Outsourcing to Tier 3 Countries: Cost/Benefit Analysis and the - - PowerPoint PPT Presentation

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Outsourcing to Tier 3 Countries: Cost/Benefit Analysis and the - - PowerPoint PPT Presentation

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Outsourcing to Tier 3 Countries: Cost/Benefit Analysis and the Development Perspective Keynote presentation at the International Outsourcing Forum, Reims By: Martin Labb, Adviser, Enterprise Competitiveness Date: 2 October 2013 What is ITC?

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Keynote presentation at the International Outsourcing Forum, Reims By: Martin Labbé, Adviser, Enterprise Competitiveness Date: 2 October 2013

Outsourcing to Tier 3 Countries: Cost/Benefit Analysis and the Development Perspective

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What is ITC?

ITC enables small business export success in developing countries by providing, with partners, trade development solutions to the private sector, trade support institutions and policy-makers

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Putting ITC on the Map

www.intracen.org

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  • 1. Overview of global IT sourcing destinations, location

rankings, and their limitations

  • 2. Benefits of working with suppliers in tier 3 countries
  • 3. Managing “tier 3” specific risks
  • 4. The Development Contribution – Not Charity, Just Work

Content of the Presentation

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Overview of global IT sourcing trends

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Global Opportunities, Local Game Changers

  • Expanding use of mobile phones and

related services

  • Improved broadband connectivity
  • Cloud computing
  • Web-sourcing
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Cloud-sourcing: the next generation of outsourcing?

Source: Freelancer.com

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Growth in the Global Sourcing Market (in B USD)

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Casanearshore Park in Casablanca

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French-speaking Africa: Morocco

  • 55/60 K employees, mostly young people
  • 800 M USD each year in revenues, mostly

in French- and Spanish-speaking countries.

  • Strong infrastructure: Casanearshore Park
  • Captive centres: MedIT, BNP Paribas,

Logica..

  • +100 innovative local IT companies.
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Teleperformance office in Tunis

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French-speaking Africa: Tunisia

  • Offshoring industry employs + 25 K in

BPO (+20 K), ITO (+3.5 K); R&D (1.5 K)

  • More than 1000 ITO/BPO companies
  • More than 70,000 multilingual graduates/

year, inculding 20 K engineers and scientists

  • Investments by Sungard, HP, Stream,

Sagem, Altran, ADP, Téléperformance

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Call Centre in Dakar

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French-speaking Africa: Senegal

  • Mostly BPO, employs around 5000

people, 40+ companies

  • Mostly local players: PCCI, Call Me,

Way2Call

  • Strategic sector for Senegal, means public

support (incubators like CTIC)

  • Jokkolabs, local innovation hub initiative
  • IT companies mostly active on the West

African market (People Input)

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View of Abidjan, the Ivorian business capital

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French-speaking Africa: Côte d’Ivoire

  • 300 IT companies > 10% are active in ITO/BPO
  • 3500 direct jobs – only a fraction on ITO/BPO
  • 0.25% of GDP (500 million USD). No figure on

export volumes.

  • The National Polytechnic Institute, ESATIC and

half a dozen private schools produce 1000 to 1500 IT graduates per year

  • Village des Technologies de l’Information et de

la Biotechnologie à Grambassa

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Global Trends

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Developing countries need to focus on ITO/BPO niches

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Overview of global location rankings, and their limitations

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AT Kearney’s Global Services Location Index™ (GSLI) 2011

Asia dominates the top 10 positions

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Gartner’s Top 30 Countries for Offshore Services

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Tholons Top 100

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A new-comer: the Towers Watson ranking

The 39 countries in this ranking were selected on the basis of three criteria: (1) They are popular locations for services offshoring, (2) they are developing or newly industrialized countries and (3) they meet minimum standards of data availability.

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Benefits of working with suppliers in tier 3 countries

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How do you evaluate and manage “tier 3” specific risks?

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Don’t apply a rigid, analytical grid on tier-3 countries

Do tier-3 countries move up the value chain from Contact Centres, BPO to ITO?

  • Call centres considered as the entry-level market

in offshoring – but highly dependent on connectivity

  • Does BPO only depend on cost arbitrage?
  • ITO as the highest segment – requires IT

universities; at the same time, web development work is often undertaken by self-taught youngsters

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Know the Usual Tier 3 Risks

  • Weak IT and Telco Infrastructure
  • Challenging business environment,

including legal framework and IP protection

  • Lack of critical mass in human resources

for larger operations

  • Cost competitiveness reduced by the lack
  • f skill sets in certain areas
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What else prevents tier-3 countries from growing market share on the global sourcing market?

  • Difficulty to mobilize the Government due to lack of

reliable data

  • Lack of data worsened by the emergence of an online

“grey economy”, particularly in developing and emerging countries

  • Domestic markets: lower ratio of software to hardware

spending in developing countries in view of the industrial structure and level of automation

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World Bank Location Readiness Index: Do Your Own Country Analysis

http://www.infodev.org/en/Publication.875.html

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World Bank Location Readiness Index: DIY Country Analysis

  • Around the 4 standard IT/ITES business

lines:

  • Data processing
  • Voice processing
  • Knowledge services
  • IT services
  • Cost, Infrastructure, Business & Living

Environment, Country Risk, Industry Maturity

http://www.infodev.org/en/Publication.875.html

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The Development Contribution – beyond CSR

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Beyond CSR: Not Charity, Just Work

  • ATOS volunteers did PM training in

Bangladesh

  • Set up a partnership with a local IT

company

  • The Bangladeshi company is now part of

their offshore supply network and works directly with some of their clients

  • Commitment, cost-competitiveness,

available skill sets, risk diversification

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Not Charity, Just Work

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To summarize:

  • 1. The pool of IT sourcing destinations goes beyond

the usual group of countries analysts focus on

  • 2. If properly evaluated, the risks of working with

tier-3 countries are largely compensated by the benefits

  • 3. The benefits are not only for your companies,

they also have a Development dimension, but this is not about Charity - Just Work

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Thank you!

labbe@intracen.org @ I T C n e w s

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How do you apply the risk-assessment process in, say, Bangladesh?

A 3-step approach:

  • 1. Assess the local IT & ITES industry using the WB model
  • 2. Do desk research on local IT companies, with the help
  • f the local IT association
  • 3. Meet with your top 10 suppliers – online or during B2B

events

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Step 1: Use the sponsored materials for your data collection

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Step 2: Use the local IT association to identify relevant companies

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Step 3: Meet face-to-face with pre-selected local providers