing focuses on attracting and securing selected high impact foreign investors, who will in turn create a groundswell of other investor interest. Broad-based marketing encompasses the supporting of government and industry initiatives, to raise South Africa’s BPO&O global profile, with the aim of securing a dominant Tier 2 position.
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BPO&O Standards A set of 3 new standards geared towards service quality Address Inbound and Outbound Contact Centres and Back-Office Processing Operations standards in four categories: •Leadership and Customer Service Management •Human Resource Management •Operations Management •Technical Resource Management SA Bureau of Standards (SABS) is now turning these into national standards ISO is interested in the standards for the first global standard for BPO&O
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BPO in the 2nd Economy Need to shift from concentration in main Metropolitan areas (JHB, DBN and CT) to ensure equitable distribution of benefit New designated areas have been identified to direct some investment to depressed communities Criteria for selection Levels of unemployment and poverty Availability of buildings BPO potential in terms of local economic development Availability of ICT Infrastructure Talent availability and development
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Identified sites
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Telecommunication costs
Working with DoC on infrastructure for designated areas/ICT hubs Negotiating with Telkom for a developmental pricing framework Large offshore clients (>1000 seats) Domestic clients SMME’s Designated areas Work is ongoing
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QUESTIONS ???
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